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# A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z
# A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z
#
# A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z
A
A Class Items: A general meaning of this term is the most important items. When a
group of products is analysed according to some criterion and the individual
products in the group ranked - ie placed in order - according to the criterion used, it
is common to subdivide the products in the ordered list into three categories. The
"A" category, or A Class, products are those products at the top of the list; the "B"
category products are next, and the "C" category products are those at the bottom
of the list. A common criterion applied in the analysis of the original group of
products is according to each product's "annual value". Annual value is often
thought of as reflecting a product's importance, and is defined as the product's
annual usage multiplied by its unit value. (For example, if 200 products are used per
annum and one unit costs £7, the annual value is £1,400.) It will typically be found
that if the A Class items are defined as the top 20% of the items at the top, that they
account for 80% of the total value of all the items. See ABC Classification and the
vital few.
ABCD Checklist: The late Oliver Wight, and, through him, the MRP training
company that bears his name, have established an assessment and scoring system
whereby companies that have installed MRPII can judge how well they have
succeeded. Originally, there were 20 or so criteria, and the rating of a company
(Class A, Class B, Class C and Class D) was simply a bit of fun. In Wight's eyes,
Class A companies are using the system and literally working to the numbers it
produces; Class B are using the system but still retain "little black books", Class C
are running the system but not using it, and in Class D companies only the computer
department ever see the output! There are now over 300 criteria and the process is
taken very seriously. Very few companies - perhaps 20 in the UK - have attained
Class A. Instead of concluding from this that it is MRP which is the problem, the
promoters of this methodology conclude that the problems lie with the staff of the
Class B to D companies (who clearly did not spend enough money on training).
Acceptable Quality Level (AQL): If a supplier sends parts to a buyer, then the
two parties may agree that a sampling plan should be used by the buyer to validate
their quality on receipt. Among other things, the sampling plan will be selected on
the basis that the incoming parts are to be at an agreed quality level of "p%" or
better. Naturally, the supplier of the items wishes to be assured that if the quality of
parts he actually sends is indeed equal to or better than p%, then there will be a
very high probability that they will be duly accepted under the plan (ie that the plan
will not result in their rejection). On the other hand, the recipient wishes to be
assured that if the quality of the goods he receives is worse than p%, then there is a
very high chance that they will be rejected. In summary, the term acceptable quality
level means the level of quality (p%) at which a sampling plan is liable to result in
the parts' acceptance. In fact, the "Dodge-Romig/Military Plans" plans give the
supplier 95% assurance that if quality is at p% or better, material will be accepted.
Note therefore that the word "acceptable" means, literally, "liable to acceptance" -
it does not have the alternative common English meanings of "welcome" or
"satisfactory". See AQL sampling tables. See also ATI.
Accounts (Type of): Asset accounts, expense accounts, liability accounts, capital
accounts and revenue accounts.
ACSI: American Customer Satisfaction Index - a metric devised by the ASQ and
others attempting to express and track customer satisfaction as delivered by a wide
range of companies and government institutions.
Action Date: The day that the next action on a part is scheduled to take place.
Advice Note: A message from a supplier to a receiving company stating that goods
ordered are in the process of being actually despatched. The advice note may be
paper or electronic, and will include the relevant Order Number. An advice note is
equivalent to an ASN.
AEN: Ambient electromagnetic noise. The electrical and magnetic waves measured
in decibels that are generated in the air by electrical devices - sortation systems,
conveyors, alarm systems, radio VDUs etc.. A major problem with AEN lies in the
installation of RFID - the radio waves generated and read by the RFID devices are
interfered with by the AEN. Prior to setting up an RFID system, therefore, it is
necessary to carry out a site assessment or site survey. In the site assessment, a Full
Faraday Cycle Analysis is performed over a 24-hour working day of the proposed
RFID interrogation zone to determine the AEN present. By doing so, RFID readers
can be positioned so as to minimise AEN radio interference. The subjects of AEN,
site surveys and Full Faraday Cycle Analyses remind us that in setting up an RFID
system, in, say, a warehouse, problems are as much matters of physics and electronic
engineering as they are of systems analysis.
AFI: Average Fraction Inspected. A term used in quality and acceptance sampling
to gauge the financial effectiveness, to a recipent of incoming goods, of a sampling
inspection table or procedure. AFI is defined as ATI / N, where N is the number of
the incoming items.
AID: Automatic Identification .... bar codes, RFID and contact memory buttons.
AIDAS: The tasks which the salesman must undertake in selling have been
summarised by the mnemonic AIDAS, as follows: A = attention (making contact); I
= interest; D = desire (showing the potential customer how the goods will benefit
him); A = action (closing the sale); and S = satisfaction (making sure the business is
retained).
AIT: Automatic Identification Technology (Auto ID) ... bar codes, RFID and contact
memory buttons.
Annual Usage Value (AUV): The quantity of a material used per annum,
multiplied by its unit cost. The figure is widely used in ABC Classification, since it
reflects both a material's commercial and manufacturing importance.
To begin, the analyst must first calculate the variance of the observed data at each
factor level (eg the variance in the output figures as observed for each of the days of
the week.) Next, two statisical measures are calculated. The first, SST, is known as
the Between Treatments(*) Variation, or "sum of the squares for treatment". The
SST is a meaure of the closeness, or difference between, the variances calculated.
The second statistical measure is known as the Within Treatment Variation, or "sum
of the squares for error" (SSE). This is a measure of the variation within each set of
observed data. Finally, both the SST and SSE are adjusted for statistical averaging
purposes to take account of the number of degrees of freedom permitted, to give the
MST (mean square for treatment) and the MSE (mean square error). The last step
is to calculate MST/MSE, known as the test statistic F. If F is sufficiently large
(greater than 1, but probably much greater), then there is statistical significance as a
result of the alternative factor levels (eg that the job shop output on Monday is
significantly different from the output on Tuesday, from ... Friday). ANOVA is
widely used in industry, including at the Analyse phase of Six Sigma. Naturally, the
analyst so using it need not be concerned with the statistics ... all he need do is enter
the numbers on, say, a MINITAB screen! Note that multifactor ANOVA allows
significance to be explored when several factors themselves are present. For
example, the output observed between the days of the week, but also qualified by
which season of the four seasons of the year is involved - Mondays in Summer, v.
Tuesdays in Winter .... (* The term "treatment" used in ANOVA and DOE harks
back to the experiments of Sir Ronald Fisher in 1915, using ANOVA and DOE to
investigate the yields from potato crops with different types of types of potato and
different types of manure.) See also The Null Hypothesis.
ANSI ASC X.121 : also known as X.12, a technical standard for the transmission
of EDI messages over telecommunications links. The dominant standard in North
America, Australia and New Zealand.
AOG: Aircraft on (the) ground - the ultimate horror for stockists of aircraft spares,
apparantly justifying the abandonment of scientific inventory principles and the
storage of gross and wildly excessive levels of stock.
AOQ: Average Outgoing Quality. The quality level of parts which have been
subject to sampling. The level will be affected by the probability that certain lots will
be rejected, and that, as a consequence, these lots will be 100% inspected. Since
there has been 100% inspection of some of the parts, with rectification of any defects
found, the overall outgoing quality will be improved. (If all lots are liable to be
rejected by sampling, outgoing quality will be 100%.)
AOQL: Average Outgoing Quality Limit. The worst possible outgoing quality
associated with items that have been subject to a particular sample plan (see AOQ).
As is: A statement that the supplier of goods will not be responsible for the
condition or quality thereof after the buyer receives them. Note importantly, that the
statement has no legal effect unless it was agreed between the supplier and buyer
beforehand at the time the contract was formed. In other words, "received as is" has
no validity if it appears for the first time written on a delivery note.
Asset (Current): Assets which are expected to be turned into cash in due course,
or consumed in the course of operations. Current assets are entered in the balance
sheet in increasing order of liquidity (i.e. stocks, then debtors, then cash itself).
Asset (Fixed): Buildings, land and equipment acquired by the company and which
have a continuing use in its business. Fixed assets are entered in the balance sheet in
descending order of permanence (i.e. land first, then buildings ...). Small items such
as typewriters are usually omitted.
Asset (Intangible): an asset having no physical existence but which is nevertheless
identifiable and controllable - four examples of many are the ownership of licenses,
patent rights, trademarks and brand names.
Asset (Monetary): An asset having a stated, unequivocal value (eg cash and
debts).
Asset (Non Monetary): An asset which must be sold in the market, and therefore
has a value that is not definite (its value depends on what the market will pay!).
Assumption of Constancy: The reasonable contention that the forces which lead
buyers in the marketplace to purchase goods are rationally based, although liable to
change. The rational behaviour of buyers ... the assumption of the constancy ...
stands behind the validity of sales forecasting (and much else).
ATI: Average Total Inspection. A term used in quality and acceptance sampling to
gauge the financial effectiveness, to the recipient of goods, of a sampling /
acceptance procedure.The ATI is defined as the sum of two costs: (1) the cost of the
required inspection of the sample taken of the incoming parts, and (2) the cost of the
required inspection of incoming lots that have been rejected by the sample plan,
even though their quality was at the level of quality agreed as being satisfactory. As
far as cost (2) is concerned, the possibility of rejecting incoming lots which prove on
later 100% inspection to be satisfactory is inherent in the very activity of sampling.
Clearly, however, the lower this possibility, the better the sampling plan and
methodology. Cost (2) cannot be completely eliminated except through 100%
inspection of incoming parts. However, cost (2) can be reduced in some sampling
methodologies if larger samples are taken - ie if cost (1) is increased. For superior,
effective sampling, a balance should be found such that the total of cost (1) and cost
(2) is minimised. Perhaps a more popular measure than ATI is AFI, Average
Fraction Inspected. This is defined as ATI / N, where N is the number of the
incoming items.
AutoID: Automatic Identification Technology ... bar codes, RFID and contact
memory buttons.
Available Hours: The total time available at a work centre over a period of time
(usually one week).
B
B2B: Business to business. That is, companies which sell directly to other
companies, rather than to private consumers.
B Class Items: Those products which are in the B Class when a group of products
is analysed and ranked according to annual usage x unit value - see ABC
Classification.
Back Door Selling: a common informal US purchasing term for the selling of
goods or services to companies without their seeking competitive offers or bids.
Backwardation: Normally, but not always, the price of a commodity future is less
than the current spot price. As time progresses towards the maturation date of the
future, the futures price rises until, at the maturity date, the futures price and the
spot price are equal. The rise in the futures price up to the spot price is referred to
as backwardation. But contrast contango.
Balance Sheet: A major financial statement required by law and good accounting
practice to be completed and filed as part of a company's annual returns (along with
the Profit and Loss Account. The balance sheet shows the assets and liabilities of the
company at the point in time it is struck - ie the financial year end. Since the capital
value of the company equals assets less liabilities, the balance sheet also indirectly
gives the value of the company.
Balanced Scorecard, The (BSC): An idea put forward by Robert Kaplan (*) and
David Norton that organisational management within the company must take into
account a complete range of sub-objectives, some of which may appear to be in
conflict and some of which may be mutually reinforcing. A balance must be arrived
at by weighing the conflicting requirements for ... (1) corporate learning and
growth; (2) superior operation of the company's business processes (especially in
relation to its "mission"); (3) intense focus on the company's customers; and (4)
soundness of financial status. So far, so good - nothing new there. However, what is
then put forward is the meaningless phrase you can't improve what you can't
measure (if the visitor to this glossary does not think that the phrase is meaningless,
he should reflect on both the word improve and the word measure in this context.)
But if the phrase is indeed accepted as having meaning, and if we want our company
to "improve", then we must follow Kaplan and Norton's logic further. For it follows
that there must literally be a balanced scorecard, one quantitatively measuring the
perspectives (1) to (4) previously related. From this point, Kaplan & Norton's
Balanced Scorecard idea drifts into a dreamworld haunted by silly numbers, psycho
babble and highfalutin consultants, and the generation of more froth than you get
from the caffe latte machine at your local Starbucks. (* Prof. Kaplan was also co-
inventor with Robin Cooper of Activity Based Costing, a concept also deeply suspect
for reasons very similar to those surrounding The Balanced Scorecard.)
Bar Code: One Dimensional (1D) bar codes are the familiar (*) representation of
the individual characters and digits making up an item's code by a succession of
vertical lines of varying thickness, the lines capable of being read and interpreted by
a computer scanning device. There are numerous alternative 1D systems for
representing an item's code. Examples are Interleaved 2 of 5 (having the advantage
of high physical density of the code); Code 39 (popular in manufacturing industry);
EAN (European Numbering System); and UPC (Universal Product System). See the
individual entries for these four systems. See also RFID tags. Two Dimensional (2D)
bar codes, also known as stacked bar codes, comprise small postage stamp size
complex patterns that appear to the naked eye as square dots and other tiny
geometric shapes. 2D bar codes convey vastly more data than their 1D cousins and
have been referred to as portable databases. Technologies include PDF417,
MaxiCode and DataMatrix. They require to be read by special scanners. (* The first
consumer item ever to be bar coded and scanned with a bar code reader was a
packet of Wrigley's gum on June 26th 1974.)
Barrel: the customary unit of measure of oil and other petroleum products, being
42 US gallons (= 35 imperial gallons or 159 litres). There are approximately 7.33
barrels of crude oil per tonne.
Barter: The exchange of goods for other goods, rather than for money. It is
estimated that some 10 to 15%. of world trade is conducted in this way. Barter is
especially likely to be encountered in trade between countries with "non
convertible" currencies, these being currencies with no value outside their countries
of origin.
Batch (Order) Picking: in stores and warehouse operations, picking the stock for
two, or several, orders together, then accumulating the picked stock at a further
location, in order to reduce the overall picking time, especially time spent travelling
to the stock. See wave picking.
Batch Progress Control: Batch Progress Control is the name that has been given
to a simple way of keeping track of a product's stock count, by keeping track of the
stock of separate batches of the product as they are used up over time. Suppose two
batches of material M are delivered, each batch comprising 1000 units. Stock of M is
2000 units in all, but two separate accounts are held on its record: Batch 1 (1000
units) and Batch 2 (1000 units). Stock over time is used on a strictly FIFO basis,
each withdrawal transaction referring to a specified batch. After a time, physical
stock of Batch 1 will be reduced to nil. At this time, the record for Batch 1 should
show 0 units (with Batch 2 showing 1000 units, of course). If the record for Batch 1
is not 0, an adjustment is made (since it known that the physical stock is nil). Batch
Progress Control is especially effective in a Variable Location warehouse, since with
this method of storing stock, locations are continually becoming empty - as each
location becomes empty, the fact is reported to the system as a stock "count" of zero.
Batch Scale: a multiplying factor, such as 1.62 or 0.78, applied to a normal product
batch quantity and the normal quantities of the batch's material components, to
adjust all such quantities to non-standard conditions. Thus the normal batch
production quantity might be 1000kgs, but the plant manager may decide to make
1200kgs instead, employing a batch scale of 1.2.
Battle of the Forms (legal): Where a purchase negotiation is not face-to-face, but
conducted by post, the so-called Battle of the Forms might determine what
constitutes an offer and what constitutes a counteroffer. The supplier offers to sell
on his conditions, 'attached hereto', perhaps in the letter, hoping the contract will be
set up on his own standard terms. The buyer 'accepts', agreeing the supplier's price,
but does so by way of his own purchase order document, containing his standard
terms, enclosed in his letter. This is a not acceptance of the supplier's offer, including
the supplier's standard conditions. Instead, it is a counteroffer substituting the
buyer's standard terms. If the supplier now goes ahead and delivers the goods
without more ado, the contract is formed on the buyer's terms. It is clearly
important for each party to know the state that has been reached - ie what the
prevailing position is with regard to standard forms, letters, faxes and e-mails. Note
that the convention is followed in law that if there is acceptance of an offer by post,
it occurs at the moment such acceptance it is posted (Such acceptance is still valid
even though the physical document might be lost in the post.) Note that this rule (of
defining acceptance as the moment of posting) applies only to the acceptance of an
offer. It does not apply to making an offer, or revoking an offer, or any other matter
in negotiation. (Thinking otherwise is a trap many people fall into. Note, however,
that the contract itself may stipulate that acceptance is to be made in some other
way than posting, for example, by actual communication.) Note finally that the
problem which the posting convention overcomes (ie delay) does not apply when fax
or email are used. Legally, then, in these cases, acceptance is deemed to take place
when the fax or email is received.
Bayesian Statistics: Bayesian statistics are experiential statistics. That is, they are
based on experience and observation. The fundamental Bayseian formula relates a
prior probability and a posterior probabability and can be stated as PRIOR
PROBABILITY + OUTCOME = POSTERIOR PROBABILITY. To illustrate what
is meant with an example, suppose we have equal numbers of two types of biassed
six-sided dice in an urn - Type A dice come up with a '6' 30% of the time, and Type
B come up with a '6' 60% of the time. We first take a die from the urn - the
probability of its being Type A is .5 and the probability of its being Type B is also .5.
If we were now to roll the die, the chance of its being Type A and getting a 6 with the
roll is .5 x .3 (= .15). The chance of its being Type B and getting a 6 with the roll is .5
x .6 (= .30). Suppose we now roll the die we have just removed from the urn and
obtain a 6. According to Bayes' theorem, the probability of the die being Type A is
given by: (the probability of rolling a 6 and its being Type A)/(the probability of
rolling a 6 and its being Type A + the probability of rolling a 6 and its being Type B).
In other words, with our example, if we roll a 6, the chance of the die being Type A is
.15/(.15 + .30) = 1/3, and the chance of its being Type B is .30/(.15 + .30) = 2/3. In
summary, the outcome of the roll of the die has allowed us to modify our original
probabilities as to the type of die we withdrew from the urn very considerably from
the original .5 and .5.
Bear (also Bull and Stag): A bear is stock exchange jargon for a trader on the
stock market speculating that a share price will fall; a bull is jargon for a trader
speculating on a price increase. A stag is a trader who subscribes to an initial public
company flotation of shares with the intention of immediately selling his holding
when the shares are later traded - ie the stag is expecting the price later traded to be
higher than the issue price.
Bill of Lading: Expressed in shipping terms rather than in terms of air or road
freight, a bill of lading is a memorandum issued by the captain of a vessel, on behalf
of the distribution company responsible for the shipment of the goods he is carrying,
stating that goods stowed on board are in (apparently) good condition. The
memorandum acts as the acknowledgment of receipt of the goods by the shipment
company and is evidence of a contract between the two parties. (Eventually, the bill
of lading provides proof of shipment and delivery - the document bears other details
such as the place of departure, the destination, the price of freight etc..) A bill of
lading is also assignable - that is, the company/person to which it has been assigned
can claim possession of the goods.
Bin/Bin Card: A bin is an old-fashioned term for a receptacle for holding stores
stock. A bin card is, literally, a card kept within the bin, and on which the number of
items present is inscribed, along with the dates and numbers of issues and receipts
that have taken place. In effect, it is a manual stock record.
Black Belt: The leader of a project team (of green belts) in a Six Sigma project.
Black belts need to be thoroughly versed in the Six Sigma methodology of DMAIC,
familiar with the statistical techniques encountered in the Analyse phase of DMAIC
and in possession of qualities of leadership. On the appointment to a Black Belt
position of a person of suitable personal qualities, but without experience, intensive
Six Sigma training of perhaps several weeks will be necessary. The Ju Jitsu "belt"
terminology emanated from Motorola, the founders of Six Sigma. In companies
committed to Six Sigma, at least in the US, it is estimated that there will be one
certificated black belt per 100 employees.
Black Book (Little): A humorous term for an imaginary small book supposedly
containing a list of the jobs and dates which a foreman is working to. The jobs and
dates are presumed to have been arrived at by the day-to-day pressures of work, by
intuition and by other informal means - i.e. not arrived at via a formal planning
system. The "little black book" is a term used by those advocating a logical, formal
planning system (such as APS or MRP) who wish to denigrate informal alternative
systems.
Blanket Order: An order placed on a supplier for a raw material intended to cover
the buying company's requirements for a considerable period of time (say, for 6 or
12 months). However, the material is not to be delivered in a single lot. Instead, the
buyer will "call off" small amounts from the blanket order for individual delivery as
and when he needs them. The advantages of the blanket order to the buyer are the
need to raise only a single purchase order and the obviousness of the size of the
order to both parties when agreeing the unit price of the material. Blanket orders
are provided for in materials planning systems. They are not to be confused with the
wasteful and pernicious practice of consignment stock. When agreeing a blanket
order arrangement, the two parties should be quite clear whether the contract is
severable or non-serverable - see stage deliveries.
BMC: British Motor Corporation - a motor company formed from Austin Rover
and Morris Motors in 1952 by an ill-advised merger encouraged by government,
and which was subsequently not well served in its management and commercial
performance. BMC marques included Austin, Morris, Riley, Wolseley and MG.
BOGOF: "Buy one, get one free". This retail offer not only stimulates demand, it
temporarily shuts rival products out for longer.
BOK: Body of knowledge - all that is known about a subject (referred to more
elegantly by the Latin term the corpus).
Bonded Warehouse: The colloquial term for an excise warehouse, this being a
storage facility approved by the Commissioners of Her Majesty's Revenue and
Customs for the deposit of goods liable to excise duty (ie tax) without the payment of
such duty. The purpose of the bonded warehouse is so that payment can be
postponed until the goods are removed for sale and use by final customers. Duty is
otherwise liable to be paid on alcoholic drinks and tobacco goods immediately on
manufacture. However, instead, such goods can be deposited "in bond" in the
bonded warehouse without payment taking place, payment being made immediately
only on their later removal. This privilege also applies to certain classes of goods
directly subject to duty on being imported from abroad. Bonded warehouses were
once policed by customs officers themselves, but are now managed by the company,
subject to approval and periodic inspection.
Bonus Schemes: When associated with shop floor work, especially as practised in
the engineering job shop, a bonus scheme is intended to reward machine operators
financially for achieving rates of production above average. Bonus schemes are often
complex and very particular to a specific production environment. For example,
management may believe that a rate of production above a certain level could be
achieved only at the expense of some other aspect of the job, such as the
maintenance of quality levels, and may wish to modify the bonus payable to
discourage the higher rate of output. Bonus schemes used in the past include
Halsey-Weir Premium; Barth Variable Sharing; Bedaux Point; Piece Rate; Gantt Task
& Bonus; Emerson Efficiency; Rowan Premium; and Taylor's Differentiated Rate.
Book Debts: in company accounts, cash sums owed to the company by customers.
Bootstrapping: In demand forecasting, the creation of forecasts for more than one
period ahead, especially when the more distant forecasts are calculated by
employing the near-in forecasts themselves. For example, the forecast for July may
be calculated by averaging the three last months demand figures. If these were April
4 units, May 5 units and June 6units, the forecast for July is 5.0 units (ie (4 + 5 + 6)/3
= 5.0). The bootstrapped forecast for August, the next period after July, is therefore
5.3 (ie ((5 + 6 + 5.0) / 3). We see that we have used bootstrapping to calculate the
August forecast, since one of the figures in doing so was the July forecast.
Breach of Contract (legal): In short, a breach comes about when one party or the
other fails to filfil the terms laid down in the contract. In fact, the breach may be a
breach of condition or a breach of warranty. (In the former case, the injured party
may if it wishes terminate the contract; in either case, it may sue in the courts for
damages.) Note that one party cannot, by an injurious act, bring a contract to an
end without the specific agreement of the other party. For example, if a supplier
states he does not intend to deliver the goods next month, the buyer can immediately
sue him in the courts - ie he does not have to wait until next month (an anticipatory
breach).
Breakback: local jargon for the explosion of the bill of materialsThe opposite of
breakforward.
BRIC powers: Brazil, Russia, India and China, emerging today as new economic
"super nations".
Brown Goods: An easy term for toasters, electric irons, kettles and similar small
scale consumer items. Contrast "white goods".
Budget: In the manufacturing company, there are various types of budget, used to
plan and monitor from the financial angle the activities of different departments
and groups. From the costing viewpoint, a budget is the sum of money it is
calculated will be spent in a cost centre over a year in order to produce the
"production forecast". The production forecast is the production quantity that it is
forecast that the cost centre will be called on to make in the year. This quantity is
used in the calculation of the standard costs.
Bullwhip Effect: The effect on inventory levels across a supply chain of delays in
communicating changed requirements - see Forrester's Curves.
Burden: In costing, the indirect cost element of a production cost. A term chiefly
used in the US.
C
3C: See CCC.
Cabotage: If a vehicle delivers goods to a foreign point, and then picks up a new
load for delivery to a second point within the foreign territory, the action is referred
to as cabotage, not backhaul. (Backhaul applies only if the second point is back in
the vehicle's own country.) Because cabotage is seen as threatening to the foreign
country's haulage business, regulations exist to prohibit it in such European
countries as France.
Capital Value (of a Company): A company's assets less its liabilities, as deduced
from the Balance Sheet. This is a strictly arithmetical view of a company's capital -
it does not include, say, its prospects or the know-how of its staff.
Capitalisation Issue (of shares): a company may believe that certain financial
entries within its accounts are in reality permanent, and that a more accurate view
might be taken of its finances if they were indeed made permanent. It may therefore
issue share capital covering the sum concerned, issuing the share capital free to
existing ordinary shareholders and removing the financial entry they previously
represented from the accounts. See also shares.
Cardinal Number: a fundamental number - thus 1, 2 and 3 are the first three
cardinal numbers, as opposed to an ordinal number ... first, second, third etc..
Carrying Cost: Normally, the cost to the company of supporting the holding of
stock (whether in the form of raw materials, components or finished goods). The
cost is usually expressed as a percentage per annum of the value of the stock
concerned and may be estimated at 25% pa. This percentage is arrived at by adding
(i) the percentage to be applied to the money tied up in the stock (by reference to the
company's target rate of return on invested capital, as set by senior management),
(ii) the cost of the stock's insurance, (iii) its warehousing costs, (iv) the percentage
cost due to any deterioration that might result, (v) general stock management, and
(vi) the percentages applying to very many more small incidental costs.
Cartel: A group of companies that have conspired to fix prices of some product or
service, contrary to the spirit of competition and free trade. Cartels are illegal in
most first world countries.
CCC: In banking and finance, the attributes the lender looks for in the person
borrowing money - ie Capital (his own!); Competence; and Character.
CCCC: In Health & Safety management, the four attributes looked for in the
management and ethos of an organisation - that is: Control (the allocation of
responsibilities and the securing of commitment); Competence (the provision of
training and advice); Co-operation ( ... between individuals and working groupp);
and Communication.
CCCCCC: The six Cs are a notion of the quality guru Philip Crosby and represent
Comprehension, Commitment, Competence, Communication, Correction and
Continuance.
CCD: Charged Coupled Device. Bar code "imaging" scanners which are less
expensive than the traditional laser scanners. The CCD is in effect a tiny digital
camera which takes a digital photograph of the bar code.
Central Limit Theorem: Suppose that, from a large population of parts, or items,
we were to take a number of samples of the same size, and measure some given
characteristic of each part in each sample. Suppose further that we were to calculate
the mean, or average, of the measurements relating to each sample (which we now
refer to as the sample-mean). Then the central limit theorem states three
conclusions, of which the third is the basis of Statistical Process Control (SPC): (1)
The grand average of the sample-means is the mean of the population of parts from
which the samples are taken; (2) The standard deviation of the sample-means is the
same as the standard deviation of the population of parts, divided by the square root
of the size of the sample taken; (3) The statistical distribution of the sample-means is
normal, or Gaussian, regardless of the distribution of the population.
Change Over: The action of converting a machine from its state of manufacture
for Product A to its required state of manufacture for Product B. Synonymous with
"Set Up".
Check Digit: In order to verify the validity of a numeric code, a simple arithmetic
procedure may be applied to the digits which constitute the code in order to derive a
further number. When this further number (or part of it) is appended to the end of
the original code, it is said to be a check digit. For example, a check digit may be
derived by the addition of the individual digits in the code. Thus the check digit
calculated for code 123 is 6 - i.e. 1 + 2 + 3 = 6. The new code is now the original code
with the check digit appended - in this case, 1236. If the code is subsequently written
as 1237, it is clearly in error. Check digits are now defunct and should be consigned
to the dustbin. They are a relic of the 1950s and the days of comptometers, which
were capable of very limited arithmetical checking. The validity of codes are now
checked directly by reference to a central database.
CIF (followed by a named port of destination): Cost, Insurance and Freight - see
Incoterms (Group C, "main carriage unpaid"). The seller has fulfilled his
obligations when the goods pass the ship's rail in the port of shipment. The seller
must pay the costs and freight necessary to bring the goods to the named port of
destination, but the risk of loss of or damage to the goods, as well as any additional
costs due to events occurring after the time of delivery, are transferred from the
seller to the buyer. However, under CIF, the seller must procure marine insurance
against the buyer's risk of loss or damage to the goods during the carriage.
Class A: A company that has installed MRP with maximum possible success - see
ABCD Checklist.
CLT: cumulative lead time - usually, the total leadtime of all stages of manufacture
to make a product ab initio.
Code 39: a bar coding system capable of encoding both numbers and letters.
Commodity: Commodities are primary products at the bottom of the supply chain
such as metal, crops and oil, sold in worlwide markets. Because the sources of
commodities are essentially limited by the amounts that can be supplied (ie by the
limitations of mines, estates and oil wells), the prices of commodities are liable to
very large fluctuations. To protect itself against a rise in the price of a commodity, a
buyer can purchase a commodity future, entitling him to buy X amount of the
commodity at future date Y. Then, when future date Y is reached, the buyer can sell
his future and buy the commodity at the prevailing spot price. If this spot price is
higher than it was originally, the profit on the sale of the future will offset the extra
cost of the commodity; if the spot price is lower than than it was originally, the loss
on the sale of the future will be offset by the lower cost of the commodity. A
commodity future therefore protects a buyer from a price rise, but blocks him from
obtaining advantage of a price fall. In reverse, a commodity future protects the
commodity producer from a price fall, but blocks him from taking advantage of a
price rise.
Common Carrier: In distribution, a haulier whose vehicles are for hire to the
public.
Competent Person: This definition has been put forward by the HSE (2003): A
competent person is one with sufficient professional or technical training,
knowledge, actual experience and authority to enable him to: (1) carry out his
assigned duties at the level of responsibility allocated to him; (2) to understand fully
any potential hazards related to the work (or equipment) under consideration; (3) to
detect any technical defects or omissions in that work (or equipment), recognise any
implications for health and safety caused by those defects or omissions, and be able
to specify a remedial action to mitigate those implications.
Consumer Protection Act, 1987: An act relating to the supply of goods and
services, including their hire. The supply of goods under this Act relates only to
consumers, not to industrial users.
Consumer's Risk: The risk inherent in a sampling plan that an incoming lot of
parts that it was intended should be rejected will, in fact, be accepted. (See also
Producer's Risk.)
Consumer Tolerance: (see also LD50 and Loss to Society) Although there are strict
physical limits of quality and product performance for the engineer or
manufacturer, the consumer may be willing to tolerate actual performance and
quality outside such limits. Taguchi maintained that as far as departure of
performance from the ideal was concerned, the consumer's limits of toleration could
be represented by the following expression: SQRT (A/A0) x (T/2), where A = the
price of the product, A0 = the cost to the consumer of obtaining a non-conforming
unit, and T = the physical tolerance limits of manufacture.
Consuming Site: The factory site using Material M, as described under Multi-Site
Netting. See also Originating Site.
Containers (ISO): a standard container measuring 8' (wide) x 8' (high) x one of
four standard lengths (10', 20', 30' and 40'). The ISO container is a type of unit load.
The manufacturer wishing to despatch his goods overseas by container contacts a
container base. The container is delivered by vehicle. It is packed and sealed, and
returned to the container base. It then proceeds to a railway station where it is
loaded onto a container train, which conveys it to a container port such as
Southamptom or Immingham. (Container ports are those specialising in servicing
container vessels, by providing such standard materials handling equipment as end
loaders; side loaders; straddle carriers; and gantry cranes.) At the port, the
container is loaded into a slot within a container vessel. See tue, a unit of
measurement of container capacity.
Contract (legal): An agreement between two or more parties for the supply of
goods or the performance of a service. To be legally enforceable, there must be an
offer (to supply), an acceptance of the offer and consideration. Consideration is the
prospect of money, and its existence proves that the agreement is a traditional
bargain. The law encompassing contracts is a major branch of Common Law,
termed the Law of Contract. It comes about from basic principles and previous
decisions of the courts. That is, there is no specific statute law passed by parliament
(although some statute laws have a bearing on contract law).
Control Chart: See Variable Control Chart, Attribute Control Chart, Control
Chart, Number Percentage Chart and U-Chart.
Control Limits: Two horizontal lines are drawn on a control chart denoting the
upper control limit (UCL) and the lower control limit (LCL). The sample-means and
the ranges drawn on the chart every so often must lie within these limits. If they do
so, the process is behaving normally and is said to be under control. If any point lies
outside either of the limits, this denotes loss of control - the process must be halted
and the reason determined.
Convertible Loan Stock: Loan stock issued by a company that can be converted
to ordinary shares at a specified future date at a price set at the time of issue.
Corn Laws: A system of tariffs protecting British agriculture from foreign imports,
as a result of which British manufacturing exports were inhibited. The Corn Laws
were famously repealed in 1846, ushering in an era of free trade.
Corporation Tax: In the UK, a government tax levied on the profits of a company.
Corrective Maintenance: one of the components of TPM, and concerned with the
carrying out of investigations into past trouble and malfunctions with a view to
changing procedures in operation or making equipment modifications. In addition,
corrective maintenance is concerned with the need for actual repairs to get machines
back and running after a breakdown (also referred to as breakdown maintenance).
Cost/Benefit Analysis: The setting out of the estimated future costs of acquiring
and operating an asset over time, usually year by year, alongside the estimated
financial benefits likely to be gained year by year in doing so. The sums each year of
cost less benefit is set out for each year. In evaluating the year by year totals, careful
account must be taken of the "time value" of money - ie if one was to spend £100
now and then gain a benefit of £100 from doing so in a years time, he would be one
worse of if the accepted opportunity value of money (ie the accepted rate of interest
on money) was 10% pa. That is, the £100 in the first year could be earning interest
over the year, so, at 10% pa, one would need a benefit of £110 in one years time in
order to break even. In considering a cost/benefit case, the executive should pay
particular attention to the financial value of the benefits. Costs are usually not
difficult to estimate, but benefits are notoriously problematical. For example,
consider the benefits of building a new plant - will sales department be able to sell
the increased output, and, if so, at what price? Sometimes, even the costs are
dubious - for example, how does one cost the destruction of the environment in
evaluating a proposal for a windfarm? Frequently, we find cost/benefit analyses
used to disguise very shaky assumptions, and to back up semi-political objectives.
See importantly DCF and NPV.
Cost (Prime): That part of an item's product cost which is directly incurred. That
is, the sum of direct materials costs, direct labour costs and direct expenses.
Cost (Product): The financial resources calculated to have been incurred in the
manufacture of one unit of a manufactured product. Two stages are involved in the
calculation: (I) all manufacturing costs and expenditures are assigned to the
production cost centres where they are incurred, and (II) the cost in each production
cost centre from Stage I is allocated to the products made there. Allocations are
made in a way reflective of the demand made by products on manufacturing
resources (eg according to the number of employees involved, or according to the
value of the capital machinery employed). Cost accounting was devised in c.1870 by
Andrew Carnegie (1835 - 1919), founder of the US steel industry. It was
instrumental in enabling him to reduce the then cost of steel rails at his Homestead,
PA, factory of $160/ton to $17/ton, itself leading to the opening up of the American
West. Nowadays, an important factor in determining a product cost is the ability to
"implode" the bill of materials.
Cost (Production): A product cost made up of the sum of the production overhead
and the prime cost. The production cost excludes any element attributable to
general company overheads such as R & D, sales and marketing etc..
Cost (Standard): A product cost calculated before the start of the company's
financial year based on production forecasts, standard assumed materials costs,
standard assumed labour costs and standard assumed expense costs. A standard
cost, estimated or otherwise, is an essential requirement in setting the selling price of
a new product.
Cost Centre: An area of operating activity where the manager in charge has
control of, and responsibility for, costs and expenditures incurred. The notion of a
cost centre is central to product costing, since a budget can be set for the area and
the manager's (cost) performance monitored.
Cost Driver: The specific means by which indirect costs incurred in a cost centre
are allocated to the various products made there. The "allocation basis". See "cost
driver", mentioned in the entry for indirect costs.
Cost Pool: Synonymous with Cost Centre. Cost pool is the preferred term in the
US.
Costs (Direct Expenses): The costs of services and sundries (not labour or
materials) directly incurred in physical production (eg the cost of electricity
consumed during the production run).
Costs (Direct Labour): The cost of labour directly undertaking the physical work
of manufacture - eg the wages of machine operators.
Costs (Direct Materials): The cost of materials directly going into manufacture
itself - ie taking part in physical production.
Costs (Indirect): Costs associated with the manufacture of a product but which
are not directly incurred in the product's literal manufacture. (For example, the
shop supervisor's wages.) A problem with the treatment of indirect costs is that
while they must be taken account of, their allocation to the costs of the products
made must be accomplished somewhat artificially (using a so-called cost driver). In
the example of the supervisor's wages, the cost driver used to allocate his wages to
the various different products made might be the number of man hours involved in
the manufacture of the different products, or the consumption during their
manufacture of, say, electricity.
Costs (Indirect Expenses): The costs of services, utilities or other sundry items
(everything except materials and labour) associated with manufacture but not
directly incurred in the manufacture itself. Examples are cleaning services and the
cost of regular planned equipment maintenance.
Costs (Indirect Labour): The cost of personnel not directly involved in literal
manufacture, such as the cost of management, supervision and so on.
Countertrade: A general term for deals between companies in which payment for
suppliers is made through the further exchange of goods, services or favours, rather
than by cash. Countertrading includes barter, buyback , direct and indirect offset
etc..
CP: (1) Cost Performance (see seven entries under "Costs" above); (2) critical path
- see PERT.
CPA: (1) Contract Price Adjustment. A contract between supplier and buyer may
provide for the prices and costs to be paid to be varied between the contract date
and the completion date. This is usually done to take account of inflation and/or
changes in foreign exchange rates over the duration of the work. It is vital for the
two parties to specify exactly what costs are to be subject to adjustment, and the
basis or bases on which they are to be made. See especially BEAMA.
Cr: Credit or creditor - the right hand side of an account (UK, not US, where it is
on the left).
Credit: A major term used if financial accounting, being a benefit received by the
company - ie the supply by others of value to our company. Thus a supplier who has
delivered raw materials to our factory is a creditor.
Critical Path: That succession of tasks and jobs in a schedule or project, none of
which can be late in completion without making the whole schedule or project
correspondingly late. Also, Critical Path Analysis (CPA) - the analysis of the
durations and interdependencies of the tasks and jobs anticipated as being
necessary to complete a project in order to determine which particular continuous
sucession of tasks from the starting point to final completion will be the longest in
duration. (The particular sucession of tasks is "critical" because it defines the
remaining maximum duration of the project, and any delay on this path will cause a
delay in ultimate completion of the project.) See also slack .and PERT.
Critical Ratio: A shop floor prioritisation rule in which jobs are prioritised
according to the quotient: (time due minus time now) / (leadtime remaining). The
lower the CR, the higher the priority. A critical ratio of 1.0 means the job is exactly
on time. The merit of CR is that the priorities tend to restore the leadtime element of
jobs, and consequently to restore the queue element of jobs on the shop floor.
CTQ Tree: An hierarchical tree diagram used to identify CTQ aspects of a service
or manufactured item. For example, a motoring organisation might place at the top
of a CTQ Tree the goal "Response to members' breakdown calls". Branching from
this might be the two measures (1) "Breakdowns fixed per day", and (2) Time to
effect the breakdown repair. Beneath (1) might be (1a) Call outs per day and (1b) %
Breakdowns fixed at the roadside; beneath (2) might be (2a) Time to respond to
request, (2b) .... etc.
Customer Service Target: A quantitatively expressed goal set by the Sales &
Marketing Manager for the satisfaction of customer orders. The goal may be set in
quality terms (say, % conforming parts), delivery date and quantity (on-time, in
full, or "OTIF") or, in the context of safety stocks, in terms of stock availability. A
stock availability target might be, say, "every line of 95% of all orders fulfilled from
stock, and 60% of all remaining lines ...".
Cycle: In sales forecasting, a period over which sales demand assumes a particular
pattern of highs and lows. Although cyclicality therefore seem similar to seasonality,
a major difference is that cycles are not of a fixed duration. Consequently, a first
task of forecasting is to detect the start and finish of the cycle. Well known cycles in
the UK in the past have been the industrial cycle (about 7 years) and the textile
cycle. Cycles appear to be dying out, however, perhaps because of increasing
globalisation.
D
DAF (followed by a named place*): Delivered at Frontier - see Incoterms (Group
D "Arrival"). The seller has fulfilled his obligations when the goods are placed at
the disposal of the buyer on the arriving means of transport, not unloaded, cleared
for export from whence they have come, but not cleared for import at the named
point and place at the frontier, but before the customs border of the adjoining
country. * Because the term "frontier" could be any frontier, it is of vital importance
in DAF that the frontier in question be defined precisely by always naming the point
and place in the term. When delivery is by sea, the Incoterms DES or DEQ should
be used.
Dangling Dependency: An alarming term for an activity that has been incorrectly
created or added to a project flowchart such that the activity does not link in with a
next stage or later activity. Dangling dependencies can be inadvertently created
when a project flowchart is being updated by reporting completed activities. (As the
activities are duly reported, they are physically removed from the project flowchart
to make it increasingly simpler to comprehend.) See critical path.
Days Cover: the number of days that stock on hand will last before running out,
based on past average daily demand.
DCF: Discounted Cash Flow (synonymous with IRR - Internal Rate of Return).
The rate of interest that would need to prevail in order for a stream of costs over
time to have the same net value as a stream of benefits. The calculation of the DCF
rate of return only became feasible with the advent of computers. Because the DCF
is standard and does not presume a particular rate of interest, it is often preferred to
Net Present Value as a means of evaluating the value of a cost/benefit stream. In the
example given undrer NPV , if a rate of interest had been selected for the project
whereby the net present value finally equalled zero, this rate of interest would have
been the project's DCF rate of return. See cost/benefit analysis for a short critique of
the use of these techniques..
Deadheading: (1) The planning of load distribution such that a vehicle is to return
to its originating site empty after delivery of its load (compare backhaul and
cabotage). The verb to deadhead is used to mean to convey a vehicle with an empty
load. (2) The removing of dead flowers from a rose bush after they have bloomed.
Dead Load: Jargon for manufacturing orders not yet released to the shop floor.
Debenture: A long term loan issued by a company and bearing a specified rate of
interest and specified redemption date. Debenture holdings can be publically traded.
A mortgage debenture is one in which the holder has preference over all other
creditors.
Decoupling (of demand and supply): the building up of stock ahead of forecast
demand. For example, manufacturing extra output in September in anticipation of
large sales later at Christmas.
Deduct Point: The point in the manufacturing process at which it is deemed, for
financial and record keeping purposes, that all of the parts used in the manufacture
are used up. That is, up to the deduct point, all starting materials are assumed to
continue to exist; and after the deduct point, they are all assumed to have been used.
Many deduct points can be created at stages in a lengthy product route, each one
intended for materials used at that stage. The designation of deduct points is
especially important in backflushing. See also Lead-Time Offset.
Deep Sea: In transportation, ocean going shipping (in the US, Ocean Going.)
Defective Unit: A part which fails or is otherwise unsatisfactory in actual use. The
ISO definition of a defect is the non-fulfilment of a requirement related to an intended
or specified use; advice is given to avoid the term, since it may seem to give non-
quality people grounds for legal action (!) See Non-Conforming Unit.
Degrees of Freedom (df): The "variance" of a group of numbers is a widely
accepted way of expressing how spread out the numbers are in the group, and is
denoted for n numbers by s SQUARED. The formula is s SQUARED = SUM ((x -
xbar) SQUARED) / (n - 1), where xbar denotes the mean, or average, of the
numbers in question. Thus since the mean of the three numbers 4, 5 and 6 is 5 (ie x
bar = 5), then the variance of the three numbers is ((4 - 5) SQUARED + (5 - 5)
SQUARED + (6 - 5) SQUARED) / 2, which equals 1. The term (n - 1) which makes
up the denominator of the variance is the number of degrees of freedom. To illustrate
degrees of freedom, consider two variables "x & y". x can be any number at all, and
so can y (say, x = 7 and y = 53). In other words, there are two degrees of freedom
with regard to the expression. Now consider the relationship "x + y = 9". Only one
of the two variables x and y can be chosen freely. As soon as it has been chosen, the
other number is fixed, since the sum of the two numbers must equal 9. For example,
if x is freely chosen as 7, then y cannot be freely chosen ... it must equal 2. Now
consider the formula for the variance of a group of n numbers. If you know (n - 1) of
the numbers and the mean x bar, then the final number ... ie the nth number ...
cannot be chosen freely. The nth number must be such that, along with the (n - 1)
numbers already freely chosen, the mean of all of the numbers together equals the
value x bar used in the calculation. For example, if the mean of three numbers is
15.0, and we freely choose two of the numbers as 12 and 8, then the third number
cannot be freely chosen ... it must be 25, since 25 is the only number which results in
a mean of 15.0 (ie (12 + 8 + 25) / 3 = 15.0). A formal definition of degrees of freedom
is df = the number of observations minus the number of required relationships
among these observations. (In the case of the variance, we are determining the
variance of n numbers and we have 1 required relationship (ie the mean), so that the
number of degrees of freedom for the n numbers is (n - 1)). The value in using
degrees of freedom in the calculation of the variance is that its use corrects a
tendency otherwise to understate the uncertainty in the measuremens, especially
where n is small.
Delinquent Order: Sometimes used of a manufacturing order not yet received but
which is past its due date.
Delivery (of Goods): The transfer of goods from a carrier to a recipient, and of no
legal significance except that the recipient has a duty to take reasonable care of
them. ("Reasonable care" would include keeping goods out of the rain and
preventing direct physical damage, but would not extend to storing them in special
conditions, such as under refrigeration.) A delivery note sent by the supplier is
merely a brief record describing what has been sent in general terms (usually
quoting the buyer's order number). An unpacking note is a document recording the
full details of the delivery - individual items and quantities etc.. It is most important
to distinguish delivery from acceptance.
Demand (Latent): Inherent demand for an existing product which has not been
placed by potential customers because of a failure in the selling company to hold
stock or a failure to provide a ready means of communication. Latent demand
persists when the customer is fobbed off by the supplier with substitutes that are
accepted reluctantly. In demand forecasting, especially as it concerns consumer
goods, it is important to obtain a picture of the true demand, not the demand for
substitutes or after-the-event, late invoice statistics. An example of latent demand
arose many years ago regarding the sales of Jonquil Yellow paint, a pale shade of
yellow. Since Jonquil is very similar to Standard Pale Yellow, customers who phoned
the company asking for Jonquil, which was out of stock, were persuaded by the sales
girls to take Standard Pale. These sales (of Standard Pale) were recorded as
demand, resulting in erroneous demand data for forecasting purposes. Although the
sales were for Standard Pale, what should have been recorded as the demand were
the turned-away requests for the Jonquil.
Demand (Patent): Sales demand which is made known to the selling company in
the form of customer orders (contrast Demand (Latent)).
Demand (Sales): The wish and ability of a customer to buy a particular good of
specified physical qualities at the price offered for sale. Demand is patent if the
customer makes his wish to buy known to the seller. It is latent if the customer is
unable to place his order, perhaps because of inadequacies in the sales operation or
insufficient stock. The seller must be careful not to record as demand the sale to a
customer of a second-choice substitute rather than his original requirement. The
seller must also record the full amount asked for by the customer, even though only
part of his requirement has been satisfied due to lack of stock. (It has been suggested
that the difference in volume between the sale of paint and the demand for paint is
2%.) The manufacturing company must forecast demand, not sales, even though it
is common to speak of sales forecasting, rather than demand forecasting.
Demand Forecasting: Demand forecasting, also commonly but erroneously called
sales forecasting, is the prediction of the future demand for products that will be
placed by customers. Forecasts are prepared by the application of statistics to
demand data. (See Demand (Sales)). The company should employ one of the many
excellent software packages on the market * - calculations are too complex to be
attempted in any other way. (But see Delphi Forecasting and collaborative
forecasting.) As a first step, the company must recognise that attempting to make
manual demand forecasts is unacceptable. Sales staff may be "nearer the market",
but clearly cannot manually detect and describe subtle trends and fluctuations,
including seasonal effects etc.. Statistical demand forecasting does not pretend to
produce accurate forecasts per se. What it does is to detect and mathematically
describe established and emerging demand patterns. The difference, then, between
the forecast obtained by extrapolating the demand pattern and the demand that
eventually transpires is termed the forecast error. If forecast errors themselves are
analysed, it will be found that they constitute random data (a statistical test can be
applied to data to show whether or not they are "random"). Random data cannot by
definition be forecast, although a buffer of safety stock can be provided to protect
customer service for those times when the forecast is too low - see Safety Stock. The
installation of a forecasting system and its companion safety stocks system is one of
the easiest and most effective actions that a company can take - typically, immediate
stock reductions of 30% will be observed. Packages vary widely in sophistication
and price and include those in the list at the end of this Glossary entry. Note that
since the mid 1990s, relatively inexpensive "multi model" packages have been
developed. Multi model packages are those incorporating as many as 20 different
forecasting models (including many otherwise identical models but each with
different parameters). Each month, the multi model software makes multiple
forecasts. The following month, multiple forecasts are again calculated, but the one
issued for use by the system user is the one emanating from the model which proved
to be most accurate the previous month. There are two basic families of forecasting
techniques - see Causal Forecasting and Naive Forecasting.
The Deming Circle: a name sometimes given to the PDCA circle (qv).
Deming Prize: One of a small number of prizes related to quality, the Deming
Prize being originally funded by royalties made available by the late W. Edwards
Deming and administered in Japan by the JUSE. The Deming Prize is thought by
many as being the premier quality prize worldwide, and immense prestige is gained
by those winning it.
DFSS: Design for Six Sigma, a methodology entailing rigorous data gathering to
ensure that "the voice of the customer" is given highest prominence, and entailing
also rigorous consideration of the intended process to ensure that output will be
within the six sigma limits (ie that there will be a process capability index of 2.0 or
better, and with non-conformancies at fewer than 3.4 per million.) In the 1998
General Electric Annual Report, the CEO Jack Welch stated that Every new GE
product and service in the future will be "DFSS" - Designed for Six Sigma. These new
offerings will truly take us to a new definition of "World Class". See Six Sigma.
DGR: Daily Going Rate - a material's annual usage value divided by the number of
working days.
DIFPAK: A collective waste compliance scheme involving the dairy industry - see
Packaging Waste.
Discrete Lot Size: Synonymous with "lot-for-lot" - that is, the manufacture of
precisely the number of units needed to satisfy net requirements, rather than the
manufacture of a specified lot quantity which may be greater than the net
requirements.
Distribution Mix: The five most important factors needed to provide an effective
distribution operation and provide for customer satisfaction in the distributor's
service. The factors are: inventory; warehousing facilities; communications;
packaging and transport.
Distribution Network: The physical storage points, transport routes and means
of communication by which (1) goods are conveyed to ultimate consumers, and (2)
information about activity and requirements is gathered for central analysis. In its
simplest form, the network will comprise a central source location, such as a factory,
a small number of major regional warehouses supplied from the centre, and a larger
number of depots supplied by the regional warehouses. The data collected will
include customer demand (at the depots) and stocks (at all points of storage). See
also echelon.
Dock Leveller: a hinged bridge installed between the surface of a goods receiving
or despatching dock and a vehicle to compensate for the difference in height
between the two surfaces. Dock levellers automatically adjust in height as the height
of the vehicle changes during the loading or unloading process.
Dock Receipt: an internal stores or warehouse transaction that may be completed
when goods have been received from a supplier but not yet "put away" into their
eventual storage location. The dock receipt holds the id of the material and states its
location merely as the company's receiving dock. The quantity received is shown on
the stock record, along with its location, but is held in a special category rather than
as available stock. A second transaction must be raised and submitted when the
goods are finally moved from the receiving dock to their eventual storage location.
DOE: (1) Department of Energy (US Government). (2) Design of Experiments - the
name given to the methodology for examining the simultaneous effect of two or
more factors on a particular system. The reaction of the system is termed its
response, and is manifest in the form of a response variable. An experiment is an
investigation of the behaviour of a system. Its purpose is to analyse the effect on the
system of one or more factors. If it is the intention of the analyst to study only the
effect of a single factor on the system ... ie to conduct an experiment with one factor
... this can be readily achieved by varying the intensity of the factor and duly
recording the system's response, verifying the results with ANOVA. However, it is
likely that for many systems, response will be affected by two or more factors. Not
only that, but the effect of one such factor on system response may depend on the
presence and intensity of a second factor. In other words, if there are two factors A
and B, then the effect of Factor A on the response may depend on the presence and
level of Factor B, and the effect of Factor B on the response may depend on the
presence and level of Factor A. Investigation of mutually dependent factors on a
response is known as design of experiments. The first step in experiments with more
than one factor is to select a factorial design. Factorial design is the setting out of the
combinations of factors and factor levels that are to be the subject of the
experimentation. "Factor level" means the degree of intensity of the factor in the
experiment. (For example, high temperature or low temperature.) For simplicity in
almost all instances, it can be supposed that each factor should be tested at just two
levels: high (+) and low (-). When this is assumed, the number of combinations of
factor levels needed to complete an experiment involving n factors and two levels is
given by 2 **n. (for example, 8 combinations for 3 factors). The four combinations
for two factors is given below; the eight combinations for three factors is illustrated
under Orthogonal in this Glossary.
Combination 1: A - B -
Combination 2: A + B -
Combination 3: A- B+
Combination 4: A + B+
Having decided on the factorial design, the next step in DOE is to carry out the
experiments, varying the factor levels between the high and low levels in strict
accordance with the design as described. The results are meticulously recorded, and
the experiment may be replicated. As well, individual tests may be carried out in
random order so as to reduce possible experimental bias. Finally, data from the
experiments are analysed as series of paired combinations, one factor pair at a time.
The results of these factor analyses can be illustrated as a set of response diagrams.
A given response diagram relates to a specific, chosen factor - say, Factor A - and is a
plot of degree of response on the vertical axis and the two factor levels for A (ie low -
and high +) on the horizontal axis. What is sketched on the plot is a straight line
joining the response value at the low level - and the response value at the high level
+. However, what is of interest in the response diagram is that there are in fact two
straight lines, not just one. The first joins the low and high reponse points when a
second Factor B is at a low level, and the second straight line joins the low and high
response points when the second Factor B is at a high level. It is very frequently the
case that only two factors ever have a mutual interaction as described. The set of
response diagrams able to be drawn through Design of Experiments will identify
these two factors and indicate how they might be mutually set so as to optimise their
effect on the system response.
Dogs: A humorous marketing term for products on the selling range with low
market share and low market growth (see also Cash Cows).
Double Sampling: The inspection of a first sample of size n1 and then the taking
of one of three courses of action: (1) accepting the incoming lot at once if the
number of non conforming items is less than or equal to the acceptance plan
number c1; (2) rejecting the incoming lot at once if the number of non conforming
items is greater than the acceptance number c2; (3) taking a second sample n2 and
accepting the incoming lot if the total number of non conformancies in the two
samples combined is less than or equal to c2.
Downdate: a jocular term that is a play on the verb update, and meaning to change
a numeric value to a lower value (eg to downdate the proposed manufacturing
quantity of 100 units to 60 units). The verb is principally used in closed-loop MRP
when the production expected from a scheduled receipt is reported as having been
achieved - the stock quantity is updated and the outstanding scheduled receipt itself
is downdated. Also in closed-loop MRP, the planner might talk of downdating
certain planned orders and simultaneously updating the number of firm planned
orders.
Downtime: The period of time a machine is not being used. (The implication is
usually that the shop floor would wish to have used the machine, but was unable to
do so because of its malfunction.)
one sigma : 691,500 DPMO; two sigma : 308,500 DPMO; three sigma : 66,800
DPMO; four sigma: 6,200 DPMO; five sigma: 230 DPMO; six sigma: 3.4 DPMO.
Draft: There are numerous alternative meanings of this term. One of them is "an
instrument signed by a drawer to a drawee requesting payment at a future time
either by a third party or by the drawee". Hence sight draft = a draft payable on
demand, time draft = a draft payable at a specified time in the future and date draft =
a draft that matures a certain number of days after its issue.
DRPII (Fair Shares, or Lean DRP): A procedure devised by R. G. Brown for the
replenishment of a distribution network. The steps involved are: (1) determining
which SKUs in the network will shortly reach critical levels of stock; (2) notionally
allocating stock held at the centre to fulfil the potential shortages; and (3)
authorising actual despatches of allocated stock in a convenient way and in
convenient quantities.
DTP: Desk Top Publishing (eg through the Quark Express Software), or
Distributed Transaction Processing.
Dunnage: any material such as boards, blocks, metal or cardboard supports used
externally to support or secure products and packages in storage or under
transportation in order to protect them from physical damage or to assist in their
handling. Dunnage is also used to refer to purely filler material used as loose
packaging, such as foam, bubble wrap and air pillows. Originally, dunnage was used
in shipping to denote brushwood or mats stowed beneath the cargo of a vessel to
protect it against damage.
Durability: the degree or length of use of an object until its replacement becomes
preferable to its repair.
Duty of Care: In common law, the precept that one should take reasonable care to
avoid acts or omissions which can reasonably be foreseen as being likely to injure his
neighbour. One's neighbour is anyone closely and directly affected by what he does
or fails to do. Note that the duty of care is a civic one, not a requirement imposed by
statute law. If the citizen fails in his duty and this failure leads to another's injury,
he is guilty of a tort and can be sued in the courts for damages.
DVD: Digital Versatile Disk. In the consumer market, machines capable of playing
DVDs - ie DVD players. DVD players are either "non-recordable" or, far more
desirably, "recordable", these being capable of also recording TV programmes, not
merely playing pre-recorded material.
E
e: (inscribed on packages as relating to the weight or volume of contents) - see TNE.
Economic Order Quantity: When raw material stock is ordered from a supplier,
two classes of cost are incurred apart from the cost of the material itself (ie apart
from the invoiced amount). These are: (1) the costs incurred literally in placing the
order itself and seeing to its delivery, unloading and putting away; and (2) the costs
of holding the stock in store before its ultimate use (see Carrying Cost). These two
costs are "in opposition" - that is, we can make the ordering costs smaller by
ordering larger quantities less frequently, but at the same time increasing the stock
holding costs. Or we can make the stock holding costs smaller by ordering small
quantities at very frequent intervals, but at the same time increasing the order costs.
The economic order quantity, or least cost order quantity, pupports to be that
quantity of stock ordered which minimises the total of the two classes of costs. The
amount is calculated as SQRT (2AO/iv), where A = the annual amount ordered, O =
the cost of placing this order, i = the rate of interest on stock capital and v = the unit
value of the stock. The formula for the EOQ is believed to be the earliest materials
management formula ever published. It is widely known and just as widely ignored.
Perhaps the reason no-one uses it, is that it does not (and cannot) take cognisance of
such factors as price discounts for volume, vehicle scheduling and payment/credit
terms. The quickest way of reducing stockholding and quality costs appears to be
the lean manufacturing principle of arranging frequent, small deliveries, and taking
care that such deliveries are themselves accomplished as smoothly and economically
as possible.
ECP: Engineering Change Proposal.
ECR: (1) Engineering Change Request (qv); (2) Efficient Consumer Response.
ECSC: European Coal and Steel Community, a trading block of six countries
promoted and launched in 1950 through Robert Schuman of France (though largely
devised by Jean Monnet).
EDI: Electronic Data Interchange. The transmission of data from one computer to
another, usually involving different companies (ie the buying company, or rather its
order placement system, and the supplying company, or rather its order processing
system) and usually involving also substantial distances. EDI is often used as an
expensive fax facility by large customers such as supermarkets terrorising small
suppliers. The technology is expensive, and seems to have been marginalised with
the arrival of the (cheap) Internet.
EEF: The Engineering Employers' Federation, a lobbying body with 6000 member
companies ("The Voice of UK Manufacturing Industry"). Visit www.eef.org.co.uk.
Elasticity (of demand): A term used in economic theory to describe the extent to
which the demand for a good will change as its price changes. Goods are said to be
price elastic if demand is considerably affected by changes in price (eg cars,
furniture and luxury items). They are price inelastic if demand changes very little on
a price alteration (eg necessities such as staple groceries).
Employment Rights Act (1996): Among other things, it is required under this
law to send to a new employee, within two months of his starting work, a written
statement containing basic particulars of his contract of employment, such as his
rate of pay, hours of work, job title etc..
EPOS: Electronic Point Of Sale - the recording of retail sales at the till in the
store/shop on a data storage device, and its communication to a central controlling
point, possibly for the purpose of direct stock replenishment.
Equity: (1) the value of shares issued by a company (or a person's own particular
shareholding); (2) in law, a person's original financial position (see
misrepresentation); (3) "fairness".
Erotic Gherkin, The: See Building the Gherkin - The Swiss Re Tower in the City
of London, home to the Baltic Exchange.
Error (true): The difference between a measured value and the corresponding true
value. In metrology, true value is almost never known. However, certain well-known
measured values such as the universal gas constant R or the acceleration due to
gravity g have been established with such thoroughness that the published values of
them can be regarded as "true".
Euro: an ultimately doomed unit of currency that will one day collapse into its
component parts (one size cannot fit all). The currency was made up of the
combined currencies of the previous currencies of European Monetary Union
members, namely Germany (Deutschmark), France (Franc), Italy (Lire), Holland
(Guilder), Spain (Peseta), Portugal (Peseta), Luxembourg (Franc) and Greece
(Drachma). Mercifully, the UK did not join. Note that the EU's Racism and
Xenophobia Monitoring Unit has stated (June 2002) that it regards criticism of the
euro as constituting "monetary xenophobia" - see EU above.
Exchange Curve: A graph showing two individual curves. If the two axes of the
graph are variable X and variable Y, then (1) for the first curve, as the values on
axis X increase, the corresponding values on axis Y decrease, and (2) for the second
curve, as the values of X increase, the values of Y also increase. A prime example of
an exchange curve is the EOQ curve: as the order size increases, the costs per unit of
product ordered which are attributable to stockholding increase, but as the order
size increases also, the costs per unit of product ordered attributable to the placing
of the order decrease.
Explosion (of the Bill of Materials): The materials planning procedure whereby
the plan requirements of products at the top of the bill are successively translated
into requirements and plans at lower and lower levels. For example, the plan for a
bicycle is exploded to show the need for two bicycle wheels and one frame,
whereupon the plan for one of the wheels is exploded to reveal the need for one
wheel rim and 150 spokes. The term "explosion" is a colourful term reflecting that
the few planned requirements at the top of the bill lead to ever increasing numbers
of requirements at the levels lower down. See also Implosion.
Exposures: The number of times the inventory level of an item reaches a low point
prior to its replenishment, obtained by A/q, where A is annual usage and q is the
replenishment quantity.
Express Terms (legal): Terms of a contract which are expressed - ie written down,
rather than merely implied. Implied terms by contrast are not written down - they
are assumed to exist either by commonsense or by the custom and practice of the
trade. See also implied terms.
External Set Up Time: In changing over a machine from the manufacture of one
product to the manufacture of the next, the external set-up time is the duration of
time required to carry out activities preparatory to the set-up, but while the
machine is still working on the previous product (or after work has commenced on
the next product). Examples of external set-up activities which take time to perform
are the fetching of the tools that will be needed for the set up, or the putting away or
sharpening of tools that have just been used. Contrast Internal Set Up Time. See
SMED.
F
FA: Flexible Automation.
Factor (in ANOVA and DOE): A set of conditions that has an effect on a system
and which can be varied or controlled fo observe that effect. For example, the
incidence of office invoice errors per 1000 invoices issued may be the observed
result, and the factor under which they occur (ie the set of conditions) may be the
employment of untrained invoice clerks. Two other factor levels under which invoice
errors could be recorded might be the employment of clerks with 2 weeks training,
and with 6 weeks training.
Failure Rate: Usually denoted by the Greek letter lamda. Under operational
conditions, the failure rate of a particular type of component or unit expresses the
number of failing units to have occurred by a certain time as a fraction of the
number of surviving units. See The Manufacturing Manager, Equation 3.5.
FAK: (Freight All Kinds) A system of tariff charging applied in Deep Sea
transportation employed by non-conference operators whereby a charge is made by
the shipper dependent only on the cubic capacity of the load carried and the
distance it is conveyed. Contrast the tariff rates charged by a Conference operator
which is set depending on the cargo's financial value. (* See also Shipping
Conference). Note that FAK is not one of the standard Incoterms.
FCA (followed by a named place): Free Carrier - see Incoterms (Group F, "main
carriage unpaid"). FCA means that the seller delivers the goods cleared for export
to the carrier nominated by the buyer at the named place. Note that if delivery
occurs at the seller's premises, the seller is responsible for loading, but if delivery
occurs at any other place, the seller is not responsible for unloading.
FCA (alternative meanings) (1) Flip Chip Assembly, or (2) Fellow of the Institute
of Chartered Accountants, a UK body.
FHBR: Finance House Base Rate, the basic rate of interest charged by a lending
insitution such as a leasing company. However, the company may charge its
customers, say, 1% above its base rate in many circumstances, or may vary the rate
charged in relation to its FHBR.
FIFO: First In, First Out - a commonsense and near universal principal of stock
rotation (but see LIFO). FIFO is sometimes used synonymously with First Come,
First Served (qv) as a simplistic despatching rule, its effectiveness being used as a
benchmark whereby other, more sophisticated, despatching rules can be judged.
Fill Rate: Usually, the percentage of lines of customer orders filled from stock
immediately on receipt. For example, if 10 orders were received each with 10 lines
on each order, and 98 of the lines were filled straightaway, the fill rate of the
company would be 98%. Other definitions relating to this common phrase are, of
course, quite possible. See also First Pick Ratio.
Finished Product: A product after its final stage of manufacture has been
completed.
Firm Planned Order (also Fixed Planned Order, or FPO): A plan type in
closed-loop MRP, being a plan in the system the timing and quantity of which is
specifically under the control of the (human) planner, not of the MRP system itself.
A firm planned order may be created by directly changing the plan type of an MRP
planned order from planned status to firm status, or may be created ab initio by the
planner. The start and finish dates of a firm plan can be directly set by the planner
so that the plan can be given a non-standard leadtime.The FPO may also have a
non-standard manufacturing quantity, a non-standard set of immediate components
(ie non-standard usages) and a non-standard scrap factor. The production controller
may create firm plans in order to interject technical reality on the plan overall as
produced by MRP, since capacity and scheduling issues are not directly taken
account of by MRP. He may also have confused the term "firm plan" with a sales
order that has been confirmed ("firmed") by a customer, so inserting these sales
orders into the MRP manufacturing plan as MRP firm plans. Like open orders, firm
plans in the MRP system cannot be rescheduled by the materials planning logic of
the system when the calculations are applied each night to reappraise the timeliness
and quantities of the plan overall. If firm plans are coming in later or earlier that
the MRP arithmetical calculations determine that they ought to be coming in, the
system merely draws this to the attention of the planner or buyer by the output of
rescheduling messages. The need to manage firm plans and the hold-ups they can
create until they are attended to means that their number must be kept to a
minimum ... if the company finds it must continually "bend" its planning through
the extensive use of firm plans, the time has probably arrived when it should
consider migrating to an APS system.
First Card Unload: An old shop floor practice of removing from the apparent
work load of a work centre the entire content of a job operation immediately the
first units of production have been reported as having been made. Although this
puts the work centre supervisor in a good light, it also understates the remaining
actual work requirements.
First Come, First Served: A popular everyday phrase, but here meaning a job
despatching rule operating as the name says. The outcome of potentially using the
FCFS rule in terms of job finishing times is used as a yardstick for judging the
performance of the other rules in simulation exercises examining the effectiveness of
alternatives.
First Pick Ratio: Where customer orders are being picked, the percentage of lines
completely filled from stock, as specified on the orders, immediately on receipt. This
definition is virtually the same as Fill Rate, except that Fill Rate may be thought to
allow some order lines to be only partially completed, while First Pick Ratio implies
that lines picked are100% satisfied as to quantity.
FISH: first in, still here ... a humourous reflection by a production or stores
supervisor in one of their more cynical moments.
Fixed Interval Re-Order System: The application of the POQ rule with a fixed,
regular period (say, one month). Also referred to as the sales replenishment system.
Fixed Order Interval: A variation of the Order Point Replenishment System (qv),
in which the reorder intervals are fixed. In the Order Point System proper, a new
replenishment is ordered when stock falls to the "reorder point". In the Fixed Order
Interval system, instead of ordering a specified replenishment lot R, what is ordered
is sufficient stock to last until the time the next order is to be placed. For example, if
the forecast of demand is M units per month, or M/30 units per day, and the fixed
order interval is 14 days, the amount ordered is M/30 x 14.
Fixed Planned Order: An alternative name for a firm planned order (qv) in
MRP.
Flag of Convenience: An expression meaning that a ship owner has registered the
home port of his vessel outside his home country, usually for tax reasons and to
avoid restrictions imposed by his home government on manning levels and wage
rates. Panama, Liberia or Honduras are often chosen as countries of registration,
and the national flag of one of these countries will be flown from the vessel
concerned. (In justification, the owner of a British vessel, employing basic Chinese
or Phillipino crew members, would be unlikely to be able to afford to pay the UK
minimum wage rate.)
Float: Stock, including WIP, in excess of the immediate requirements for it. There
are a large number of dictionary definitions of "float", including (1) a dock or place
where vessels may float, and (2) an issuance of shares. See also Slack.
Floating Order Point System: An order point system in which the order point is
recalculated from time to time as the overall levels of sales demand fluctuate.
Floor (flatness of): In a stores or warehouses, the flatness of the floor is critical to
economical and safe working. Floors which are not flat will slow down fork lift
trucks and cause elevated loads to lean. "Flatness" is specified by BS8204 (Part 2).
The maximum elevation difference should be 3mm, although the standard for
"super flat" flooring is more exact, this being required where VNA trucks are
employed in placing and picking items stacked to heights over 12 metres. Services
relating to floor flatness are provided by a number of specialist UK companies,
including Monofloor. The flatness of a particular floor can be determined by a
prophilograph machine.
Floor Stocks: Commonly used C-Class items issued to the shop floor for general
use and replenished by the 2-bin system. Also known as line side stocks.
fmcg: Fast Moving Consumer Goods - typically groceries, bottled drinks and such
like. Sports cars are not fast moving consumer goods.
FMECA: (a) Failure mode, (b) Effect and (c) Criticality analysis. A formal four-
step procedure for investigating the reliability of a product currently under design.
The potential liability to failure of the product under design is investigated thus: (1)
Failure mode - what happened when it failed? (2) Failure mechanism - what was the
cause of the failure? (3) Effect of Failure - what actually happened - what was the
result? (4) Criticality analysis - what can be done about it, vis a vis the design?
FMECA is a tool to reduce customer dissatisfaction, not a tool to increase customer
satisfaction. See also Failure Mode and Risk Priority Number (RPN).
Fraser's Five Point Plan: A procedure put forward in 1958 by Munro Fraser for
assessing a job candidate at an interview. See also Rodger's Seven Point Plan.
Free Change Zone: the unfrozen part of the master schedule horizon - see 3rd
Time Fence.
Free Trade: Trade between nation states transacted without import barriers or
import quotas.
Frozen Zone: also referred to as the firm zone - see Time Fence (1st).
Frustration (legal): The occurence of an event such as a flood or fire may make
the fulfilment of a contract impossible. The difference between frustration and force
majeure (qv) is purely semantic - ie it is the force majeure which causes the
frustration.
Future: On the London commodity market (or on any other global commodity
market), a future is a contract either to buy or to sell a quantity of a particular
commodity (raspberries, copper or American dollars, for instance) at a specified
date in the future. An industrialist wishing to sell physical goods in the future will
sell a future at a given price in order to protect himself from a subsequent fall in
their price - that is, if the price falls, he will pay less to buy back the future, so that
the profit on the futures deal will offset the reduction in the price obtained for the
physical goods. (On the other hand, if the price rises, he will lose money on the
future, the loss being offset by his gain on the sale of the physical goods.) Similarly,
an industrial buyer requiring goods in the future will buy a future contract. When
the time comes, if the price of the physical goods has risen, he will be able to sell the
future at a profit. The profit will offset the extra price he must now pay for the
physical goods. (On the other hand, if the price falls, he will lose money on the
future, his loss being offset by the lower price he now needs to pay for the physical
goods.) Futures protect the buyer against price rises, but block him from taking
advantage of price falls. They protect the seller from price falls, but block him from
taking advantage of price rises. See Commodity and see Hedging and Speculator.
See also The Manufacturing Manager, Ch 16.
# A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z
G
3G: Third generation mobile phone services, enabling very fast access of mobile
phones to the Internet, and the retrieval therefrom of, say, pictures and video.
g: the acceleration of a body due to gravity, being 32 feet per second per second ( = 9
metres per s per s).
Gantt Chart: a horizontally oriented bar chart. When the horizontal axis denotes
time, as usually it does, the Gantt chart is particularly useful for illustrating work
schedules. See also planning board.
Gateway Work Centre: The first work centre that a job proceeds to, immediately
after its release to the shop floor. The measured control of the release of work to
gateway work centres is the vital function of I/O Control, qv.
GATT: General Agreement on Tariffs and Trade. A treaty originally devised and
launched by the US in 1947 to promote free world trade, and since extended many
times.
Gazette: In the UK, a daily publication of the Department of Trade & Industry, in
which are made official public announcements, including winding up orders (hence
to be gazetted ... to be made the subject of a winding up order).
GEC: General Electric Company. There are, or were, two companies of that name.
First, there remains the rock-solid trillion dollar US company. Alas, the multi-
million £ British company changed its name to Marconi, and proceeded to make a
number of disastrous decisions, including selling off its "boring" defence and capital
goods businesses, and buying telecommunications companies at a high price just
before a collapse of the market for these goods. Shareholders in the British company
have paid a high price in terms of destruction of value.
Gemba: Gemba is Japanese for the "actual place" or workplace. In the context of
manufacturing, this is taken to mean the factory floor - the real place where activity
takes place and where product itself is made. Gemba keiei (pronounced gemba "K" -
"A") means managing the workplace as a physical entity and business (rather than
simply managing the people who work there). Gemba kaizen means continuous
improvement of the workplace.
GEN2: Gen 2 is a protocol (ie a set of standards and rules) issued by the EPCglobal
committee for formulating data to be used in an RFID radio environment. The
GEN2 protocol governs the air interface standard (ie the frequency at which data
are transmitted), the data structure of the EPC number, and the RFID network
rules. GEN2 has a "WORM" capability (write once, read many). It keeps data in
sequential order and manages data more easily than the RFID protocols which it
supersedes (Generation 1, Class 0 and Generation 1, Class 1). As with Generation 1,
there are also five classes of the GEN2 protocol. GEN2 enables RFID readers to read
multiple tags more quickly, to sort multiple codes, to deal with a temporary loss of
reader power and to deal easier with such problems as "ghost tags" (partial data
from tags which ought not to be read). The standard mode of operation defines
three states (1) single reader, (2) multi reader and (3) dense reader. GEN2 is an open
standard - ie it is universally available throughout industry to all tag
manufacturers.See also ALE, GTAG and Group Select.
General Stores: the stores, or stock room, itself. Often the term excludes stocks of
tools (which are in the tools store) and stocks of finished goods (which may be in the
finished goods store, or warehouse).
Genchi genbutsu! Japanese for Go and see for yourself - go to the "gemba" (the
actual workplace - see above) and see what is really happening!.
Gilts (Gilt Edged Stock): In the UK, "stock", or certificates, issued and sold by
the UK Government. There are an extremely large number of such stocks issued by
the Government to raise funds, with different maturity dates, different rates of
interest (some rates being linked to indexes such as the RPI (retail price index)) ,
different redemption prices etc.. Gilts are widely traded on the London Stock
Exchange. They are called what they are because they are presumed to be free of
risk. (Unless their redemption value is indeed linked to the RPI, their value is not, of
course, free from the risk of erosion by inflation.)
Gimbal Tag: a perforated cardboard tag about 2 inches square attached to retail
objects, especially clothing, and used by stores and distributors to gather statistics
on sales. Now defunct.
Goal, The: The Goal is a novel based on a manager who optimises his bottlenecked
production output so as maximise his profits. The book failed to win the Nobel prize
for literature but nevertheless outsold most novels that did, and was written to
promote the OPT planning system (qv). The Goal's existence is known to all
management consultants, some of whom, with a knowing wink, may well suggest to
clients that they have read it. The book is by Eliyahu Goldratt and Jeff Cox and was
published in 1984 by North River Press (see also The Race, 1986.)
Goodwill: A financial value, being the difference between the company's value as
"a going concern" and the fair value of its individual assets as recorded on the
balance sheet.
GPRS: General Packet Radio System, a means of increasing the speed of data
communications on a mobile phone network.
Grain & Feed Association: The City of London exchange dealing in agricultural
produce.
Green Belt: (1) A team member of Six Sigma quality improvement project, the
team being led by a Black Belt; (2) in the UK, a rural area protected from industrial
and housing development.
Gross: one meaning is entire and whole, as opposed to net. Gross also means a
dozen dozen (eg a gross of eggs = 144 eggs).
Gross Domestic Product (GDP): The GDP of a country is the total value of the
goods it produces and the services it provides in one year. For the UK, the GDP is
$1.25 trillion (2000).
Gross National Product (GNP): The GNP of a country is its Gross Domestic
Product (qv), plus the total of net income from abroad.
Group Forecast: The aggregate forecast demand for a group of products. The
group is almost always a well-defined product marketing group (for example, "dairy
products", "office consumables"). In order to aggregate the individual forecasts,
they are usually expressed in monetary terms. Group forecasts are encountered in
Sales & Operations Planning (see The Manufacturing Manager, Ch 6.).
Group Technology: When a factory floor and the products made there are being
converted from functionally oriented manufacture (qv) to group oriented
manufacture (qv), it may be thought necessary (*) to employ a methodology to find
which products should be assigned to which group flow lines. Group technology is
just such a methodology, and employs formal methods for describing similarities in
manufacturing requirements and simulating the capacity loads on potential group
flow lines. (* Richard Schonberger has criticised the use of complex and elaborate
methods for determining the arrangement of plant and products, and advocates the
simple use of routings data to make rapid progress, followed by straightforward,
pragmatic action to iron out any difficulties encountered.)
Gulaosi: Chinese for death by working too hard. The next time someone talks about
outsoucing to China, they should think about those 24 hour shifts (*) in the
Guangzhou factories of the Guangdong manufacturing region. (* Yes, really ...
24hours. Gulaosi is a not uncommon phenomenon in China.)
H
HACCP: Hazard Analysis and Critical Control Points - the evaluation of potential
sources of failure in a product under design - see also FMECA.
Hay Guide Chart: The Hay Guide Charts are the central instrument of a
proprietory point-factor job evaluation procedure devised and administered by the
Hay Group (in the UK, known as Hay-MSL). The Hay Group was founded in 1943
in Philadelphia, PA, by Ned Hay. In the Hay system, the individual requirements
needed in the performance of a job are regarded as universal, and are termed
factors, these being sub-divided into "dimensions". The three universal factors are
said to be: know-how; problem solving; and accountability. The dimensions within
each factor vary - three examples of dimensions within the know-how factor are (1)
depth and range of technical knowledge; (2) breadth of management know-how;
and (3) human relations skills. Each dimension as it applies to a specific job is split
as to the degree to which it applies (the degree of application is referred to as a
graduation). The Hay Guide Chart itself comprises a ready-made points system, so
that after job evaluation in terms of factors, dimensions and graduation, job scores
can simply be read from the chart. The Hay system is used worldwide and is by far
the most popular of the point-factor schemes. See The Manufacturing Manager,
Figure 19.3.
Health & Safety: The existence of a safe and healthy working environment, its
provision being prime moral and legal imperatives of the company. See H&SAWA.
Heijunka: A Japanese word for "smoothing the waves of production", or, in more
prosaic terms, setting up an even flow of manufactured product by establishing a
succession of very small batches of production throughout the factory chain of
manufacture. Accomplishing this is a major goal of Just-in-Time, or lean,
manufacturing, and must be supported by fast set-ups and group-oriented plant
layout. See The Manufacturing Manager, Section 15.2.
Hidden Factory, The: The hidden factory expresses the notion that much of the
endeavour of the company that is not quality minded is directed inadvertently to
creating waste and performing wasteful tasks - examples of wasteful activities are
the production of non-conforming products and the holding of excessive stock. The
hidden factory is the extra useful, positive output that would theoretically be
possible if the energy directed at creating waste were released and directed instead
at making good quality items. In 1977, the quality guru Armand Feigenbaum
estimated the endeavour within the hidden factory might be 15% to 40% of total
company effort. The notion of the hidden factory is bound up with the metric COPQ
(cost of poor quality). The COPQ may be estimated by multiplying the number of
defects per period of time by the average unit cost to fix a defect (labour and
materials). Such a sterile calculation however omits such costs as loss of goodwill
and loss of competitiveness, and such other matters as warranty costs and even legal
damages. See The Manufacturing Manager, Ch 13.
HIFO: Highest In, First Out - a stock rotation system whereby the most expensive
stock is issued first.
Hire Purchase (HP): Similar to a leasing arrangement, but with two differences:
(i) the company using the goods takes possession of them as owner at the end of the
payment period; and (ii) the using company is also permitted to depreciate the
goods over the time it pays for them. Since the company putting up the goods is
consequently not able to depreciate them, unlike a lessor, it will make a higher
charge to compensate.
Histogram: A graph of vertical bars illustrating how the values of some particular
phenomenon are distributed among all the possible values the phenomenon could
take. On the horizontal axis of the graph are the ranges of the values, set out on the
scale of the axis as so-called "class intervals". For example, the class intervals for
people's ages might be 0 - 9, 10 - 15, 16 - 25, 26 - .... On the vertical axis of the
histogram is the percentage (or number, or fraction) of values in each particular
class. For example, 20% of all age values of the population of a town might fall in
the 16 - 25 class. Consequently, the area of the bar on the histogram above the 16 -
25 class would be drawn such that it was 20% of the total area of all the bars on the
total graph.
Hold Order (noun): A works order on which work has been suspended for some
reason by management (eg due to the non-payment of his account by the customer).
Horizon (Master Schedule): The period ahead for which the master schedule
must be formulated. The minimum period of time is the sum of these two elements:
(1) the maximum cumulative leadtime of materials manufacture, including the time
to acquire raw materials*, and (2) the master schedule review period. Companies
setting their MPS horizon too short will find that there are material and raw
material requirement "past due" after they have performed the materials explosion
of the master schedule. Companies setting it unnecessarily far out will create
material plans which are unnecessarily far out in the future and which will consume
computer time to no useful purpose. (*See purchasing time horizon.)
Hot List: A list of items which are urgently required for a current works order, the
list having been compiled by informal means and requiring progress chasers to
commence a search for them. The items are likely to be recorded in a little black
book!
HP: (1) High Performance, or (2) Hosin Planning (qv), or (3) Hire Purchase, or (4)
Hewlett Packard, or (5) HP Sauce.
H&SAWA: The Health & Safety At Work Act, 1974 - The original UK legislation
arising from the Robens Report, published in 1972 (latest legislation 1992 and 1999).
The Act is what is known as enabling legislation, and led to the establishment of the
HSC (Health & Safety Commission) and the HSE (Health & Safety Executive).
Although there are those who claim that the Act has brought about great
improvements in industrial safety, there are others who believe that it has been
something of a disaster, and has achieved the exact opposite of the objectives set out
in the original Robens Report. These were (1) that there was too much law, it was
too complex, and that matters should be simplified, (2) that the emphasis of
legislation should shift from being "prescriptive" to being "goal setting". The red
tape and regulation entangling industry, now added to by yet more destructive
nonsense from the EU, threaten to cripple the UK's competitive position.
Unfortunately, criticising anything with the words "Health & Safety" in its name is
equated by some classes of people as advocating child abuse. See also COSHH. Also
see The Manufacturing Manager, Section 19.4.
HSC: Health & Safety Commission, a UK body. The HSC is empowered to write
framework law in the field of industrial health and safety, and write its
accompanying regulations and codes of practice. While there is a requirement to
consult with industrial companies (a cosy arrangement), proposals are passed on a
minister's signature without the scrutiny of Parliament. See also The Health &
Safety Executive.
HSE: Health & Safety Executive, a UK body. The HSE is empowered to appoint
factory inspectors and to investigate premises and the circumstances of accidents.
The HSE may bring prosecutions before the courts. Question: How many HSE
Inspectors does it take to change a lightbulb? Answer: None - it's too dangerous.
Hub: the dictionary definition of a "hub", apart from being the central, solid part
of a wheel, is a central point of revolution, activity, life, interest etc.. This definition is
not far from the many alternative uses of the word in logistics. That is, in logistics, a
hub may be a point at the centre of many distribution routes where goods are
received, consolidated, stored and despatched to other sites. Strictly, in formal
distribution planning, a hub is a node. In communications technology, a hub is an
alternative name for a router, especially one distributing other services such as
Internet telephony and TV.
Human Resources (HR): The management of rules and procedures within the
company as they relate to people themselves. While HR policy at the broad level is
formulated by senior management, HR management and administration other than
at the local, working, level is the responsibility of the HR manager (= personnel
manager* ). HR department administrative responsibilities encompass reward
management (ie pay); recruitment; discipline and dismissal; and health & safety. *
The distinction between the terms "human resources" and "personnel" is a fine one.
HR may be preferred since it is said to emphasise such matters as personal
commitment and empowerment etc, while personnel may suggest merely wages and
pension schemes. See also Human Capital.
I
IASB: International Accounting Standards Board.
Idle Time: The time that a machine (or machine operator) is waiting for work
(does not include time under set-up or undergoing planned maintenance).
IED: Inside Exchange of Dies - synonymous with internal set-up time (qv).
IMPACT: The name of an IBM program of the 1950s, being the first to incorporate
the replenishment lot size into the calculation of safety stock.
Implied Terms (legal): Implied terms are those which are not written down in a
contract, but are nevertheless assumed to be part of it, either by commonsense or by
the "custom and practice of the trade" (see Custom and Practice). For example, a
company purchases 100 bags of cement for delivery to its stockyard. On delivery, it
rains, but the bags turn out to be not waterproof and the cement is ruined. Even
though there is no express mention in the written contract that the bags will be
waterproof, the requirement for their being so is implied. Consequently, the supplier
will be deemed to be in breach of contract if it rains and the cement is ruined. To
determine whether a condition is implied or not, the company can use the"Officious
Bystander Test" (qv). Also, contrast "Express Terms".
Implosion (of the Bill of Materials): Starting at a low level of the bill of
materials, "implosion" of the bill is the determination of the plans at increasingly
higher levels of the bill which give rise to them. (For example, starting with bicycle
wheel spokes, implosion leads us first to the bicycle wheel, whence further implosion
leads ultimately to the bicycle itself.) Implosion of the bill is a central requirement in
the calculation of product costs. (We start with the costs of raw materials, and
accumulate - or "roll up" - more and more costs as we go up the bill of materials,
finally arriving at the top product, the cost of which comprises all the lower costs
which have so far been accumulated.) See also explosion.
Indirect Costs: Costs associated with the manufacture of a product but which are
not directly incurred in the product's literal manufacture. A problem with the
treatment of indirect costs is that while they must be taken account of, their
allocation to products must be accomplished somewhat artificially (using a so-called
cost driver). An example of an indirect cost is the cost of supervision. A cost driver
might be the number of work hours involved in manufacture. In this case, suppose
the cost of supervision was £20,000 and the total number of work hours conducted
in the area supervised was 4,000 hours. Then a job taking 1000 hours would bear an
indirect supervision cost of £5,000 - ie £20,000 x (1000 / 4000).
Insolvency: A company is said to be insolvent either when (1) it cannot pay its
debts because it has insufficient money in the bank, or (2) its total liabilities exceed
its total assets. Situation (2) is referred to as balance sheet insolvency. An insolvent
company may be put under receivership, or alternatively be placed in
administration. If the receiver or administrator believes there is no chance of
"rescuing" it, it is likely to be liquidated - ie its assets are likely to be sold forthwith,
for what they will bring, to pay its debts. The term insolvency jurisdiction means the
court having the power to issue such a winding up order.
Inspection (Sampling): See Single Sampling and Double Sampling (of many
sampling topics).
Internal Set Up Time: In changing over a machine from the manufacture of one
product to the manufacture of the next, the internal set-up time is the duration
during which the machine must be switched off and stopped while the necessary
changes are carried out. Contrast External Set Up Time. See SMED.
Invoice: a bill requiring payment. A "VAT invoice" is an invoice bearing the VAT
registration number of the company raising the document. This is required by the
party paying the invoice in order for it to claim the VAT amount back from
H.M.Customs & Excise at the end of the quarter. Note that a pro forma invoice is an
invoice sent to a potential customer in advance - usually before the supply of goods
or service, or perhaps with goods sent on approval. The pro forma invoice may be
required by the customer in order to effect advance payment or for any other reason
to do with its payment controls.
IRR: Internal Rate of Return, synonymous with DCF rate of return, qv.
Ishikawa, Kaoru: A notable Japanese quality guru credited in 1952 with devising
the PDCA circle of continuous improvement (qv).
Issue (Allocated): material may be received into store from a supplier intended for
a specific, identified works order or department. Care must be taken to ensure it is
strictly reserved for and issued to the relevant job or user, and no-one else. A
variation of this is the receipt in certain industries of material of the same item but
different quality grades, with particular grades to be allocated only to certain jobs.
Issue (Bulk): A large quantity of material (eg components) typically issued to the
factory floor for handy use over a reasonable period of time (eg for a day or week).
Careful monitoring of bulk issues should be made to prevent waste.
Issue (Capital): The issue from the stores, for factory use, of a machine or tool, the
machine or tool being individually identified in the company's Asset Register.
Because it is individually identified, the fact of the issue should also to be recorded
in the Register.
Issue Deck (Pick Deck): An issue deck is a number of documents, often in the
form of cards, each one individually holding the details of each item to be picked.
Storesmen and warehousemen often find issue decks easier to manage than long
multi-item issue lists (see Issue List below) - for example, there may be problems
with an issue list if many warehousemen are involved in picking the items or if, at
the end of a shift, some items have been picked and some not picked.
Issue List (Pick List): Normally, a single document listing all parts to be issued by
the stores for a production job (the original meaning of a bill of materials!).
Although those responsible for computer data input and output may find the issue
list convenient, storesmen required to pick from a long list may find it less so. Care
must be taken in stock recording as well, at the end of a shift, if certain items on a
list have been picked and others not picked. Issue decks may be preferred to issue
lists, qv.
Issue (Loan): A tool or instrument issued by the stores, perhaps to enable a repair
to be effected, and which must be returned after use.
Issue (Replacement): A tool or part issued by the stores only in exchange for a
used-up or burnt-out old tool.
Item (invisible): Items coded and entered on the item master file may be present
purely for their use in planning and as planning references - that is, they may in
reality have no physical existence. Examples are pseudo parts (qv) and super items
(qv). An everyday example is a sports pack, being a customer option on a motor
vehicle indicating that the customer requires a number of distinct, separate features.
Note that a phantom part (qv) is not an invisible item - it really does exist, albeit
briefly.
Item Master File: A file of records relating to the products, components and raw
materials of concern to the manufacturing company. Each record will be keyed on
the item's code and contain permanent or relatively permanent data about the
product in question - for example, its name, leadtime and standard cost.
J
JEIDA: Japan Electronic Industry Development Association.
JICARS: Joint Industry Committee for National Reader Surveys. See entry under
Media Research.
Job Evaluation: The general procedure in both commerce and industry through
which the pay of staff is determined is first to determine the rates of pay to apply to
the company's jobs, and then to assign staff to the various jobs - that is, strictly, a
person's rate of pay is decided indirectly, not offered directly. There are two basic
methods for evaluating a job so as to be able to allocate to it a rate of pay:
qualitatively and quantitatively. Qualitative job evaluation means regarding the job in
its entirety, and then assigning to it a grade based on one of three methods - ranking,
classification or market pricing. See separate Glossary headings under these three
entries. Quantitative evaluation requires that the demands of the job be analysed
from such distinct viewpoints as the need for original thinking; the requirement to
assume responsibility; the need to apply manual skill etc., and then assigning to each
such facet a certain number of points, to arrive at a job score. The job score is then
translated to a pay rate. The two quantitative techniques are point-factor and factor
comparison. See The Manufacturing Manager, sub-section 19.2.3.
Job Shop: A plant or shop floor given over to the manufacture of individual works
orders, usually on a once-off basis. All work undertaken in the job shop is thus
unique, or, at least, is individually undertaken. Many products in the job shop will
have been specially designed and will thus have unique product routes. The length
of time of manufacture in a job shop is typically days or weeks rather than hours.
Repetitive or batch manufacture is not associated with work undertaken in the job
shop.
Journal: In accounting, the journal holds basic financial data and supporting
evidence that the financial accounts are based on actual, real transactions. Evidence
may include supplier and customer receipts, contracts, business letters etc..
Judgment Creditor: If a company or person sues another company for debt and
obtains judgment in the court for that debt, the company/person is said to be a
"judgment creditor".
K
Kaizen: The effecting of continuous improvement by systematically making small
beneficial changes on a continuous basis. Two kinds of change are possible in a
company: (1) wholescale major changes associated with the introduction of new
technology or systems; and (2) gradual, never-ending change using existing
resources to effect small improvements. Kaizen is concerned with (2) - for example,
kaizen is concerned with SSSSS. The principal exponent of kaizen is Masaaki Imai,
who also holds that the subject subsumes personal, or self improvement, as well as
improvement of the work environment.
Kalman Filters: Synonymous with Bayesian Forecasting (qv), the term Kalman
filters having its origin in engineering science.
Kerf Allowance: An addition to the stated requirements of bar, rod, tubing and
similar material to compensate for the small amount of material that will be lost in
cutting operations.
Kit: The collection of those parts needed to complete a manufacturing job. Thus a
job to make 50 bicycles will require a kit of 100 wheels, 50 frames, 50 handlebars ...
Kitting and Kitting Area: An area in which a kit of parts is to be assembled prior
to the commencement of a production job. In unruly and less than brilliantly
managed factories, it has been known for kits to be "robbed" - ie for material in kits
to be removed surreptitiously by operators wanting those parts for other jobs. If
stock records are 100% correct, physical kitting is unnecessary ... kits (if necessary
at all) can be assembled "on the computer" by moving the stock into a special
category of the stock record (ie into "allocated status"). Although kitting is often
held to be synonymous with the terms staging and hauling, staging at least is
perhaps more associated with assembling material in preparation for its despatch.
Krupp, Alfred: A prominent German iron and steel industrialist, and founder of a
major steel firm bearing his name.
KWA: Key Word Analysis, a technique associated with design quality and failure
avoidance.
KWIC: Key Word in Context - a library and text classification and search
technique.
KWOC: Key Word out of context - a library classification and search technique.
# A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z
L
L4L: Lot for Lot (qv).
Lake Wobegon Effect, The: Lake Wobegon is a fictional town in Minnesota, the
invention of author Garrison Keillor, where all the women are strong, all the men are
good looking, and all the children are above average. The remarkable statistic
relating to the children is the significance of Lake Wobegon's presence in this
Glossary - in manufacturing quality, as Deming never tired of saying, there is an
average and, as a result of common causes of variation, there is a statistical
distribution above and below it. If the manager doesn't like the lower boundaries of
performance of a system under his control, he should get to work and improve it.
See The Manufacturing Manager, Ch. 13. See also target.
Lb: An abbreviation, from the Latin libra, for a "pound", being the principal unit
of weight in the Imperial system of weights and measures. 1 lb = 0.453 592 37 kgs.
LBO: leveraged buy-out (ie a buy out by a person or group made with the help of
someone else's money).
LCL: (1) Less than Carload Lot, a largely American term meaning a vehicle or rail
shipment which occupies less volume than a full load. (2) Lower Control Limit (on
control charts in SPC).
Leadtime: In manufacturing, leadtime is the assumed elapsed time from the point
of entry of a job into production to its completion and final emergence therefrom. It
is normal to consider manufacturing leadtime as consisting of five separate elements
: queue time (time spent in queues waiting to begin); set-up (time to set the machine
up for the job); run (the time occupied by actual manufacture); wait (the time
waiting after manufacture has been completed); and move (the time spent moving
the job to its next destination). However, other elements might also be relevant in
other environments - for example, inspection time and tear down time. In whatever
way it may be sliced, almost always in the traditional job shop environment, 90% of
leadtime is found to comprise queue time. (Sometimes a cause of excessive queue
time is the operation of a viscious circle - qv.) Note that leadtime in distribution has
a completely different make up - for example, order processing + packing & despatch
+ transit time + order receipt + putting away.
Leadtime Demand: The demand for a product that is forecast to occur over the
time necessary to secure its replenishment from the source of supply. If the forecast
is F units/month, and the month comprises 20 days, then the daily forecast is F/20
units. Now if the replenishment leadtime is D days, the leadtime demand is F/20 x D
units.
Leadtime Management: Action taken at the shop supervisor level to shorten the
leadtime of a current production job - see Operation Splitting, Operation
Overlapping and Operation Compression.
Lease: A means of financing the payment for an asset. The company wishing to
acquire the asset (the lessee) arranges with the organisation putting up the money
(the lessor), and a simultaneous transaction then takes place as follows: The supplier
of the asset sells the equipment to the lessor, and the lessee agrees to pay the lessor
money to have immediate, exclusive use of it for a limited number of years (often
either 2 or 3). Payments made by the lessee to the lessor depend on the cost of the
equipment and the prevailing rate of interest on money. A financial lease is one
where the lessor is a financial institution, usually a finance house such as Mercantile
Credit, but perhaps a bank. An operating lease is one where the supplier himself is
the lessor (usually, the leasing division of a large company). Computers are very
often leased through operating leases, since the lessee will probably wish to upgrade
to a new model at the end of the payment period and therefore does not wish to buy
the equipment outright. The government has an interest in leasing, since the lessee's
payments are, financially speaking, expenses, and their payment reduces his profit
and hence liability to tax. Contrast Hire Purchase.
LEO: Low Earth Orbit, or the acronym for Lyons Electronic Office, a British
computer developed in 1955 by the food company J.Lyons Ltd in conjunction with
engineers from Cambridge University. (See A Computer called LEO, by Georgina
Ferry, published 2003.)
Letter of Credit (L/C): A letter of credit is a document, along with certain other
accompanying certificates, intended to facilitate international trade. The form of the
L/C and the commercial and legal procedures accompanying it have been laid down
by the International Chamber of Commerce (qv). The purpose of the L/C is to
eliminate or reduce certain risks involved in international trade incurred by both
supplier and buyer. The particular risks targetted include: (1) one side swindling the
other; (2) those risks arising from the unfamiliarity of the parties with each other's
court or language; (3) customs problems; and (4) political uncertainty (for example,
in relation to prohibited imports). Note that if a buyer is fully familiar with a foreign
supplier and the supplier's country, he will not usually care to incur the cost of a
letter of credit ... perhaps £250. The "letter of credit" itself is issued by the buyer's
bank, referred to as the Issuing Bank, and specifies the activities to be performed by
a nominated bank in the supplier's country of origin, and the documents and data to
be furnished by this bank (The Advising Bank). A letter of credit may be revocable
or irrevocable. Often, a standard form, UCP1993, is employed. See The
Manufacturing Manager, Section 16.5.2.
LIBOR: London Inter-Bank Offered Rate - The rate of interest at which London
banks offer to lend money to other banks, the rate being based on the lending bank's
base rate.
Life Cycle (of a Product): The period from a product's launch to its final
withdrawal from the selling range. Usually, the life cycle can be illustrated by the
familiar changes in demand levels which occur. Thus, on launch, demand increases
very rapidly in accordance with the product's appeal to the marketplace. Demand
then flattens out and remains at a high, steady level for a lengthy period of time.
Eventually, it declines as the product loses its appeal and alternative, competitive
products appear. Finally as sales further decline, marketing withdraw it. One tricky
phase for the manufacturer is the launch - it is difficult to predict what sales will be,
and statistical forecasts made after the upwards acceleration will clearly be in error.
A second problem phase is decline - when marketing department take the decision
to terminate it, what about existing stocks and any continuing demand for spares
and service? See The Manufacturing Manager, Section 2.1.2 and Figure 2.1.
Lifed Item: A tool or piece of equipment against which the supplier or tools store
supervisor has assigned a likely life span. The life span will typically be nominated
in terms of usage - say, 1000 hours, or 50,000 miles.
LIFO (Last in, First out): The opposite of FIFO (qv). From the viewpoint of
stock rotation, it can rarely be correct to retain the oldest stock. However, if the
stocked items are not liable to deteriorate with age, normal stock rotation may be
irrelevant. Consequently, with heavy goods such as concrete blocks and other
building materials, it may be convenient to store incoming items on top of items
already present, and issue the new items first from the top. An example of LIFO in
everyday queue management is a lift (US = elevator).
Limiting Quality Level (LQL): A quality level that a supplier agrees with a
customer that it will equal or exceed, expressed as a percentage of non-conforming
items.
Linear Loss Function: A term that has been used for the Partial Expectation, qv.
Liquidated Damages (legal): A buyer may insert into a contract a stipulation that
if some specified activity required of the supplier is not, in fact, performed, then the
supplier will pay a certain sum to the buyer as recompense. For example, "delivery
of the goods is to be made on the 15th, and the supplier will pay liquidated damages of
£1000 per day for every day they are delivered later than the 15th ... ". From the legal
point of view, it is essential that the liquidated damages should be a fair reflection of
the buyer's real likely loss. If they are not, the supplier will refuse to pay them, and
will be supported in his refusal by the courts regardless of the fact that he signed the
contract in the first place. From the practical point of view, the circumstances under
which the liquidated damages become due, and when they are to be paid, should be
quite clear. Liquidated damages are dealt with in the on-line training course notes
Successful Negotiating (off site).
Live Storage: Roll through storage systems typically based on chutes or metal
rollers.
LME (London Metal Exchange): The market in the City of London for buying
and selling non-ferrous metals and metal futures. The LME is the largest non-iron
market in the world. It trades in US dollars and dealing is still (2006) done by "open
outcry" rather than by way of computer.
Load: When applied to capacity planning, the total amount of work standing at a
work centre waiting to be processed. (The figure is usually expressed in hours.)
Loading Bay: The area of a stores or warehouse which receives the vehicles and
goods of suppliers of raw materials or from which vehicles and goods are
despatched to customers - where the stores meets the outside world. Critical issues are
side loading of vehicles (speed of access) v. end-loading (economy of parking,
temperature control and safety); safety; temperature control; and efficient vehicular
traffic management. It may be preferable that incoming goods should be delivered
direct to their points of use within the factory. If this is to be arranged, there must
be good data communications to a controlled central area.
Location Code (stores or warehouse): Storage areas are often organised by aisle
(A), rack number (RR), shelf (S) and bin number (B). If so, a location code C10B4 is
aisle C, rack 10, shelf B, bin 4.
Logistics: "The art of moving and quartering troops, and associated supplies - ie a
quarter-master's work." (OED). Logistics now means what distribution used to
mean in the 1960s - ie the calculation of needed external supplies and the
arrangement for their receipt and replenishment, and the determination of channels
of supply and communication.
London Fox: London Futures and Options Exchange. The market in the City of
London dealing in coffee, tea, cocoa, sugar and other similar commodities.
Loop (in Production): Each component and raw material constituting a bill of
materials of a product will occur only once in that bill. That is, P is made from Q, Q
from R, R from S etc.. Technically, however, it is possible for a component to appear
more than once: P made from Q, Q from R, R from Q ... An example is the use of
oxide to coat video tape, and the later recovery of the oxide when the tape is cut. The
recovered oxide is fed back into an earlier stage of the process. In order to explode
and level the bill of materials, loops must first be discovered and removed. See The
Manufacturing Manager, Figure 9.5.
Low Level Coding: In the process of levelling the bill of materials (see Bill of
Materials), it is very likely to be found that a given component contributes to the
manufacture of two or more higher level products. It is quite possible that the
component may be assigned to one particular level from the viewpoint of one of
these higher components, but later in the procedure assigned to a different, lower
level from the viewpoint of the second higher product. It is essential for the integrity
of the materials planning procedure that all the component's requirements should
be considered together. Consequently, when there is a clash of levels, the lower of the
levels is assigned to the component. (Doing so may somewhat distort the pictorial
representation of the bill.) A computer program is permanently resident to ensure
that the low level integrity of the bill of materials is maintained whenever a change
is made to the bill's structure.
M
M&A: City talk for mergers and acquisitions.
M&S: Marks & Spenser, a UK retail chain specialising in clothing and food, or
Modelling & Simulation.
Maintenance Prevention: that aspect of TPM related to how easily the design of
equipment lends itself to maintenance - in a word, the machine's maintainability. A
mistake in ensuring maintainability is permanent.
Make to Order: Many products required by customers are not held by the
manufacturer in stock, but are made ab initio on receipt of the customer's order. The
reasons may be the products' expense or degree of specialisation or their required
customisation. One problem for the customer in ordering a product on this basis
may be the possibility of its eventual late delivery. A problem for the manufacturer
may be the financing of the manufacturing operation.
Makespan: somewhat out-of-date shop floor jargon for the time to process a set of
jobs.
Manifest: (noun) a list of a ship's cargo signed by the ship's master for use by
customs officers (OED).
Manufacturing Logic, The: In the heyday of MRP in the 1980s, this term was
used to subsume the following: the netting logic - the activity of subtracting stock on
hand from gross requirements to determine net requirements; the exception logic -
the determination of any rescheduling necessary to the current due dates of open
and firm planned orders to new dates when arithmetic shows they are now needed;
and the reporting logic - the display of rescheduling messages to the planner in
relation to the exception logic. See The Manufacturing Manager, Ch 10.
Market Research: Market Research is the gathering and analysis of facts relating
to the sale of goods. The activity first includes the investigation of markets
themselves, such as the determination of their sizes and composition and the
preferences of consumers within them. (A "market" might be defined as, say,
"young couples with children", or "pensioners living in retirement homes".) Market
research also includes, second, an analysis of the activities of marketing itself, such
as an analysis of TV viewing habits, vis a vis TV advertising, and the readership of
magazines. Market research is carried out by a wide range of organisations, from
large multinational companies to one-man bands, including market research
sections of large companies. Types of market research include retail audits (for
example, as carried out by AC Neilson Inc, which conducts shop audits); syndicated
research (surveys of aspects of consumer behaviour); qualitative research (in depth
interviews); advertising research; and media research (see JICARS).
Market Share: If the total market demand for a product is 100%, the company's
market share is as follows: (actual sales of the product) / (total market demand in
units) x 100%. Market share is a vital indicator of a product's prospects - if market
share is diminishing, it means that competitors' products are being preferred and
chosen either by existing customers or by new ones coming onto the market for the
first time.
Marketing Concept: "Marketing is the management process responsible for
identifying, anticipating and satisfying customer requirements profitably" ...
definition published by the Chartered Institute of Marketing.
Master Black Belt: An expert in charge of a number of black belts, in six sigma
quality. At the technical level, the master black belt will be very knowledgeable
about use of the more "difficult" procedures in the Six Sigma Analyse phase - DOE,
ANOVA etc.. At the practical level, the MBB will give advice on team working and
company politics.
Materials Management: A composite term for all those procedures and actions
which govern the manufacture of product and the disposition of inventory.
Examples of procedures may include: master scheduling; materials planning;
distribution; and others such as sales forecasting. In addition, materials
management may include the setting of manufacturing lot quantities and the
management of forecasts and safety stocks. See also Inventory Management.
Mean Square: = Mean Square Deviation from the Mean, synonymous with
variance, qv.
Media Research: the conduct of market research in order to find which types of
consumers read which magazines and newspapers, and watch which TV
programmes. In the UK, consumers are classed by the JICARS classification (qv)
into seven social groups as follows: (1) higher management and professional (eg
directors, accountants); (2) lower managerial and professional (eg supervisors, bank
managers); (3) intermediate occupations (eg machine operators, policemen); (4) small
employers and sole traders (eg self-employed builders, farmers); (5) lower
supervisory and technical (eg plumbers, bakery workers); (6) semi-routine
occupations (eg security guards, postmen); and (7) routine occupations (eg
bricklayers, cleaners). The classification scheme was introduced in 2001, replacing a
long-established six-class system (see * below). The changes were felt necessary
because of the decline in the number of blue collar workers and the increase in
numbers of white collar workers and working women. The previous 6-class scheme
was (A) higher managerial (3%), (B) intermediate managerial, administrative and
professional (12%), (C1) supervisory, clerical , junior administrative and junior
professional (29%), (C2) skilled manual (29%), (D) semi-skilled manual and
unskilled (19%), and (E) state pensioners, widows, casual and low earners (8%). See
The Manufacturing Manager, Chapter 2, Sub-Section 2.2.2.
MES: Manufacturing Execution System, a term that never quite made it, and
intended to cover the area between general materials planning and the actual
detailed scheduling on the shop floor. "MES" has probably been subsumed by the
more popular acronym APS (qv).
Metrology: The science of weights and measures, but a term more often used in
relation to the practice and procedures in using measuring devices within industry
and the problems associated them. See also Gauge R&R.
Mezzanine: A low storey between two others, usually in general buildings between
the ground floor and the storey above. A mezzanine floor has also been defined as "a
raised platform independent of the host building structure, supported by steel
columns". (Two further dictionary meanings are: (1) a small window that is less in
height than breadth, and (2) a floor beneath a theatre stage.) In logistics and in the
context of warehouses, a mezzanine floor creates additional floor space and is
usually seen as a rapid, cost effective alternative to re-locating, with minimum
disruption to on-going operations. Mezzanine floors must comply with BS5950
(parts 1 & 5) and BS6399. Floors are usually made of steelwork with a choice of
decking, and can typically be installed in a few weeks. For further information on
the subject, be aware that Link 51 Ltd has produced a 40 page guide to the subject
(Guide to Building Regulations for Raised Storage Areas and Mezzanine Floors).
Contact Link 51 - phone 0800-169-1515, or email at sales@link51.co.uk or through
www.link51.co.uk.
Millihelen: that degree of feminine beauty that will launch exactly one ship.
Mistake (legal): A contract can be brought to an end due to a central mistake that
is either (1) common to both parties; or (2) mutual, or (3) unilateral. Mistake here
has a legal meaning: it never has the everyday meaning of misjudgment or lack of
wisdom. See The Manufacturing Manager, Ch 16.
Monopoly: The sole supplier of a good or service. Theoretically, the monopolist can
dictate the price of what he sells, since there is no competition. In practice, he must
be careful - the customer forced to pay an excessive price will seek substitutes or
alternative paths of business - see the "Dynamic Market".
Monopsomy: The market condition where there are many sellers of a good, but
only one buyer. The situation arose in the "command economies" - ie the old defunct
communist economies and others controlled by the state. A market condition with
many sellers but few buyers is termed an oligopsomy. In the UK, a manufacturer of
grocery products might believe he is in an environment such as this vis-a-vis the big
supermarket chains.
Month (Calendar): One of the twelve months of the year. If calendar months are
used in time-series forecasting, an adjustment must be made to account for the
different number of trading days in each one. For example, the average number of
trading days in a month may be 26.1 (ie one twelfth of the total number of trading
days in a particular year), so that a demand of 1000 units in February (say, 22
trading days) will be considered for forecasting purposes to be (1000 / 22) x 26.1
units.
Month (Costing): Cost accountants may divide the year into 13 months of 4 weeks
each, to avoid the problem described under Month (Calendar). A problem for those
using the system, however, is that they must recognise that CP7 (cost period 7) is not
July, but only part of the calendar month July.
Move Ticket: A brief document authorising the movement of material on the shop
floor, either to the next operation or into stock. A shop floor can be plagued by
unauthorised materials movements, making it difficult to track jobs, and the
insistence on move tickets is an attempt to mitigate the problem.
MPEG1: Moving Pictures Expert Group 1. (A video file compression format used
on Video CDs.)
Multi-Level Pegging: see full pegging in the Glossary entry for pegging.
Multi Site Netting: When one factory is responsible for the production of material
M, and Material M is actually used at a second company factory site, it is necessary
to formulate plans for the production of M by considering the net requirements at
the second consuming site and the transit times between the two. See The
Manufacturing Manager, Figure 9.8.
Murphy's Law: A rule ascribed to by the cynical, the weary and those who have
been too long in manufacturing industry, that what can go wrong, will go wrong
either (a) at the worst possible moment for doing so, or (b) as soon as one takes his eye
off it. See also O'Leary's Corollary.
MVP: Modular Variable Pricing.
# A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z
N
NAFTA: North American Free Trade Agreement, an agreement between the US,
Canada and Mexico providing for equal opprtunity - ie free of import restrictions
and customs tax - regarding the supply of certain goods.
Naïve One: A forecast simply comprising the last actual demand value recorded.
That is, if the last recorded demand was 17 units, 17 units is now made the one-
ahead forecast. Naive One is used purely as a yardstick to compare the efficacy of
other more sophisticated forecasting methods. See Naive Forecasting and Causal
Forecasting.
Net Change: One view of an overall material plan is of plans created at one level of
the bill of materials giving rise to requirements at the next level lower in the Bill.
Plans for components at this lower level are then created to cover the net
requirements for them themselves - see Closed-Loop MRP. When data arising from
plan amendments and completions are fed back into the overall materials plan,
clearly the lower level net requirements are also liable to have changed. If so, the
plans that had been formulated to satisfy these net requirements may also now have
changed, and so on down the bill of materials. Net change is essentially a data
processing solution to this problem: when a change occurs that might affect plans
and lower level requirements, action by the system is not taken immediately.
Instead, the product potentially affected by the change is "flagged", and any
repercussions of the change dealt with later *. When they are so dealt with, change is
confined to the product directly affected. (In MRP, any change will include the
recalculation of planned orders and the recalculation of their corresponding lower
level requirements.) * In a continuous net change system, the localised recalculation
of change is performed continually, the advantage then being that the system is
always largely up to date; in batch net change system, recalculation is performed
from time to time. Contrast Regenerative MRP.
Nettable Locations: For a particular product, nettable locations are all of the
locations where any stock of it held can be netted against the product's gross
requirements to determine its net requirements. (Remember that gross
requirements less stock = net requirements.) Thus a storage area holding stocks of
components reserved for direct sale as spare parts will be a non-nettable location as
far as the parts are concerned, since the parts are reserved for spares, while an off-
site emergency depot holding the parts would be a nettable location.
North West Corner: A term used in the operation of the transportation algorithm
(the starting point of the solution at the top, left corner of the "initial tableau"). See
The Manufacturing Manager, Ch 20.
NPV: Net Present Value, a method of evaluating a stream of costs and benefits over
time assuming a nominated rate of interest applying to the value of money. For
example, if a rate of interest of 20% pa were to be assumed, a £100 cost now would
need to be matched by a benefit of £120 in one years time for the cost (£100 now) and
benefit (£120 in Year 1) to be equal. Consider a project that costs £500 to start and
which will yield returns of £600 in year 1 and £400 in year 2, then finishes. Assuming
an interest rate of 20% pa, the net present value of the start up amount is £500
(obviously!), the net present value of £600 in one year is £500 (ie £500 for 1 year at
20% equals £600), and the net present value of £400 in two years is £278 (ie £278 for
2 years at 20% pa equals £400). Thus the net present value of the project at this rate
of interest is - £500, + £500, and + £278, = £278. The DCF rate of return is the
interest rate whereby the NPV equals zero. As an example of a DCF rate of return,
consider the following "cost/benefit stream" - ie complete succession each year for
the life of a project of costs less benefits ... +£1000; -£500; -£600; -£500; -£300. If this
stream of costs less benefits related to a particular project, we could evaluate it
assuming various alternative rates of interest. For example, if we used 10% pa, the
resulting value of the the project works out as - £532. (Note however that the chief
executive of the company might have stated that all company projects are to be
evaluated at some interest rate specified by him - say 20% pa., not 10% pa, the
specified percentage being his strategic investment target.) However, it may be
preferable to work out the DCF of the project instead. In the instance given, this is
34.5% pa. That is, if we use a rate of interest of 34.5% pa, the stream of costs less
benefits given previously work out as +£1000; -£371; -£332; -£205; -£92. The total of
these five figures is zero. One advantage of using DCF is that it makes the
comparison of projects more meaningful, especially from a historical perspective.
See especially cost/benefit analysis for a brief critique of the pitfalls of these
comparative methods.
Null Hypothesis, The: The starting assumption in ANOVA (qv), namely that there
is no statistical significant difference between two or more populations - ie that any
difference between them is due purely to random causes.
O
O'Leary's Corollary: (to Murphy's Law) - Murphy was an optimist. (An
alternative version states if everything seems to be going well, you have clearly
overlooked something.)
Ocean going: (US term) In transportation, shipping on the open sea (in UK
English, deep sea.)
Offset: (See also leadtime offset.) In countertrading (qv), direct offset is where the
supplier agrees to incorporate materials from the country of export in the actual
goods being supplied. Indirect offset is where the exporting company or exporting
country places business with, or provides assistance to, the country of export, the
business or assistance not being directly connected with the goods being exported.
See The Manufacturing Manager, Ch 16.
OFT: Office of Fair Trading, a UK body which investigates alleged breaches of the
Competition Act, and is empowered to take legal action as it deems fit.
Open Order (or Scheduled Receipt): One of the three plan types in closed-loop
MRP (along with the planned order and the firm plan), the open plan being a plan
which has been released to the shop floor for work to start (*). Similarly, an open
purchase order is a planned purchase in the MRP system which a supplier has
committed to transit. When materials plans are assessed by the closed-loop MRP
system with regard to their timeliness and the appropriateness of their quantities,
open plans cannot be rescheduled to different dates if they are found to have due
dates earlier or later than that those that are indicated by strict materials planning
logic as being needed. Instead, the open plans are left with their existing dates (and
quantities). However, messages are produced by the system commanding the
planner, shop supervisor or buyer to reschedule the plans by direct manual
intervention in the system. (*When planned or firm planned orders are "released to
manufacture", usually by the planner in charge, the MRP system changes their
status to that of being "open".) The open plan is also referred to as a scheduled
receipt, which self obviously it is. The difference is purely semantic.
Option Forecast: a term coined by John Proud in his book Master Scheduling to
replace "production forecast (meaning (2))" used in two-level master scheduling.
Oral Agreement (legal): A legal contract between two parties that has been
agreed verbally ("Oral contracts aren't worth the paper they're written on " -
Samuel Goldwyn).
Orange Book, The: The name given to the book Production & Inventory
Management in The Computer Age, by Oliver Wight, following its publication in
1974, on account of the colour of its dust jacket. The Orange Book included the first
published exposition of Closed-Loop MRP.
Ordinal Number: a number denoting order or rank, such as first, second, third ...
as opposed to a cardinal number (1, 2, 3 etc.).
Ordinary Shares: see shares - an ordinary share's issued, face value may merely
be £1, but if the company prospers, as we know, its value will be many times higher
than its face value.
1 .........-....-.... - ..
2.........+....-....- ..
3.........-....+....- ..
OSA: On Shelf Availability - a common and obvious customer service goal, which
must normally be qualified by such statements as "for 99% of all orders" or "non-
available items supplied within 3 days" etc., (There is also the question of the
consequences of non-availability.) See The Manufacturing Manager, Section 5.3 &
5.4.
OS&D: Overage, shortage and damage, as they may relate to the delivery of
materials from a supplier (contrast OTIF).
OTC: (1) Over The Counter, A term applied to medicine and drugs able to be
bought without a doctor's prescription; (2) On-Time Commit, or on-time delivery to
commit date.
OTCR: On-Time delivery performance to Customer Request date ... in effect, the
same as OTIF, qv.
OTIF: Relating to the delivery of goods from a supplier - on-time, in full. The
presumption must also be that the delivery is 100% conforming to quality
requiremements - contrast OS&D! OTIF is but one of many possible customer
service targets.
Outside In: The quality view of a system, whereby basic procedures are considered
broadly from the viewpoint of the customer.
Over Planning: In two-level master scheduling (see Master Scheduling and also
the Final Assembly Schedule), the quantities of the various option variants which
are master scheduled are determined by forecasts derived from option preferences
specified by customers in the past. In a particular month, however, the variants
specified in actual orders are likely to differ from the forecast split. For example, the
split of option variants may be forecast to be 50:50 between the red and blue types.
In a particular month, it is expected to sell 500 assemblies. Instead of selling 250
blue types, however, the company is asked for 305 blues and 195 reds. An option
overplan, therefore, is a safety stock placed on an option variant to help ensure that
these are high levels of option availability even though the split of actual customer
orders is different from forecast. In effect, option overplanning is the providing of
safety stock of option variants. The overplan amounts should be set by calculation,
not by hunch and guess. A useful quick calculation is available, however, avoiding
the complexity of normal safety stock mathematics- see The Manufacturing
Manager, Ch 8.
Over Trading: A company is said to be over trading when the volume and extent of
the business it has taken on is excessively large in relation to the capital it has to
meet it. In these circumstances, the company may place excessive reliance on loan
capital, overdrafts and supplier credit.
Overlap: In pay structures and grading, overlap is the percentage of the scale of
the bottom of a higher pay grade also covered by the scale at the top of the pay
grade immediately lower in the pay structure.
Overrun Device: in mechanical safety, a device used in conjunction with a guard
designed to prevent access to machinery parts which are moving by their own
inertia after the power has been switched off. Examples are rotation sensing devices,
timing devices and certain braking systems.
P
3PL: Third Party Logistics.
Pareto Analysis: Vilfredo Pareto was an Italian economist and sociologist at the
University of Lausanne, Switzerland. In his treatise of 1924, he postulated that the
consumer spent 80% of his income on 20% of the things he bought, and was
indifferent as to the identity and type of the vast 80% of things accounting for only
20% of his income. This notion was taken up by H. Ford Dickie in 1951 in an article
"Shoot for Dollars, not for Cents", and lead to ABC Classification.
Partial Requirements: The gross requirements are the sum of all quantities of
material needed to support higher level plans. Partial requirements usually means
those requirements needed to support just one particular plan of the many higher
level plans at the higher level. In the example given under the Glossary entry for
"gross requirements" (qv), of the gross the requirements for 27 motors, the partial
requirements for the electric toothbrushes are 15 and the partial requirements for
the electric pepper mills are 12 motors. See also net requirements.
PASA: The initials of the "Purchasing And Supply Agency" of the National Health
Service.
Passing Off: a legal term whereby a company adopts a name similar to the name of
another firm in the same line of business, to cash in on the other's reputation.
Passing off is a tort so that the other firm can sue in the courts for damages.
Pay: see reward management, pay posture, pay structure, variable pay.
Pay Posture: When reference is made to the external jobs market in determining
the rate of pay for a company job, it will be found, naturally enough, that the
external pay rates for the job vary from company to company. In other words, the
external market pay rate is, in reality, a scale from lowest to highest. The point on
this scale chosen by the company in setting its own internal rate is known as its "pay
posture", or pay position, and should be consistent from job to job. If the company
chooses a high point of the scale, it will be known as a "good payer", and may
receive job applications from better qualified job seekers as a consequence; if it
chooses a low pay posture, it may be thought of as a "poor payer". However, in the
UK, as in other countries, the pay posture that management often determines upon
may be what it feels it can get away with, say, having regard to the company's
geographic location. Perhaps here might be a fruitful area of research for
academics: to investigate whether the choice of a low pay posture by a company is a
false economy.
PDSA: Plan, Do, Study, Act - synonymous with PDCA, qv. Also, People's
Dispensary for Sick Animals, a well-known UK charity.
Period Order Quantity (POQ Planning Rule): A planning rule whereby a plan
quantity (ie an order quantity) is the sum of the product requirements over a
specified future period of time. For supplies of raw materials, when raw material
requirements change, use of the POQ rule has the merit of ensuring that the dates
supplier deliveries are needed remain fixed even after changes are made in material
requirements, although the actual quantities to be sent on the (unchanged) dates
may be different from the original supply plans notified.
PERT: Program Evaluation and Review Technique. A technique for managing and
evaluating progress in relation to a major project by Critical Path Analysis. The
steps which constitute the project are drawn as a set of interlinked activities in
chronological sequence (with "Start" at the extreme left and "Finish" at the
extreme right). The durations of each activity are analysed to see when one activity
finishes and the next one can begin. For example: Action 1 is followed by Action 2;
Action 2 is followed by Actions 3 and 4 carried out in parallel; Action 4 is followed
by Action 5 ...). The critical path is the unbroken sequence of activities with the
overall longest duration. Activities not on the critical path will have "slack times",
meaning that the earliest date they can start is some time before the latest date they
must start (if the project is not to be late). Slack time durations can be readily
calculated from the diagram (the slack time of activities on the critical path is zero,
of course.) The output from PERT programs includes optional Gantt charts, and
listings of activities completed and not yet started. The Microsoft application Project
Manager is well spoken of as a PERT tool. A PERT analysis is also referred to as a
bill of events.
Picking: Finding and removing stock from a storage area - generally found to be
the most expensive activity in the operation of a stores or warehouse, due especially
to the travelling time of the picker to reach the stock to be picked. See Wave
Picking.
Picking (Zonal): The division of a stock area into a number of geographic zones,
each zone having allocated to it a distinct range of stock. (A second consideration in
allocating items to a zone should be each zone's picking load.) The picking of an
order proceeds from zone to zone, the chargehand for each zone picking and
assembling the stock on the order that is stored in his zone. Also referred to as
"Pick-and-Pass".
Picking List: A list of items, their quantities and their locations, usually generated
by computer and used by the storeman or warehouseman to direct the picking of
stock. The items will typically be for a works order or a customer order. The list will
usually be sorted in order of the locations to be visited and will also specify each
item's name and, perhaps, other information including special instructions.
Picro- : having a bitter taste or smell; also the names of derivatives of picric acid.
PICS: The first ever MRP system, developed by IBM from 1965, and introduced to
a number of manufacturing companies at the time in Racine, Wisconsin.
Planned Capacity: The capacity required to manufacture the materials which are
planned to be made at a work centre.
Planned Order: A plan type in Closed-loop MRP, being any plan within the
system generated by the planning logic, or arithmetical procedures, of the system
itself. When MRP is re-run after the closed-loop transactions are fed back into the
system, all existing planned orders are deleted and a new set is generated. However,
the newly generated planned orders may be identical to the previous set in timing
and quantity, so that it will appear to the system user as if the old plans have simply
been somewhat revised. The use always of planned orders in closed-loop MRP
ensures that plans are always in synchronisation and that the planner does not need
to concern himself with rescheduling messages - contrast the use of Firm Planned
Orders.
Planning Board: In the past, a planning board was typically a white board on
which were inscribed (down the left hand side) work centres, and across which was
drawn a Gantt chart showing the identities of jobs scheduled to be manufactured
over time (time being on the horizontal axis). The VDU output from a discrete event
APS system emulates a planning board, but with obviously far more powerful
features such as the capability for interaction. Discrete job APS systems were at one
time referred to as electronic planning boards.
Plumley Brick: The geographical area of the UK has been divided by one Plumley
into a large number of small, square sub-areas not dissimilar to post code sub-areas,
each one categorised for sales and marketing purposes according to such
characteristics as retail spending power, industrial use etc.. This division (ie into
Plumley Bricks) allows the sales company to target areas for advertising and
promotion purposes.
POD Rule (Period Order Despatch rule): A DRP system is likely to create
despatch lot quantities not synchronised with transport schedules, and then to
compound the problem caused by frequent rescheduling. In order to mitigate the
disadvantage of the system, despatch lots may be calculated equal to total required
material requirements over a period of time, each despatch to take place on a
specified date. When, inevitably, requirements change, even though the quantity to
be despatched may be different from the original quantity, use of the POD rule
ensures the date of despatch stays the same. See also POQ Rule.
Point to point: (1) A private dedicated leased telecommunications network for the
transfer of messages between participating company sites. Point-to-point networks
have the advantages of security and, for large volumes of traffic, low costs of usage,
but they have the disadvantages of high start-up costs, high fixed overheads and
exclusivity. (2) In England, a rural amateur horse racing meeting, the successor to
the popular steeplechasing of the 18th century (which was so called because the
routes of races were between parish steeples.)
Poiseuilles Law: A law of physics relating to viscosity and liquid flowing through a
pipe. The law relates the rate of volume of flow to the radius of the pipe (dv/dt =
vpr**2).
Poisson Distribution: A statistical distribution developed by Simeon Poisson. The
Poisson law is also known as the law of small numbers, and may be derived from the
binomial theorem.
PPM: Parts per million, usually found in the context of a quality rating (ie 35 ppm
= 35 non-conforming items per million produced). Nowadays, the term often
preferred is DPMO (qv), defects per million opportunities, and the performance of a
system is likely to be expressed as "so-many sigma" - say, 6 sigma (qv).
PPPP: The four P's of change management - Purpose (reason for change); Picture
(vision of how the new state of affairs will look); Plan (key elements of the change
process); and People (what roles are to be played by employees).
Primary Product: metal, crops, oil etc ... synonymous with commodity (qv).
Priority Rule (Priority of a Job): see despatching rule, static rule and dynamic
rule.
Privity (legal): In a contract between two or more parties, the parties concerned
are said to be privy to it (for example, the supplying company and the buying
company). An outside party not privy to the contract cannot take action in law with
regard to it, even though the outside party may be directly affected by the outcome
of the contract. For example, our own company's customer cannot take legal action
against our own supplier.
Pro Forma: A general Latin phrase used to mean that something has been done or
produced by way of example. It can mean the production of a "model", or standard,
document or form - for example, a model export document to be completed in a
standard way by all customers. Thus we have the term Pro Forma Invoice, an
invoice (ie a bill requiring payment) sent in advance of goods to be supplied later, or
sent with goods which are only on approval.
Producer's Risk: The risk inherent in a sampling plan that a lot of parts that it
was intended should be accepted will, in fact, be rejected by the customer. (See also
Consumer's Risk.)
Product Availability: In engineering design and the allied study of the propensity
of a product to fail, "product availability" is a useful quantitative measure through
which this vital machine characteristic can be expressed. It is defined as (mean time
to failure)/ ((mean time to failure) + (mean time to repair)).
Product Brief: Preparation of the product brief is the very first stage in the long
and expensive process of designing, developing and introducing a new product to the
company's selling range. The product brief says what is to be developed, the market
at which it is aimed and the product's desired key features. A number of company
departments will contribute to the brief, especially marketing department, but it is
the voice of the customer that must be heard louder than them all. See also "Quality,
Function, Deployment" (QFD).
Production Forecast: (1) A term used in costing to mean the output which is
forecast to be required of a cost centre over a year. The production forecast is
calculated by exploding the annual sales forecast through the bill of materials. It is
most unlikely, of course, that actual production will be the same as the production
forecast - see Volume Variance. (2) A term used in two-level master scheduling to
denote the expected remaining customer demand for a particular option variant. In
manufacture suitable to two-level master scheduling, option variants each relating
to particular Option Types can be specified by customers, and combined to make
the final product. In order to plan the production of the alternative option variants,
estimations are made through the super bill of the popularity of the variants.
However, the actual customer orders as they turn out are likely to reveal a different
mix of variants from plan. Keeping track of actual orders for specified variants is
clearly straightforward from the orders received, but what must also be done is to
keep track of probable future orders for the various variants. Thus as actual orders
are received, the forecast for any remaining specification for a particular variant is
referred to as its production forecast.
Profit Centre: An area of operating activity where the manager has responsibility
for costs and revenues.
Projected Available Balance: The stock of a product that it is forecast will be free
for use on successive future dates (usually consecutive future days or weeks). The
calculation of the amount is made as follows: (Free stock on the previous date) plus
(receipts into stock on the future date in question) minus (the forecast requirements
for stock on the future date).
PTFE: Polytetrafluoroethylene.
Pull Manufacture: Manufacture the rate of which is strictly and directly geared to
the immediate requirements of the next stage of production, such requirements
being directly communicated by the next stage. The expression is usually used in the
context of Just-in-Time - ie manufacture is synchronised to market demand and
controlled by the kanban system of visual control.
Put Away Rules: Rules relating to the placement of stock in a stores or warehouse
after its arrival there from goods-in or from the shop floor. The rules are especially
critical where the storage facility is a variable location one (qv), so that decisions are
made within the software. (A computer program used for this purpose is referred to
as a "put away algorithm".) Two simple rules are: goods with the highest pick
densities (qv) in easily picked locations ("the golden zone"); and put goods as near
as possible to existing goods of the same type.
PVD: Physical Vapour Definition - a method of applying a superior brass-like, high
shine protective surface to metals such as polished stainless steel. PVD is expensive
and employs vacuum treatment and annealing,
Q
Q Chart: see Quality Score Chart.
QMS: Quality Management Systems, a term used in the ISO 9000 : 2000 set of
procedures (qv).
QR: Quick Response - a term similar to Mass Customisation, denoting the quick
final assembly of customer options in Assemble-to-Order. See Final Assembly
Schedule.
Quadratic Sum (or Sum in Quadrature): the quadratic sum of two numbers is
obtained by squaring them, adding the two squares, and taking the square root of
this sum. Thus for x and y, it is (SQRT(x**2 + y**2)).
Quality: There are numerous definitions of this phenomenon including the
following: (1) the totality of features and characteristics of a product or service that
bear on its ability to satisfy stated or implied needs (BSI); (2) conformance to
requirements (Philip Crosby); (3) a predictable degree of uniformity and
dependability, at low cost and suited to the market (W. Edwards Deming); (4) fitness
for purpose or use (Joseph M. Juran); (5) a system of production methods which
economically produce quality goods or services meeting the requirements of
customers (Japanese Industrial Standard). For other definitions, see The
Manufacturing Manager, Chapter 13.
Quality, Function, Deployment (QFD): (Read this title as three separate, semi-
independent words.) QFD is a product development technique intended to ensure
that what is finally produced is truly wanted by the customer. Four stages are
involved, each involving a matrix drawn on a very large sheet of paper. In Stage 1, a
QFD team writes out customers' desires, or wishes, as short phrases on the vertical
(left hand) scale of Matrix 1, and on the horizontal (top) scale writes out how these
desires are to be satisfied (ie the customers' needs). At Stage 2 a second matrix is
drawn up with the needs from Matrix 1 now drawn vertically on the left scale. The
team completes the matrix by entering the design features needed to satisfy them on
the horizontal (top) axis. At Stage 3, yet a third matrix is constructed with the design
features from Matrix 2 now vertically on the left. The process requirements needed
to fulfil these features are entered horizontally at the top. A fourth matrix is finally
constructed at Stage 4, this time with process requirements vertically on the left, and
process control requirements horizontally at the top. The technique was originally
developed by Yoki Akado in 1966. For a good description, see Quality, Function,
Deployment by R.G.Day (1993).
Quality Grades: In the process industries, it is possible for the operation of the
production process to result in the production of a grade of material other than
"grade 1". In these circumstances, it is essential that the stock record of the
appropriate grade should be augmented to show stock quantities by individual
grade. See The Manufacturing Manager, Sub-Section 9.4.6.
Quality Lever: imagine a see-saw (which is a lever, of course) that is 10 feet long,
and which is rested on a fulcrum 8 feet from the end. Now imagine three points on
the long end of the see-saw which are 8 feet from the fulcrum (point A), 6 feet from
the fulcrum (point B) and 4 feet from the fulcrum (point C). The effect of a force on
the short end of the see-saw exerted at point A is very considerable; the effect at
point B is less so; and the effect on the short end exerted at point C is least. The see-
saw is the quality lever. At the short end, we have the quality attributes of a product
or service. At point A we have the effect on these quality attributes of product design.
At point B we the effect on quality of process design. And at point C we have the
effect of design for manufacture. See especially Taguchi.
Quantum Meruit (legal): Latin for "as much as he has deserved" - an agreement
or court ruling that a buyer should pay proportionately for the work that has been
done or the goods that have been delivered. For example, if only 600 units of an
order for 1000 units are delivered, under a quantum meruit settlement, the buyer
will simply pay a 60% portion of the bill. Sometimes, quantum meruit is not
acceptable: for example, here, the contract may state that it is absolutely essential
that the full 1000 units are to be delivered. The 600 units are not acceptable - they
are returned, the buyer pays nothing, and sues in the courts for breach of contract.
See severable/non severable agreement.
Quarantine Area: A factory area associated with either the shop floor or goods-in
area in which stock is to be held pending its investigation with regard (usually) to
quality.
Queue(1): (See also Queue (2) below). Work in progress physically present at a
work centre, waiting to be loaded onto the machine for processing. Hence queue
time, a major component of production leadtime in many factories (typically, queue
time constitutes 90% of total lead time). While some degree of queue is usally
welcome on the shop floor, to ensure men and equipment are kept busy, total queue
should be carefully managed to strike a balance between WIP and activity. This is
achieved in many factories through Input/Output Control (qv) - the principle that at
the gateway work centres, no more work goes in than comes out. A graph showing
the relationship between queue size and the percentage occupation of a work centre
is given in The Manufacturing Manager, Chap 11.
Queue (2): (US terminology = waiting line). Queues are a phenomenon of everyday
life and require to be considered carefully by operations managers responsible for
providing service to customers - queues for service at banks, queues for airline
passengers, queues for petrol pumps etc.. Two examples of queues in industry other
than in definition (1) in this Glossary above are (1) queues of shop floor staff for a
central tool service, and (2) queues of suppliers' vehicles waiting to unload goods at
the stores or warehouse. The general approach to managing queues is to provide a
service such that the total cost of the queue plus the cost of providing the service is
minimised. In the example of the central tool service, the cost of the queue is
represented by the idle time of shop floor operators queuing for service, while the
cost of service is the cost of providing central tools staff needed to provide that
service. Operational theory relating to queue management is extensive and Glossary
readers are referred to the many texts on Operations Research. Some of the terms
encountered in this theory are as follows. The calling population: the units or people
wanting service from the queue, such as staff wanting a tool or suppliers' drivers
waiting to be unloaded. The calling population may be considered to be infinite (eg
suppliers) or finite (shop floor employees). We also need to know the characteristics
of the calling population - ie the time between arrivals. It is generally observed in
queuing theory that the rate of arrivals for service is Poisson distributed. Finally, we
must also decide the length to which a queue could grow (it is unlikely that a queue
could in reality grow to infinite length - in the case of a petrol pump, for example,
car drivers would be reluctant to join a queue greater than one vehicle!) The next
term is the service facilty - ie the entity providing the service. Options here might be
a single-channel system (ie one provider of service) or a multi-channel system (many
stations each providing service). As well, we must also state the "queue discipline"
(are some members of the queue to receive priority, or is it strictly FIFO?). Finally,
what length of time does the actual provision of the service finally take (ie after
reaching the head of the queue)? The general assumption here is that the variation
in duration of actual service provision is exponentially distributed. The theoretical
calculations involved in describing queues and determining the least cost option to
providing service are not especially difficult if it is assumed that all the variables
such as arrival distribution and service time are exactly as in the text books.
Because, of course, they never are, the approach to queue management taken in
industry and commerce is to set up a simulation model. The simulation model allows
the user to specify any characteristics of the queue that he wants, and to "observe"
the effect of various options on queue size and queuing duration, by simulating
matters over any desired length of time. There are several proprietory simulation
models on the market, some illustrating the results of the computer processing with
coloured animation. An example of the use of simulation is in determining the
number of receiving and despatching docks to be provided in a new warehouse. Any
Glossary reader who is to embarking on a simulation to be conducted on his behalf
by a consultancy service should remember that he should first determine
beforehand precisely what data the consultancy requires to conduct the
investigation.
Quick Response (QR): the ability to respond quickly to a customer order for a
highly differentiated product with many options - see FAS and Two-Level Master
Scheduling.
qv: quod vide (Latin), meaning "which see", an instruction directing the consultant
of a term in this Glossary to a further reference elsewhere.
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R & D: Research & Development.
Racking (High Bay): Racks which are, say, 70' to 200' high. Automatic stacker
cranes are used to store and retrieve material, usually along narrow aisles. Narrow
aisle high bay racking is costly to install and maintain, but provides high density of
storage and good security.
Racking (Mobile): Racks which can be moved, allowing very dense storage when
closed up, and access to stock when the racking is moved. Perhaps used for very
long-term low use storage, such as military field spares.
Racking Safety: Racking safety is a vital on-going topic for the stores or
warehouse manager. There are a number of courses in the UK on the subjecty - see
SEMA and also the Storage Equipment Safety Service website.
Racking System: A honeycomb of pallet spaces, perhaps one space deep and (say)
35' high.
Radio Bar Codes: loose talk for Radio Frequency Identification codes (see RFID).
The term is often used by Tesco,
Range: Usually, the difference between the smallest and largest measurement in a
sample. The range is used in Statistical Process Control (SPC) and is plotted on a
variable control chart - see The Manufacturing Manager, chap 14.
Ranking (of Jobs): A qualitative job evaluation technique whereby the jobs to be
ranked in order, from those that are to have the highest rates of pay to those to be
awarded the lowest, are simply ranked against each other in order (1st, 2nd, 3rd ... ).
Clearly, in order to carry out the ranking, job criteria must be decided.
Raw Material: the products constituting the starting step in manufacture, and
from which all subsequent manufactured items stem. Raw materials are obtained by
buyers as part of the purchasing process, and occupy Level 99 in the levelled bill of
materials - see Low Level Coding.
RDT: Radio Data Terminal - a small device, often hand-held, used in process
monitoring and stores/warehouse control by which data may be transmitted to a
computer, or received therefrom, by means of a radio link rather than by means of a
co-axial cable. An RDT may weigh 15 oz, and have, say, a 128 character VDU
display, a limited key pad, a 12 hour rechargeable battery, a bar code wand and a
range (to the computer) of 5 miles.
Receipt (of Goods): When goods are delivered from the physical possession of a
supplier or haulier to the physical possession of a customer, they are said to have
been received by the customer. There is no legal significance in such receipt of goods
beyond the duty of the recipient in common law to take reasonable care of them (ie
not to damage them or store them in unpropitious circumstances). Contrast
Acceptance and Title.
Recipe: A term used in the process industries to mean the immediate components
(ie ingredients) of a manufactured product, including the usages of each of them.
Not surprisingly, there are a number of terms relating to the bill of materials which
differ as between engineering and process industries - for example: yield v. scrap;
usage v. quantity per; recoveries; by products; etc... see The Manufacturing
Manager, Chapter 9.
Recoveries (in Materials Planning): A product may take part in a
manufacturing process, but may then be either wholly or partly recovered at the end
of it. Examples are solvents (perhaps 97% recovered) and catalysts (100%
recovered). See The Manufacturing Manager, Figure 9.9.
Recursion: Recursion occurs when a computer program calls itself - that is, there
is an instruction in Program X which states "Call Program X". Recursive
programming is widely used in analysis of the bill of materials - for example, the
programming action to be taken at one level of the bill is precisely the same as the
action needed to be taken at the next level down, and so on all the way down to the
raw materials. Not all programming languages support the technique of recursion -
for example, Pascal, C and PL/1 do, COBOL, FORTRAN and BASIC do not.
Release: The action of authorising a works order to proceed to the shop floor to
commence manufacture. In closed-loop MRP, the release of either a planned order
or a firm planned order will change the order's status to that of "open" (ie to that of
a scheduled receipt). Other activities will also be initiated, such as the generation of
shop paperwork such as an ID card and the issue of component kitting instructions.
Reliability: The tendency of a product to continue to work and perform
satisfactorily despite chance events and changes in its operating environment. The
achievement of reliabilty in the product is a prime objective in product design, and
is investigated formally through FMECA (qv). See also Failure Rate, Failure Mode
and Product Availability.
Repairable Item: A tool, fixture or other item used in manufacture, and which is
repaired or refurbished prior to its reuse. Repairable items have associated with
them repair leadtimes.
Reporting Logic: The messages output by closed-loop MRP advising the planner
as to the need to reschedule open and firm planned orders, in order to restore the
equilibrium of demand and supply within the materials plan.
Res Ipsa Loquitur (legal): (Latin: the thing speaks for itself) An assertion in court
in, perhaps, a case involving personal injury, that it is self evident that the only
possible explanation for an employee's injury was the defendant's negligence. An
example might be an employee injured by a tool shattering in use, the defendant
being the tool manufacturer.
Retail: The practice and sale of goods through shops and markets frequented by
everyday consumers.
Retail Audit: the conduct of market research in the retail market. Researchers
typically take inventories of the shelves and stock rooms of shops and supermarkets
(with permission - and usually paying a small premium to do so). Well known
market research companies conducting retail audits are A.C.Nielson and Dun &
Bradstreet.
RFP: Request for Proposal - a proposal may be solicited from, say, a contractor or
capital goods supplier, the proposal then forming the basis of a subsequent contract.
Pitfalls in preparing an RFP are: (1) making it too simplistic, omitting the detail that
would enable the vendor to prepare an accurate reply; (2) basing the RFP on wildly
inadequate forecasts of future needs; and (3) omitting consideration of set-up issues.
Rights Issue: a company may wish to raise money other than at its foundation in
order to expand its business. It may do so by issuing new shares, offering them in
the first instance to existing shareholders, usually at a preferential rate. See shares
and see The Manufacturing Manager, Chapter 1.
RIU: Regulatory Impact Unit (formerly the Better Regulation Unit) ... a
government organisation connected with the HSC/HSE (who else?) with a name to
make you weep.
RMS: root mean square, the root mean square of a group of numbers being
identical to their standard deviation.
Robot: A machine controlled through a computer program, inputs to the program
usually emanating from sensory devices attached to the robot itself (video, audio and
tactile). The robot typically comprises devices and attachments capable of
performing the functions particular to its own design - say, gripping; picking and
placing; moving; and so forth. There are some 350 different types of robot employed
in industry, varying in cost from £100 to £100,000.
Rodger's Seven Point Plan: A procedure put forward in 1970 by Alec Rodger for
assessing a job candidate at an interview. See also Fraser's Five Point Plan.
Root Mean Square: the RMS of a group of numbers is identical to their standard
deviation.
Rotational Tool: A tool or or device that can be repeatedly restored to its original
condition after use in a production job. The elapsed time for restoration must be
taken into account in scheduling, and, as far as equipment maintenance is
concerned, the fact must be accepted that the tool does in fact gradually deteriorate.
Rough Cut Capacity Planning: The schedule itself which constitutes the Master
Production Schedule is generated by an arithmetical procedure which takes no
account direct or otherwise of the resources and capacity either to make the planned
material or to make the components needed to support final manufacture.
Consequently, before the final release of the Master Schedule as a company
plan/commitment, some after-the-event check must be made to ensure that there is
sufficient capacity and that it is capable of being made. Any such checking is termed
rough cut capacity checking. Note that rough cut capacity checking is not a specific
technique, although software vendors may claim that their own versions are
standard methods. RCCP is anything the company or software house devises in
order to do the job of investigating and ensuring that the Master Schedule is feasible
from the capacity viewpoint. There are, legitimately, wide differences from company
to company in the thoroughness of their rough cut methods. See also Resouce
Requirements Planning. Also see The Manufacturing Manager, Chapter 6.
Route: A sequence of operations - and the locations where they are to be performed
- which is followed in the course of manufacture of a specific shop floor job. A route
will be given an identification number and will specify the work centre / machine /
operation of each step along the way, and also the identity of any special tools
needed. Routes are recorded on the Routings File (qv).
Routing, Blanket: a routing that lists a group of operations etc which are needed
to produce a family of manufactured parts. The parts may have small differences in
size, times and tool requirements, but each uses the same sequence of operations.
See Routings File.
Routings File: A file, each record of which holds the details relating to a particular
route (qv). The accuracy of the routings file was not a critical matter under MRP;
with an APS, however, the routings file must be 100% accurate, since an APS
specifies the details of the hour to hour work to be performed. Obtaining and
maintaining 100% accuracy can be a problem: it is usually best if the file is made
the responsibility of a named manager, perhaps someone skilled in work study.
RP: Repairable Period - the elapsed period from the point in time when an item of
equipment breaks down to the point when it is returned and reinstalled after repair.
RPN: Risk Priority Number, a term encountered in FMECA. The RPN is obtained
by multiplying the Risk Severity score (1 - 10), by the Probability of Occurrence
score (1 - 10), by the Risk Detectability score (1 - 10). Problems which are more
serious incur a higher RPN. The sum of all RPNs gives the total risk figure for the
process or service under consideration/design.
RTLS: Real Time Locator System. A system in which the location of an object is
revealed by the attachment to it of an RFID tag.
RTY: Rolled Throughput Yield, a measure used in Six Sigma. See also DPMO.
Rush Order: A job usually accepted to be done in far less than the normal
leadtime, often as a favour to a valuable customer. The job is assigned constant high
priority and is given maximum attention by the supervisor.
Rx: receive
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5S: see SSSSS.
Safety Time: (1) one meaning is the duration of time that materials are planned to
arrive before their need date - for example, a safety time of 5 days might be placed
on a raw material required date, hopefully to make sure the material really will be
available when it is needed. The concept of safety time is rightly looked down on by
companies that pride themselves on OTIF deliveries. (2) the length of time it is
estimated that safety stock will last.
Sales Forecasting: Companies do not usually forecast sales, they forecast demand.
What they sell will depend on demand, stocks and the master production schedule.
This is not a pedantic point - see the Glossary definitions of Demand (Latent) and
Demand (Patent). Also, see especially Demand Forecasting which gives a short list of
prominent forecasting software packages.
Sales Order Processing (SOP): The activities which are put in train on receipt by
the company of a customer's order are quite critical. How well procedures are
carried out directly determines the perception of the company in the customer's eyes
- their smoothness and efficiency, and the correctness of the clerical work, for
example. They also lead to the (hopefully) efficient actual fulfilment of the order
itself by the numerous staff involved. Thus participating departments and sections
include: the sales office; stores and despatch; stock replenishment; invoicing and
accounts; and transport/distribution. See The Manufacturing Manager, Figure 2.5.
Sampling: the taking of a small number of units (the sample) from a large
population of units, the sample being as representative of the population as possible
(ie by avoiding bias in selecting the members of the sample). The relationship of the
characteristics of the sample to the characteristics of the population as a whole can
be computed by statistics, enabling inferences to be drawn about the population -
this being the purpose of the whole procedure. See the seven Glossary entries under
"Sampling" immediately below.
Sampling (Single): Taking a randomly chosen quantity n units (the sample) from
an incoming lot of materials of size N, and 100% inspecting the sample so taken. If
the number of non-conforming items in the sample is less than or equal to the
"acceptance criterion" c, the incoming lot is accepted. If not, it is rejected. The
values of N, n and c are obtained from Sampling Tables (qv).
Sampling Table: The data that constitute sampling tables are calculated through
probability theory and, in particular, through the use of the binomial theorem. In
broad terms, a sampling table requires the user to specify (1) a desired or expected
quality level of incoming parts, p, and (2) the size of the incoming lot, N. If single
sampling is to be employed, the user then reads the following from the table: (a) the
size of the sample n to be taken from the incoming lot and subsequently 100%
inspected, and (b) the acceptance criterion c, or the number of non-conforming units
allowed in the sample in order for the incoming lot to be accepted.
Sampling Tables (AQL, or Military): These are sampling tables devised in the
1940s and 1950s, and are intended to give a high probability of acceptance of
incoming lots which are at a designated level of quality. Since 1959,the tables have
been modified so as to give a 95% probability that a lot at a declared quality level
will be accepted.
Scrap Factor: The percentage of ruined components created during the operation
of a process. Note the adjective "ruined" - the implication of the term is that the
process failed, either due to machine malfunction or operator error, rather than that
the process is inherently incapable of producing 100% conforming output. It is said
that a 10% scrap rate will increase factory cycle time by 40% and create a 50%
increase in work-in-progress (in the second case, partly due to excessive production
and safety stocks, caused by uncertainty). Things are rarely as bad as 10%, however,
although a survey in the December 2000 issue of Industry Week (US) revealed, at
least in US manufacturing, that scrap and rework costs exceeded 1% of sales
revenue in 77% of companies. See also Spoilage, Yield and Rework.
S-Curve: S curves are often associated with the variation observed in product
demand (or sales) over time. That is, plotting demand on the vertical axis of a graph
and time on the horizontal axis, after the launch of a new product, demand begins at
a low level with a small upwards trend month by month. After many months, the
level and growth rate of demand begin to sweep upwards in a steep climb. Some
time afterwards, level and rate flatten out and, later still, begin to decline.
Pictorially, the illustration of the curve on the graph somewhat resembles the letter
'S', lying flat on its side. Mathematically, two types of S-curve are the Gompertz
curve and the Pearl-Reed curve.
Season: In sales forecasting, a fixed known period such as the 12 months of the year
or the 7 days of the week. Seasonality is important because, as we all know, the sales
of certain goods are more pronounced at certain points in the season due to the cycle
of weather, social holidays etc. Contrast a "cycle"and also remember Easter.
Seasonality: The phenomenon whereby the period by period sales demand over a
season assumes a pattern of rises and falls (highs and lows) depending only on the
period in question. For example in a twelve month season, the demand for warm
clothing is likely to be highest in the winter months of the year and lowest in the
summer months. Seasonality is represented in demand forecasting either by a set of
seasonal factors or by a set of sine equations (ie harmonics - see Fourier analysis). A
particular problem in dealing with seasonality can be the effect of Easter, a period
of time which can fall in one particular month one year, and in another month the
other year.
Semi Frozen Zone: Also referred to as the trading zone - see Time Fence (2nd).
Service Part: Peferred, and often US, terminology for a spare ("If they were spare,
we wouldn't have them").
Set Up Time: The sum of internal set-up time (qv) and external set-up time (qv).
SFO: Serious Fraud Office - in the UK, a division of Scotland Yard law
enforcement. (Scotland Yard is the location of the Metropolitan (ie London) police
HQ).
SFC: Shop Floor Control - the day to day management of that area in a factory
where production itself takes place. Management (ie Control) activities include short
term work scheduling; the deployment and general management of work operators;
and seeing to the good order of equipment.
Shares (in a company): on its foundation, a company issues and sells shares of
ownership, the revenue from the sale yielding the capital it needs to to start the
business and the share ownership of those purchasing them representing their
investment in the company. There are two main types of share. (1) An ordinary share
carries a vote at a shareholders' meeting and the shareholder is entitled to a
dividend decided by the directors of the company. (2) A preference share does not
carry a vote, and the shareholder receives a fixed percentage dividend. As well as the
issue of shares on the company's foundation, shares can be created by rights issues
and by capitalisation issues. See The Manufacturing Manager, Chapter 1. Note that
in stock exchange jargon, a share option is a right to buy (or right to call) shares at a
future date or a right to sell (or right to put) at a future date.
Shelf Life: The maximum time an item can be stored until it becomes unfit for use.
The implication of unfit for use is that the item has physically deteriorated. In fact,
many items which reside too long in the stores because of poor inventory control
become scrap because the bill of materials has changed and they are no longer
current!
Shift: "A relay or change of workers organised to take over from others in the
performance of certain duties - " (OED) In manufacturing, a shift is the particular
assembly of employees directed to work certain proscribed hours of the 24-hour day,
such that the shift may be superseded by a following shift, of different workers,
required to work other hours of the day. For example, in a factory there may be a
"day shift" of employees working during the day (say, 8am to 5pm), followed by a
"night shift" of other employees taking over and working 5pm to 1am. The
advantages of shift working are that capital machinery is kept in use for a longer
overall period and that the flow of production is not disrupted. Problems with shift
working are communication of working decisions between consecutive shifts, the
provision of effective management in other than the "prime" shift (*) and the
provision of general, non-production factory services in other than the prime shift.
(* The prime shift is usually normal office hours, say 8am to 5pm, which managers
would prefer to work. Employees working in non-prime shift times are usually paid
a shift allowance - a premium per hour on the normal rate of pay.) The well-known
US logistics consultant Roy Harmon has contended that if cleverly and
imaginatively organised, shift working can be of great benefit to employees, such as
in avoiding traffic rush hours to work etc. His suggestion is to have 3-shift working
comprising overlapping "management shifts" and "worker shifts" as follows:
Management/Supervision Shift 1: 6.30am - 2.30pm; M/S Shift 2: 2.30pm - 10.30pm;
M/S Shift 3: 10.30pm - 6.30am; Worker Shift 1: 11am - 7.00pm; W Shift 2: 7pm -
3am, W Shift 3: 3am - 11am. Different companies devise different shift hours, and
invest a great deal of care and time in arriving at them.
Shop Calendar: Literally, a calendar in which the work days of the year are
consecutively numbered without regard to month and ignoring/skipping weekends
and public holidays. The shop calendar is useful in scheduling and tracking
consecutive jobs over time. For example, on what date will a job be finished if it
starts on February 22nd and has a leadtime of 33 days? If February 22nd is Shop
Calendar Day 37, the answer is Shop Calendar Day 70. Now we can look up the real
date of Shop Calendar Day 70 on the shop calendar!
Short Hedge: A company that sells a commodity future is said to "go short" on the
material concerned. If the company takes this action so as to protect the income it
will eventually receive when the futures date is reached, the action is said to be a
"hedge". See commodity and see future. Also, visit the "Investor Words" Internet
site.
Sigma: The Greek letter for "s", customarily used in statistics to denote the
standard deviation of a distribution, qv.
Sigma, Six: Six sigma is a formal set of procedures that enables a company to put
into effect the quality lessons taught at the shop floor level by Walter Shewhart and
W. Edwards Deming. Six sigma is highly focussed on maximum financial return and
the satisfaction of external customers. It is currently being widely applied to very
great effect in the USA by large and small companies alike. Using the DMAIC
methodology,the successful application of six sigma typically results in the delivery
to the customer of near perfect products and near perfect service (in fact, with non-
conformities down to 3.7 per million, and minimum variation of output). Six sigma
was so named in the 1980s by Bob Galvin, CEO of Motorola Inc., and led to the
institution by that company at that time of a number of very highly profitable
initiatives. The technique was boosted further in 1993 by its adoption as a required
means of process improvement and management procedure by Allied Signal Inc.. In
1998, Jack Welch, then CEO of General Electric, described six sigma as the most
challenging and potentially rewarding initiative we have ever undertaken. As implied
above, six sigma is not reserved for the giants of international manufacturing,
however. It is a simple technique centred on financial return and sound data that
requires no software to install; instead, six sigma is the application of long-
established, well proven methods to both manufacturing and commercial processes.
Slack: In the context of jobs on the shop floor, the extent to which the progress of a
job is ahead of schedule.That is, the number of hours (or days) early it will be
completed. In project management, slack is the difference between an activity's
earliest start date and its latest possible (critical) start date; if the slack on an
activity is zero, that activity is on the critical path. The critical path is the succession
of tasks such that if any one of them is completed X days late, the project itself will
be X days late, and if any one of them is completed earlier than scheduled, the whole
project will similarly be correspondingly early.
Slack Time Despatching Rule: A shop floor prioritisation rule in which jobs are
prioritised in accordance with: (the time due minus the time now) minus (the
processing time still remaining). The greater the amount of slack time, the lower the
relative priority.
Slack Time per Operation: A shop floor prioritisation rule in which jobs are
prioritised in accordance with their slack time (qv), but the slack time being divided
by the number of operations remaining. (Each operation is an opportunity for
delay.) The lower the Slack Time per Operation, the higher the job's priority. See
The Manufacturing Manager, Ch 11.
Sliced Bread: Invented in 1927 by Otto Frederick Rohwedder of Iowa, US, and
marketed from 1928 by the Chillicothe Baking Company Inc of Missouri, US.
Within five years, sliced bread accounted for 80% of the US market.
SLOB: Slow Moving and Obsolete Stock. See Stock (Slow Moving) and Stock
(Obsolete).
Smart Label: A term often used to describe an RFID tag. The tag comprises two,
and possibly three, components: a silicon microprocessor, a lithium battery
(optional) and an antenna. The antenna is able to pick up electric fields when the tag
comes within range of an RFID interrogator (ie a tag reader). Smart labels are
paper thin and able to survive very harsh environments (*). If a battery is present
(to boost range and power), it is an active smart label; if there is no battery (to save
cost), it is a passive label. Note that RFID tags themselves do not have to be labels.
For example, tags for animals are encased in glass beads. Of vital importance in
choosing a tag is its ability to be read by the RFID reader ... a particular tag design
may be poor at picking up the electronic signal from a tag reader, and in addition,
specific individual tags from a given manufacturer may vary considerably from one
to another in terms of reliability and quality. It is necessary therefore in designing
an RFID system physically to test the (electronic) suitability of the tags that are to be
attached and the environment in which the RFID network is to operate (see
particularly AEN.) (* Nevertheless, a chip embedded in a label can be damaged and
rendered inoperable by a direct blow, and the connection between a chip and its
antenna can be damaged by twisting - the likely physical environment in which
smart labels are to be employed must be properly tested in setting up the RFID
system.)
SME: Small to Medium Enterprise - a company having fewer than 250 (?)
employees.
SMED: Single Minute Exchange of Die - the three stage methodology devised by
the late Shigeo Shingo to effect a machine changeover in a very short time. It was
Shigeo's claim that any changeover could be reduced to 9 minutes or fewer (hence
"single minute"). The two purposes of achieving very short machine changeovers
are: (1) to reduce the minimum size of an "economic" manufacturing lot - if
changeover times are lengthy, it may be necessary for financial/costing reasons to
make a large lot of material (see EOQ ... although this entry relates to the size of lots
ordered from suppliers). A large lot of material creates stock keeping problems and
results in unnecessary investment costs; And (2) to fulfil Shigeo Shingo's original
purpose of manufacturing in small, even quantities so that manufactured material
flow matched the demand for product in the market, as explained under the
Glossary entries for Just-in-Time and Lean Manufacture. See also OTED. Also see
Internal Set Up and External Set Up.
Smith, Adam: Author of the influential book in 1776 Inquiry into the Nature and
Causes of the Wealth of Nations. This book is still in print and is used as an economic
text.
Sole Trader: The appellation given to a person in business merely on his own
account - for example: a plumber; a person who has set up as a printer; a person
running a taxi or fleet of taxis. The implication is that the sole trader has not formed
a limited company and that he is therefore personally responsible for the debts of his
enterprise - for example, unpaid creditors will enforce their bankrupcy. It is a
fundamental right of a citizen in the West that he can freely set up as a sole trader
without let or hindrance by government (although there are grievious regulatory
obstacles placed in his way in Europe by the much despised European Union.)
SOP: (1) Sales Order Processing, or (2) Standard Operating Procedure. See also
S&OP.
Sources and Sinks: Terms used in the operation of the transportation algorithm.
Split Batch: When a shop floor job is behind schedule and some, but not all, of the
components involved are very urgently needed in a next stage of production, the
batch of components involved may be "split" - ie the urgently needed ones sent
ahead and the remaining ones left behind to be processed at a later date.
Unfortunately, the units left behind are all too often forgotten and lost: as a
consequence the practice of batch splitting may be banned on some factory floors.
Also see Operation Splitting.
Spoilage: The degree to which units manufactured are rendered unfit due to the
maloperation of the process. (Rarely, spoilage might mean the percentage of non-
conforming items produced by a process not inherently capable of manufacturing
100% conforming parts.) See Scrap Factor.
SPT (Shortest Processing Time): A job despatching rule in which the highest
priority is given to jobs with the shortest expected processing time (*). Thus of two
jobs A and B with respectively 5 hours of processing time and 12 hours, Job A would
be prioritised over Job B. SPT is a static despatching rule (qv) and has only two
merits: (1) it wins computer simulation competitions involving other rules, and (2) it
ensures the greatest number of jobs are despatched. Its disadvantages are that the
despatch order bears no relation to the jobs' real urgency, and that jobs with long
processing times become increasingly late. Nevertheless, it is a useful rule when
things are not going smoothly. (* Note that processing time = run time + set-up time,
and excludes queue, waiting and moving time.)
Squeaky Wheel, The: If one is riding in a vehicle and one of the wheels is
squeaky, he stops and fixes the wheel with a drop or two of oil. The analogy is used
in manufacturing to mean that when a problem becomes readily and obviously
apparent, the manager gives it his attention. In other words, the manager is reactive.
But he should be positive and methodical. The squeaky wheel may need attention,
but fixing it distracts from the need to set up a regular maintenance programme for
the company's vehicles.
SSAP: Statement on Standard Account Practice, these being issued from time to
time by the Accounting Standards Committee. An example is SSAP9, issued in 1975
relating to stock valuation.
Stage Deliveries: A buyer is not obliged to accept the delivery of material in stages
unless he has agreed beforehand. If stage deliveries are made, a question then is, as
to whether the contract is severable or non-severable. Stage deliveries made under a
severable contract are usually those where the buyer must pay for each delivery
separately; if so, and if a specific delivery is refused (eg because of quality), the
contract nevertheless continues. When stage deliveries are made under a non-
severable contract, one single payment is usually made as a lump sum (at a time
specified in the contract). If any delivery is then refused, the whole contract can be
terminated (but see Quantum Meruit).
Stage Payments: Where large structures are to be purchased, such as major items
of plant or substantial buildings, both contractor and purchaser may wish to
arrange stage payments. The contractor may require the staging of payments for
cash flow reasons and the purchaser may prefer the arrangement so that he is able
to withhold payment until the undertaking has proved satisfactory in use. In the
contract beforehand, therefore, the two parties may specify a schedule of stage
payments to be made by purchaser to supplier. It is important that each payment is
linked to a specific date or event, and that, before payment is authorised, a separate
invoice relating to that particular payment is submitted. For both parties, but for the
purchaser especially, in compiling the schedule of payments, it is wise to involve
finance department so that taxation and government grant matters can be taken
into account. A contractual agreement that a final payment (of, say, 5%) is not to be
made until many months after completion of the work is referred to as a retention
clause (see retention). See also Stage Deliveries and Severable/non-severable.
Staging: Either assembing materials on the despatch dock to check its readiness,
prior to its distribution to an external customer, or accumulating material in a
temporary holding area to ensure that sufficient of it physically exists to begin a
manufacturing job (and that it is thereby kept safe from allocation to other jobs
which might need similar items). In this second context, staging is synonymous with
kitting - see Kitting Area. "Staging Time" is synonomous with Queue Time (see
Queue).
Standard Hours: The number of standard hours is any standard that can be used
as a yardstick when assessing the actual circumstances of the moment. Example 1: it
is presumed by the shop supervisor that under normal conditions, an operator will
complete a job in 50 hours. 50 hours is now regarded as the number of "standard
hours", so that if the operator actually completes the job in 40 clock hours, he may
obtain a bonus if a bonus scheme is in operation. Example 2: if standard hours are
the same as the demonstrated capacity, then with a load factor of 1.33 and with
standard hours available at a work centre of 100, the actual available (clock) hours
are 100/1.33 = 75 hours. Finally, remember if you always have enough people for the
days tasks, you're probably overstaffed!
Static Despatching Rule: A rule whereby the priority of a job is calculated based
purely on the factors inherent in the job itself, rather than on its current timeliness
of progress through the shop. A prime example of a static despatching rule, or static
priority rule, is Johnson's Rule. Johnson's Rule dictates that jobs in a queue should
be released for manufacture in the order of the shortest jobs first. Note, however, if
this is done in practice, it may result in a few lengthy jobs becoming "stuck". To
prevent this happening, some failsafe mechanism needs to be applied to rescue
them! It is said that Black & Decker in the US once had a scheme whereby the
shortest jobs were released in order from Monday to Thursday, and FIFO was
applied on Friday. In contrast to a Static Despatching Rule, see dynamic
despatching rule Also see despatching rules.
Stationarity: The pattern of sales demand in which the level of demand is constant
from period to period. (The consultant of this Glossary may protest that demand is
never constant from month to month! If however the only deviations from level
demand are random fluctuations, the pattern of demand is stationary and that
should be the basis of the forecast. The fact that in reality the forecast will be in
error due to the random fluctuations is a matter for safety stocks.)
Statistics: Statistics has been defined as applied probability theory, but it is also the
art of obtaining a quart of information from a pint of numbers!
Stem and Cluster: A transport route made up of a single long haul to a particular
point, followed by a number of short journeys from the point to various local
delivery/collection destinations. Often preferred by drivers in contrast to a petal
route.
Stillage: a metal cage, usually tall, used for the temporary storage and movement of
materials within a factory and between manufacturing sites. Originally, stillages
were used in brewing as stands for casks and to keep materials off the ground.
Stillages are used in their hundreds of thousands within motor car manufacturing -
there may be 300 stillages in the loop per component between component suppliers
and the main plant. It is reported that over seven years, a manufacturer can "lose"
20% of his stillages, and at a cost of several hundred pound each, great expense is
clearly thereby incurred (including particularly expense in production hold-ups due
to non-availability of materials). To put an end to the problem of loss, Ford UK in
conjunction with the Warwick Manufacturing Group have begun the RFID tagging
of individual stillages.
Stock: Material usually held in readiness for some future use. Also, material
undergoing transformation of its physical form (ie being processed). The
circumstances in which the material has been made or the reasons for its retention
give rise to very many alternative stock categorisations - see many entries below.
Stock, Cost of Holding: (Cost of carrying stock etc): The cost imputed to the
holding in storage of one unit of inventory. The individual costs making up the total
fall into two categories. (1) Operating and administrative costs including insurance,
housing, general stock management and obsolescence, and (2) capital costs, relating
to the fact that the stock which has been made has cost money to manufacture or
buy, and that this investment should have ascribed to it a rate of return on the
capital so represented. Note that the value of the stock must be considered to be its
standard cost, not its selling price or disposal value. Note also that the the company
and the MD will have set a target for the % return on any corporate financial
investment - say, 20% pa - and that it is this figure which should be used to arrive at
the capital cost of stockholding, not the everyday bank interest rate. As a guideline,
inventory holding costs are considered to be some 25% per annum of the value of
the stock.
Stock (Active): Any product or component which is currently in regular use (used,
say, at least once in the past six months).
Stock (Allocated): That part of stocked material which has been set aside
(whether physically or merely by categorisation on the stock record) on behalf of
specified, identified works orders. Stock so allocated may be either (i) a standard
allocation (or soft/normal allocation), or it may be (ii) a firm (or specific/hard/frozen
allocation). Standard allocated stock is general stock from the quantity on hand,
whereas firm allocated stock is material physically identified by lot number or other
id for the specific works order or customer order concerned. Contrast Stock (Free).
Stock (Average): In an order point system, or Min/Max, system, the average stock
holding. This level is encountered half way between the arrival of each
replenishment, and is calculated as (R/2 + S), where R = replenishment lot size and S
is the safety stock amount.
Stock (Buffer): Usually synonymous with Stock (Safety), but sometimes used to
mean Stock (Policy) .
Stock (Economic): Within the company, the sum of the stock actually present plus
raw materials ordered but not yet delivered, less the stock of goods sold but not yet
despatched.
Stock (Free): That part of stocked material which is able to be allocated as the
occasion arises for any purpose including future works orders. Stock which has not
been reserved. See also Stock (Allocated).
Stock (Inactive): Stocked items which have not been sold or used in production
for so-many months (or weeks).
Stock (Obsolete): Stocked items which are no longer used in the company, and
which will have to be disposed of. Stock may have become obsolete because the bill
of materials was changed without proper inventory planning, or because of poor
record keeping (ie not knowing it was there). See SLOB.
Stock (On-Hand): Stock of a given product recorded as being present in the stores
or complete and available on the shop floor. In planning, the stock of the product
currently being manufactured on the shop floor and expected to be completed in the
next so-many days will be considered to be "on hand".
Stock (Policy): Material provided for to protect its availability, and safeguard the
company's position, in the event of a defined disaster. For example, policy stock may
be held by a pharmaceutical company manufacturing a unique, life-saving drug in
order to guard against the destruction of its factory by fire or earthquake. As the
name says, policy stock is not related to ordinary sales demand or logistics ...
whether it to be held at all, and, if it is, the amount so to be held, are matters of
business judgment that can be decided only by senior management. See also Stock
(Strategic).
Stock, POU: Point-of-Use Stock. Stock which is held at the place it will be
consumed (eg in the plant, on the shop floor, or, perhaps, in the assembly shop),
rather than in stores. POU stock can create a problem in cycle counting and general
control. For example, on the stock record, its manufacturing location must be
correctly held. It is important to distinguish POU stock from Work-in-Progress.
Stock (Quarantine): Usually, on-hand stock from a supplier, or the shop floor,
which has been set to one side until it can be inspected with regard to quality. (An
example of waste.)
Stock (Safety): Safety Stock is material planned for over and above what is
forecast to be required, so as to provide stock availability (and hence customer
service) despite forecast requirements being less than actual customer demand. The
need for a safety stock arises self-evidently because the forecast of product demand
is in error - ie the forecast on which the stock replenishment needs are calculated is
too small. The key to determining the amount of safety stock to be provided,
therefore, is the analysis of forecast errors occurring over the period of time needed
to obtain a re-supply of the product. In most circumstances in industry, the
statistical distribution of forecast errors is Normal, or bell shaped. Note, however,
that in operations involving warehouses and distribution, the distribution of forecast
errors is not likely to be Normal - it is likely to be Poisson or exponential. This fact
must be specifically taken into account in any calculations performed by the user's
software. The principal element in arriving at a formula, therefore, for calculating a
safety stock is the statistical probability of a forecast error over the product's
replenishment leadtime. A second vital factor that must also be taken into account is
the protection of stock availability by working stock - ie the protection of customer
service provided by the size of the manufacturing lot or replenishment lot. For
example, a given product replenished 12 times per year will have 12 times more
opportunities of stocking out than if it were to have been replenished once per year
(with 12 times more stock, of course). Yet a further factor that might be considered
is the cost of rescheduling production or resupply. The definition of customer
service, or stock availability, used in most safety stock software packages, is p =
(Quantity of sales demand for a product filled from stock over the year) / (Total
sales demand for the product per year) x 100%. The formula is E = (1 - p)/s x A/N
where E is the partial expectation of the forecast errors, p is the stock availability, s
is the standard deviation of the forecast errors, A is annual demand and N is the
number of replenishments per year. The calculations clearly are too complex to be
attempted manually - the use of a proprietory safety stock software module usually
associated with forecasting software will typically not only improve a company's
level of service but at the same time reduce its safety stock holdings by some 30%.
Incidentally, having calculated the (new) safety stocks through the system, it is
essential that they should first be applied in simulation - it is imposible for the sales
& marketing manager to tell by examining them himself whether they are
"correct", because of the complexity of the calculations, and the IT expert may have
made a mistake in applying the software. So better sure than sorry by the use of
simulation, to see what would have happened if the new values had been applied! As
a final footnote to this lengthy Glossary entry, note that safety stock cannot be set by
the means described here for retail operations - the pattern of demand is too erratic.
In some retail outlets selling big-ticket items such as washing machines, stock
provision can be calculated using queuing theory, assuming the provision of
"service" to a Poisson distributed queue. Otherwise, in retail, service is based on
forecasting and rapid replenishment. Note finally that the full text, illustrated
course. Also see Negative Stock (entry (2)).
Stock (Slow Moving): Stock which has not been the subject of a withdrawal or
deposit for more than a specified number of days. The time period must be decided
on by the inventory controller. Slow moving stock is singled out since it may be
liable to physical deterioration or may be in the process of becoming obsolete. If its
circumstances are considered in good time, it may be possible to sell it before
matters get any worse. See SLOB.
Stock (Strategic): Stock from a vital but vulnerable source, held in a large
quantity in case supply is disasterously curtailed or terminated - eg raw material
produce from a sub-Saharan country. See also Stock (Policy).
Stock (Work in Progress): There are two definitions of WIP - financial and
operational. Neither of them are straightforward - see importantly WIP.
Stock (Working): Stock arising from a manufacturing lot size, the lot size being in
excess of immediate needs and having been made for reasons of production
efficiency.
Stock Cover: Either (1) the current stock divided by the average weekly demand
or (2) the number of days the stock on hand will last, based on past average weekly
demand. (This last is clearly days cover.)
Stock Exchange: The City of London market dealing in company stocks and
shares.
Stock Out: Having no stock. During a stock out, demand for a product must either
be turned away or, if the customer will agree, put on backorder. Alternatively, with
an available-to-promise capability, the customer's order can be accepted for future
delivery in accordance with the ATP rules. (It is true that available-to-promise is
normally associated with make-to-order, but it can be appliied to make-to-stock just
as readily, giving the company a completely new level of service.)
Stock Out Percentage: The total number of orders which were either lost or
placed on backorder, due to stock-outs, divided by the total number of orders
actually received, as a percentage. Stock out percentage might be used as a measure
of achieved customer service in a make-to-stock company.
Stock Record (see also Stock Records Accuracy below): A data record, usually
held on a computer disk, relating to a particular product or SKU and holding
certain basic information (name, cost etc). In particular, the data also include the
quantity of stock being held. (The quantity may be subdivided into such categories
as free stock (ie available for use); allocated stock; stock awaiting disposal; sub-
standard stock ... Maintenance of the correct figure for the quantity of stock is a
vital matter in planning, but difficult to achieve to the levels of accuracy needed -
-see below.
Stock Records Accuracy: The accuracy of a single record relates to the quantity
of stock recorded as being present apropos the quantity of stock which is actually
physically present in store or in the warehouse. Thus the accuracy of a group of
records is usually defined as a percentage, as follows: (number of records correct) /
(number of records in the group) x 100% (this is referred to as the good count/bad
count method). The accuracy goal in manufacture has been variously put as: 95%
(the late Oliver Wight), 97.0% (most authorities nowadays) and 97.0% ± 1%
(GMCS). The GMCS notion of a variance about a mean figure is suggested since the
system through which accuracy is maintained is a human centred one subject to
common causes of error. A second definition of accuracy preferred by auditors and
accountants is the net piece variance method. Here, the sum of the piece variances (ie
the sum of the differences between the counts of the physical stock and the stock
records) is compared to the sum of the stock on the stock records. Yet a further
definition is the absolute financial net piece variance - here, the plusses and minuses
from the previous method are not allowed to cancel each other out (hence
"absolute"), and the differences between the physical stock and the stock record are
expressed in terms of the financial value of the stocked items concerned. Also see
Negative Stock (entry (1)).
Stock Rotation (FIFO): The practice of "first in, first out" (FIFO) - ie of
ensuring that stock which has been in a stores or warehouse for the longest time is
despatched first, in preference to newer stock. LIFO (last in, first out) is sometimes
the practice when goods are non-perishable and it is convenient to stack recently
arrived units on top of those already present (bricks, concrete slabs etc).
Stockyard: (1) An outdoor storage area, usually used for storing building
materials, but sometimes for storing dangerous chemicals in drums or large metal
structures (such as pumps). Issues in the management of a stockyard include the
requirement for a one-way traffic system, because of the size of vehicles; a good
surface (concrete, with drainage, rather than asphalt); and for a conscientious
programme of maintenance. The latter must include prompt repair to fencing and
boundaries, since, apart from the matter of theft, the company is responsible for
harm befalling children who trespass. To avoid complaints from neighbours,
stockyards are best located well away from private housing. (2) In Chicago and
other cities of the American MidWest, stockyard is likely to mean a large area for
keeping cattle which have arrived by train from prairie farms prior to their sale and
despatch to local abatoirs.
Stores (see also Warehouse): An area or room furnished with racks, shelves, bins
and so on, for holding stock needed to support the operations of a factory. The stores
is a service function, and the services provided include : the acceptance of deliveries
from suppliers (ie the receipt of bought-in parts); the receipt and timely issue of
material for the factory floor (ie kits of components); the preparation of loads for
despatch to customers (finished goods); and the timely issue of tools and fixtures for
engineering and maintenance staff. A dominant task also performed is the
maintenance of high levels of stock records accuracy - qv. Company departments
dependent on the stores for accuracy include planning, finance and sales. See also
General Stores.
Strangers: Parts which are found in the production schedule only rarely - contrast
"runners".
Streaming: the broadcast of audio and video data over the Internet, in real-time
and on demand by a customer.
Stretch Goal: a target beyond what is generally agreed as being realistic. Stretch
goals are set by management perhaps to encourage staff to put in extra effort but
also to gain an edge in achievement. They appear, however, to be in conflict with
planning and the acceptance that one should "work to the numbers". The conflict is
resolved by pointing out that the difference in outcome between the stretch goal and
the realistic target makes clear to the company what additional resources must be
provided and how the plans should be modified. An example of stretch goals are the
corporate sales plans/forecasts issued in Autumn and their modification each month
of the following year in sales & operations planning.
Student's t test: a statistical test performed to determine whether or not one set of
continuous data is statistically independent of or dependent on another set of
continuous data. The workings out hinge on whether the distributions of the
populations of the two sets of data from which samples are drawn are normal or not.
The test is one of many that might be used at the Analyse stage of DMAIC in Six
Sigma. Of some interest also is the origin of the the name Student's t test. The
statistics were developed by one William S.Gosset in 1908 in Ireland. Gosset was
employed by Guinness Breweries in Dublin, and throughout his life published all his
valuable statistical articles under the pseudonym "Student". It has been
romantically suggested, however, that the reason for this cloak of secrecy was the
prohibition by his employer of the publication of scientific research by its
employees, and that Gosset used the pseudonym to get round this ban. It is certainly
true that a number of valuable contributions to science were made by Guinness
scientists, including very famously the discovery of indigo by Perkin at the Park
Royal (Guinness) Brewery in north London. What a pity that young Guinness
marketing staff today have not discovered how vastly superior is their brew when
served at ambient temperature, instead of cold with half the life expunged from it.
Sunk Costs: costs which have been incurred and are utterly unable to be
recovered.
Super Bill of Materials: A planning bill of materials having (1) an entry at the top
(ie at level 0) which is a single representative of a very large number of alternative
configurations of the final product able to be specified by customers, and (2) lower
level option variants with usages, or "quantities per", given as decimal fractions.
Such usages are based on the split of customer preferences between the different
option variants. An example is a super bill for a Ford Focus having a single entry at
the top called simply "Focus", even though this car can be made in many hundreds
of thousands of combinations of engine sizes, colours, gear boxes etc. Then, at lower
levels in the super bill, the various alternative options are entered as usages with
decimal fractions. Thus, since a Focus is available in any one of 10 colours, at a
lower level in the super bill, under the option variant "colour", there may be, say,
"Blue 0.07", "Red 0.20) ... meaning some 7% of customers for Focusses choose the
colour blue and 20% choose the colour red. See also Super Super Bill.
Super Item: The product at the top of the super bill of materials is merely a
representation, present for planning and conceptualisation purposes, of all the
combinations of option variants which can be assembled at the final assembly stage.
For example, a Ford Focus is a single representation of all possible Focuses, each
with its particular engine specification, body colour, radio specification, gear
specification etc..
Super Super Bill of Materials: It may be convenient where there are many "not
relevant" entries in a super bill of materials to restructure the bill so as to create
families within the total structure. An example is the restructuring of a previous
super bill for "lawnmowers", to create a lawnmower super super bill containing
three 3 super bill families: (1) electric lawn mowers, (2) small petrol lawn mowers,
and (3) ride-on lawn mowers. The three super items at the top of the three super
bills are now all subservient to a single "super super item" called simply "lawn
mower".
Super Super Item: The entry at the top of a super super bill. See Super Item.
Supplier: See Vendor for a discussion of the terms vendor and supplier.
Supply Chain: To give an example, one link in a chain may be the commercial
procedures and agreement between a supplying company, Company C and a buying
company, Company D, including the means provided for the exchange of goods and
money. Now, first, suppose that another company, Company B, supplies goods to
Company C. Next, suppose that Company D supplies goods to a further company,
Company E. In this situation, the supply chain is extended to three links B - C - D -
E. And so on. Because of the interdependency of members of the supply chain, and
especially recognising (in the foregoing example) the interdependency of supplier B
and the final customer, Company E, the logistician looks for improvements that
might be made in data and physical communications between all participants in the
chain. An example of the interdependency of B and E is seen in the matter of quality
- if B has made a defective part, this part may go undetected and be eventually
incorporated in the final product used or made by E.
Supply Chain Simulator: A tentative name for computer software capable of
exploding a bill of materials extremely quickly (in seconds) to enable fast analyses to
be obtained, such as load reports, RCCP etc, making the use of these techniques
practical and easier than hitherto. The best known of the Simulators is webPLAN -
visit webplan.com. See The Manufacturing Manager, Ch 6.
Survival Rate: Because of what they are and their operating environment,
manufactured components are liable to fail after some time in actual use. (Failure
might mean burning up, wearing away, cracking open ...) The survival rate is defined
as the number of surviving units after a certain time, as a fraction of the original
number. If the survival rate is R(t), it is related to the failure rate F(t) as follows:
R(t) = 1 - F(t). See also Product Availability.
Swap Bodies: Trailers on vehicles that can be demounted onto small wheels,
enabling (say) the loaded trailer to be left at a customer's premises one week, while
the driver returns to base with the now-empty trailer he left last week.
SWAT (team): The acronym SWAT (Special Weapons And Tactics) originated in
the Los Angeles Police Department in the 1960s, and is occasionally used in industry
to mean a one-off problem solving group similar to a Six Sigma project team.
Symbology: The pattern of black and white stripes which form the basis of a
particular bar coding system.
Syndicated Research: the conduct of market research surveys by a group of
companies selling a particular type of consumer item (for example, shoes, light
bulbs).
T
t test : see Student's t test.
Tableau: (French: "table") A term used in the transportation algorithm for setting
out the basic data relating to the transportation network.
TACT: Total Average Cycle Time (net available time/weekly requirements, when
established under Heijunka). Also see Takt Time.
Tactic (in Negotiation): In a negotiation, one party is clearly acquainted fully only
with the facts about his own position - eagerness to buy, admiration of the product,
shortage of money ... A tactic is a ruse or subterfuge practised by one party in these
circumstances either to deceive the other party or narrow his options by misleading
him as to the true facts, in either case gaining an advantage over him. For example,
"The Engineering Department would like to pay your price of £15,000, but has only
£10,000 remaining in its budget". This budget limit is a gross lie, of course, but the
tactic may achieve its aim of obtaining the machine at the lower price. The more
expert the negotiator, the more natural and truthful seems the deceit he practises. It
is not a question of recognising what tactic is being used against you, but that a
tactic is being used. The best protection is outright cynicism, churlish though it
might appear to others. .
Takt Time: the total time specifically spent in manufacture in producing one
object. Takt time as defined by Toyota, however, is the planned time allowable
between the completion of each vehicle model. Also see TACT. The word Takt is
German for metronome, this being strictly an instrument used in music for marking
the time by means of a graduated, inverted pendulum with a sliding weight..
TAQ: Total Acquisition Cost. The sum of all costs incurred by a company in
ordering and holding stock from a supplier - ie Order Costs + Stock Holding Costs.
The "economic order quantity" (EOQ) is that quantity of stock to order which will
minimises the TAQ.
Tare: the weight of the wrapping, receptacle or conveyance containing goods which is
deducted from the gross in order to ascertain the net weight (OED). Thus if the
package including goods weighs 100 lbs (ie gross = 100 lbs) and the tare is 20 lbs, the
goods themselves weigh 80 lbs (100 lbs - 20 lbs). See also weigh counting.
TBPM: Time Based Process Mapping - a means of illustrating and examining the
durations of time involved in the steps of manufacture from supply to delivery, with
a view to eliminating unnecessary delays.
Terotechnology: A word derived from the Greek and meaning the study and
management of an asset's life from its very start (acquisition) to its very end (final
disposal, perhaps involving dismantling and specialised treatment prior to scrap).
One of the most dramatic examples of the full consideration of terotechnology is the
construction, use and final decommissioning of an oil platform at sea.
Theory of Runs: On a variable control chart used in SPC, probability will suggest
that the sample means will be distributed more-or-less evenly about the centre line.
If two successive sample means are on the same side as the centre line, the possibility
of this occuring is simply 1 / 2. If three successive sample means are on the same
side, the probability is (1 / 2) x ( 1 / 2) x (1 / 2) x 2. If nine or ten successive sample
means are on the same side, the probability is about 1 / 370, and this may indicate a
loss of process control.
Theory X and Theory Y: Theory X states that employees are antipathetic to work
and can only be cajoled into doing their best by money and perquisites. Theory Y
states the opposite - that employees enjoy work and its challenges, and can be
motivated by their employers' encouragement and recognition. These two theories
are no longer fashionable.
Time & Motion Study: US terminology for Work Study. See Taylorism.
Time Fence (1st): In master scheduling, the duration of time from the present
moment to some designated time in the future (ie the first time fence) is termed the
frozen zone. Master scheduled plans in the frozen zone cannot be rescheduled by the
mechanism of the projected stock balance - ie if the arithmetic indicates that plans
within this zone are needed at different times, the system will merely issue
rescheduling messages. In some campanies, there may be rules restricting even the
master scheduler's freedom to reschedule plans in the frozen zone. The freeze zone
might be one week. In master plan management relating to stocked items, if the
projected stock balance falls below the safety stock level in the frozen zone, but not
below zero, no rescheduling message will be produced (safety stock "is there to
use"). Time fences have also been referred to as decision points and the frozen zone
the firm zone.
Time Fence (2nd): In master scheduling, the duration of time from the first time
fence to some designated time further in the future is referred to as the semi-frozen
zone. As with the frozen zone, the MPS system cannot reschedule plans within the
semi-frozen zone. If the arithmetic indicates material plans are needed at different
times, rescheduling messages are produced. In all companies, the master scheduler
is allowed to reschedule plans in the semi-frozen zone, but perhaps no one else.
There is some merit in setting the duration of the semi-freeze zone from the end of
the freeze zone up to the longest supply leadtime of manufactured and purchased
products. This will ensure that the raw material schedule remains stable when there
are small changes in the master plan. In master plan management relating to
stocked items, if the projected stock balance falls below the safety stock level in the
semi-frozen zone, but not below zero, no rescheduling message will be produced
(safety stock "is there to use"). The semi-frozen zone has also been referred to as the
trading zone.
Time Fence (3rd): In master scheduling, the third time fence (in so far as it exists)
is from the 2nd time fence to the planning horizon of the product. There are no
rescheduling restrictions, and if the projected stock arithmetic shows that plans
must be rescheduled, they are duly rescheduled by the system. It is very likely that
frequent changes will be made by the system to raw material plans and the plans of
components low in the bill of materials. Since such changes may be due merely to
the uneven arrival of sales demand, it seems desirable that the start of the third time
fence should be sufficiently far out that raw material plans which have actually been
communicated to suppliers should not be rescheduled. The third time zone has been
humorously called the liquid zone, but more elegantly as the free change zone.
Tim Wood: an amusing and useful mnemonic relating to waste and lean
manufacture as follows: T = the waste of Transport, I = Inventory, M = Movement,
W = Waiting O = Overprocessing, O = Overproduction and D = the waste of Defects.
See also Waste.
Tine: a prong of a fork, as in the expression the tines of a fork lift truck.
Title: Legal ownership. The title in goods, or legal ownership of them, passes to the
buyer either when the contract says so or when the goods are processed in such a
way as to change their physical form. Nowadays, contracts will normally specify
that title passes to the buyer only when payment has been received by the supplier.
(If title passed to the buyer, and the buyer subsequently became bankrupt, the goods
would be sold by the receiver in bankruptcy. If title still remained with the supplier,
the supplier would be able to re-possess them.)
TLA: Three Letter Acronym (an acronym being a word formed from the initial
letters of other words - eg FAS = Final Assembly Schedule).
TNE: Tolerable Negative Error. Under the average weight system (ie the "e" on
packages), the TNE is a maximum of 2.5% shortfall on the average weight. For
example, 1000gms of sugar sold as 1000gms "e", can legally have an actual range of
weight from 975gms to 1025gms. In this case, the TNE is 25gms.
Toll Manufacture: In the process industries, because of the size, specialisation and
capital cost of plant, it is common for Company A to send material to Company B
for processing and return, Company B being in possession of the special equipment
needed by Company A at the next stage of manufacture its product. The
manufacture performed by Company B is termed toll manufacture. (This
arrangement is also found occassionally in engineering industry, but is given no
special name.)
Tort: The breach of a duty imposed by common law other than one where there is a
contractual obligation. Thus the tort of negligence; the tort of breach of statutory
duty, the tort of passing off, etc.. See duty of care.
Total Productive Maintenance (TPM): TPM requires that its principles and
practices should be accepted as valid and central throughout the company - ie that
they should be accepted and supported by the most senior manager and the most
junior shop floor operator alike. The subject of TPM itself is usually thought of in
five divisions: (1) maintenance prevention (selection of equipment); (2) predictive
maintenance (historical analysis and the use of SPC); (3) corrective maintenance, or
improvement maintenance (upgrading equipment to prevent the recurrence of
breakdowns); (4) preventive maintenance (routine, regular work and inspection to
keep equipment in top shape); (5) autonomous maintenance (the training and
involvement of operators, and the transference to them of independent
responsibility - often regarded as the central plank of a TPM initiative).
Total Value: The cost to a buyer or consumer of a good that includes all
expenditure liable to be incurred, not just the purchase price itself. Examples of
costs other purchase price are the costs of breakdowns, maintenance, consumables,
energy consumed and - eventually - the cost of disposal.
Toyota Equation, The : An equation given by the Toyota Motor Car Company for
calculating the initial number of kanban cards to be provided in a Just-in-Time
manufacturing system. In words, the number of kanban equals the number of
production units to be made during the transportation lead time (to the next stage).
The equation is n = (d L (1 + b))/c, where n is the number of cards, d = the number
of units made per hour, L = the transportation leadtime in hours, b = a safety factor,
usually initially set at 0.1, and c = the number of units in a parts container, if one is
used. Toyota make the point, however, that the number of kanban calculated is
merely the start and that every effort must be made to reduce the number required
(and so reduce the stockholding).
T/R: Transmit/Receive.
Trade Creditors and Trade Debtors: companies which are currently credit
suppliers/credit customers.
Trade Descriptions Act, 1968: An act dealing with the application of false or
misleading trade descriptions to goods and services.
Trading Day: A day on which the company is open for business with regard to
sales - see forecast period.
Trading Zone: the "semi frozen" part of the master schedule horizon - see 2nd
Time Fence.
Transaction: (1) Data. A single record of data, often describing an event such as
the receipt of a raw material or the completion of a machine operation. The data
may be recorded on a paper form or electronically. The data transaction may also
refer to the data processing system as it is actually transmitted through the data
processing system it is intended to support. Because there can be many different
types of event, there can be many different types of data transaction. (2) Computer
Software. In writing software to handle data transactions, it is customary for IT
personnel to write a distinct, separate program to process each different type of data
transaction. These programs are often referred to by them simply as transactions.
Trend (in sales demand): A pattern of sales demand in which the level of demand
is growing (or declining) at a certain rate from period to period. The growth (or
decline) may be by constant amounts (ie having linear trend) or by accelerating
amounts (ie having exponential trend).
Trial Balance: In accounting, a trial balance is a check to see that total debits (eg
purchases, wages) equals total credits (sales receipts etc.). If debits do not match
credits, the accounts are wrong. (If they do equal, this does not mean that they are
necessarily correct, however.)
Trigg's Error Tracking Signal: Devised by Derek Trigg, one time of ICI in the
UK, the signal is a dimensionless number calculated from the past n forecast errors,
and is equal to: (the sum of the errors where signs cancel ... ie negative errors help
cancel out positive errors) / (the sum of the absolute errors ... ie where pluses and
minuses do not cancel). The worse the forecasts, the greater the signal value, up to a
maximum possible value of unity. In a forecasting system, Trigg's tracking signal
might be set, say, at 0.5, with any forecast series for which the signal equals or
exceeds 0.5 being brought to the attention of management. (But it is most unlikely
with moderen forecasting software that forecast errors will be large and persistant.)
Trunking: The conveyance of large full loads along major transport routes, usually
as a first stage in the dispersion of product throughout the distribution network.
Trunking is carried out for cost saving reasons, before the later more expensive
distribution activity of local deliveries of many small lots - see Local Delivery.
Tue: a unit of measurement equal to the space occupied by a standard 20 foot
container. 'Tue' is used in stating the capacity of a container vessel or storage area,
and is an acronym of Twenty foot Equivalent Unit. A container vessel is considered
large if it has a tue of 7,000 or more. The Cosco Ningbo is currently the world's
largest container ship, with a tue of 9,449, a gross tonnage of 109,149, a length of
351m and a width of 42.8m.
Turn Round Time: This everyday expression is often used to mean the total
elapsed time to repair or refurbish a machine from the time the repair or
refurbishment is initiated to the time the machine is ready again for use.
Turnover: The total sales invoiced by a company during its financial year
(regardless of whether all such invoices have in fact been paid by the customers
invoiced).
Two Bin System: A simple materials replenishment system in which a spare full
container of parts stands close to the container of parts being used. When the
container in use is used up, the full container is then brought into operation. As this
happens, an order is issued for a new replenishment bin from the source of supply.
Note with a two-bin system that the quantities of stock are not recorded and are not
known (except that the total quantity is approximately between one bin minimum
and two bins maximum). The system is entirely concerned with replenishment. It is
safer with a two-bin system to organise matters so that someone has literally to take
and return a physical container - because two-bin is essentially a simple, paperless
system, relying on people to process forms or tickets frequently leads to failures to
effect the necessary replenishment.
Tx: transmit.
# A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z
U
u-Chart: When a manufacturing operation is performed that affects a physical
area of product of sizeable dimensions, but the extent of the area of product varies
from one manufacturing operation to the next, it is not possible to track statistically
the number of undesirable quality attributes from area to area because of the
variation in their sizes. It is, however, possible to compare the number of attributes
per unit area. For example, if there are 510 paint flecks on an object of 1250 square
feet, this may be recorded as 4.0 flecks per ten square feet. The results are recorded
on a u-chart, time being on the horizontal axis and the number of attributes per unit
area on the vertical.
Ultimate Consumer: The person who finally uses a good (eg the person who eats
manufactured food).
Unit Load: Either a load comprising a full standard pallet (see pallet) and the
goods placed on its platform or the goods comprising a full standard ISO container.
The building up and carriage of unit loads enable great economy and convenience to
be realised in the provision of material handling equipment from one industrial user
to the next.
UPC: (Universal Product System) - a bar coding system devised in 1973 by IBM,
and used in bar coding groceries in supermarkets. Its advantage is that the code or
label does not have to lie flat when scanned by the bar code reader.
URL: Uniform Resource Locator, used as shorthand jargon for the address of an
Internet site..
Usage: Within a bill of materials structure, products are seen to be made from
other products. For example, a bicycle is made from 2 wheels. The amount of a
component product used in the manufacture is its usage, or quantity per. In the
bicycle, the usage or quantity per of wheels in the final assembly is 2.0.
Usage (Annual): The amount used each year of a product or (often) the amount
per year purchased. The amount may be expressed in units or in financial value.
V
VAD: Value Added Distribution.
Value added: in the eyes of a customer, the value of something might be defined as
its inherent worth to him - what he is prepared pay for it. One might become very
philosophical at this point, and say that many things we find "valuable" can have no
monetary value attached to them (eg good health). However, in the hard headed
world of manufacturing, added value is often used as a measure of a company's
productivity and may be defined as "sales revenue from a product, less the cost of its
purchased materials & services". Two problems with this definition are (1) it does
not isolate a change in added value due merely to price changes (affecting revenue),
and (2) it does not distinguish a change in added value due merely to changes in
costs, as opposed to changes in efficiency. A further definition of value is: Value =
function of (satisfaction of needs)/(use of resources).
Value added time: in lean manufacture, that time over the production cycle
during which actual, physical operation is taking place. See process cycle efficiency.
Value Engineering is as value analysis, but carried out on a potential product still at
the design stage.
Value Discipline: A notion put forward by Prof. Michael Porter in his book
Competitor Strategy, a value discipline being a dominant area of management
interest and expertise, usually being either product leadership, or operational
excellence or customer intimacy. Porter contended that that a company will/can
focus on only one of these three value disciplines, but that a balance should be
struck - that is, competence must be achieved in the other two.
Variance (Volume): In costing, the difference (ie variance) between the standard
(budgeted) expenditure and actual expenditure, due solely to a difference in volume
between the amount it was assumed would be made or purchased (in calculating the
standard originally) and what was, in practice, actually made or bought. Volume
variance is defined as (Standard Price) x (Standard Volume minus Actual Volume
Made). See The Manufacturing Manager, Ch 17.
VAT (Value Added Tax): A flat-rate tax levied on all services and on almost all
goods (*) by government, acting through HM Revenue & Customs. The tax is added
to all invoices as they are raised from one stage to the next, starting with the original
supplier and paid by the various buyers along the supply chain, to the ultimate
purchaser at the final stage. The VAT paid, however, is claimed back from the
government each quarter by each participant in the chain except for the consumer
or company constituting the final link. VAT was introduced in the UK in the 1970s,
and replaced a previous multi-rate sales tax, levied only at the final stage, termed
"purchase tax". To claim back VAT, a participant in the supply chain must be
registered with HMR&C (to obtain a VAT number), and be in possesion of a "VAT
invoice" relating to the payment being claimed back. A VAT invoice is merely an
invoice showing the amount paid and the VAT registration number of the company
raising the invoice. (* In the UK, the current rate of VAT is 17.5%, but the tax is not
levied on foodstuffs, children's clothes, retaurant meals, books or newspapers.)
VBR (Vendor Base Reduction): In the 1980s and the coming to prominence of
Japanese manufacturing techniques, Just-in-Time companies such as Toyota were
seen to operate with far fewer suppliers (or "cooperating companies" as Taiichi
Ohno called them). In the JIT company, because of the amount of work needed to
arrange for daily material deliveries from very many suppliers and to put in place
quality accreditation schemes based on SPC and process capability indexes, the
retention of a very large supplier base would not have been practical. Thus two
reasons for initiating a Vendor Base Reduction programme are: to keep in check
communications costs and to keep in check the staff time needed to administer
quality schemes. Others reasons include the need to limit the staff time necessary to
manage cooperative ventures on technical matters (continuous improvement and
value analysis), to ensure contract security (with fewer vendors to track) and
(because of larger volumes springing from sole supply) to obtain significant price
reductions. In initiating a VBR drive, the purchasing manager should be aware that
if buyers in the past have been competent and industrious, the VBR scheme will
inevitably destroy the refinements of choice they have made over the years. A target
aimed for by the manager such as to cut the number of suppliers by 50%, which is
set outside the context of other major company initiatives in lean manufacturing,
logistics, kaizen and quality, suggests a shallow understanding of the principles on
which VBR is based. Thus VBR is not of itself "good". Instead, it may merely be
necessary in order to support and make practical the other programmes. A
particular problem spoken of by many buyers in companies which have set up
formal vendor schemes is the sheer bother and difficulty which usually results in
later getting rid of suppliers who are not performing well and replacing them with
alternatives - in other words, with VBR, lean may not turn out to be "agile". See
The Manufacturing Manager, Ch 16.
Velocity Ratio: a measure of the speed at which material moves through a supply
chain, and defined by (total duration of all stages in the supply chain during which
value is added) / (total elapsed time).
Vendor: A word best reserved for an organisation offering items for sale, but not
necessarily selling to a particular company. The word supplier, by contrast, might
best be taken to means a vendor that is actually selling to the customer. For
example, one must merely speculate as to the probable delivery performance of a
vendor; the delivery performance of a supplier, however, is directly measurable.
Vendor Hub: A warehouse holding stock supplied and owned by many supplying
companies, the stock being for delivery on request to a small number (or one)
customer. The warehouse is operated by an independent third party
storage/distribution company, these services being paid for jointly by the companies
whose stock is being stored. By giving the arrangement a smart, modern name
("vendor hub"), the participants are able to close their minds to the waste inherent
in the practice.
Vicarious Liability: Liability assumed (ie taken on) by one person on behalf of
another - in the context of manufacturing industry, this can be taken to mean the
liability of the company for the tort, or wrong doing, of its employee. (It will be
recalled that the company is a legal entity consisting of the body of its directors and
staff acting according to its own rules and going about its everyday business.) The
vicarious liability of the company for the action of its employee can only arise when
(1) the tort, or wrongfull act, was authorised by the employer, (2) the tort is
committed by the employee doing something which was authorised, but in an
unauthorised way, and (3) when ther tort was committed by the employee, the action
was then ratified by the employer. A defence in court by the company is often that
the tort, or crime, was not committed in the course of the employee's job, or
employment.
Vineyard Economics: a somewhat off-beat term that recognises that for some
investments, the capital cost incurred in the start-up of an enterprise is insignificant
compared to the operating and materials costs that will later be incurred and the
sales revenue that will later be generated. (The cost of the land on the hillside in
Burgundy and the purchase and planting of the vines v. the time and care to nurture
the vines over a couple of hundred years, and, each year, the necessity to harvest,
press and ferment the grapes ... thus in regard to the original capital to buy the hill,
what is important is not the payback relating to its cost, but the economics of the
consequent activities.)
Viscious Circle: In the context of shop floor control,a viscious circle is the
unending sequence of activities which lead to a very lengthy, permanent queue of
work waiting at a work centre. The viscious circle starts with the release to the work
centre of more work than it can handle. The consequence is that the leadtimes of
jobs there rise and complaints are heard from customers. The company now
increases its official leadtime to quell the complaints. As a result of the increased
leadtime, the work that customers were intending to submit in the future is now seen
by them to be past due. This new work is all released to the company. The company
responds to the surge of this new work by again releasing it to the work centre,
which becomes even further overloaded, and begins missing its new, longer leadime.
More complaints are heard, and in response the company again increases its official
leadtime. Once more, customers replace the old leadtime with the revised values,
and once more then discover that work they were going to release in the future has
become past due. This new work is once more released to the company, overloading
it even further. The viscious circle stabilises only when the leadtime become so great
that it is out of the horizon of customers' planning systems, or customers find
alternative suppliers. The viscious circle can be reversed by the virtuous circle.
Here, the company reduces its official leadtimes and informs its customers. Work
which customers were to have released in the future is now seen by them to be no
longer due, and is held back. As orders temporarily dry up, the company takes
advantage of the lull and clears up some of its outstanding queue. When this has
been achieved, it announces yet a further reduction in its official leadtime, and again
customers find that work that was to have been released is no longer due and need
not be submitted. The viscious circle can be avoided in the first place through
Input/Output control - the strict management of queues at gateway work centres.
VMI: Vendor Managed Inventory, being (1) a means of fooling customers that
stockholding and associated costs are bourne by the vendor, and are not
surreptitiously passed on to the custmers in numerous ways, and (2) an inducement
to customer complacency in such matters as quality and inventory management.
More seriously, a definition of VMI is merely inventory at the customer's premises,
but controlled by the supplier. Importantly, VMI is paid for and financed by the
buyer and is "off the supplier's books". A further common feature of VMI is that
the schedule of the stock replenishment is directly determined by the supplier
himself, not by the buyer. In these two important respects, VMI is different from
Consignment Stock (qv).
VNA: Very Narrow Aisle - a close-packed warehouse storage arrangement. Among
other things, a VNA arrangement must be supported by "super flat" flooring.
Vocabulary (of Stores): Not the cheerful, ever polite discourse of storemen
discussing technical and philosophical matters, but the means of coding stored
items. Like all codes, those of stored items must be (1) unique for each item stored,
(2) meaningful (if possible) and (3) succinct. There is clearly a clash between
succinctness and meaning. To support the case for meaningful codes, we note that
storemen cannot always be closely familiar with the vast range of goods and package
types that they are required to store, and wish to avoid mistakes in picking and
putting away. To support succinctness, it is noted that the human brain cannot easily
memorise and recall codes greater than 7 digits in length at a single glance. If codes
of 8 or more digits are used, stock recording mistakes are inevitable.
Voice Directed Picking: The picker of goods (in a stores or warehouse) wears
apparatus on his head that enables him to hear picking instructions transmitted by
the system and to respond to the system after a successful pick by voice. Unlike
picking instructions transmitted in other ways, voice directed picking leaves both
the warehouseman's hand free and considerably reduces the cost of the most
expensive operation in the warehouse. A popular commercial system in Vocollect.
Voice of the Customer: This phrase refers to the precept that during the design
and development of a new product, those responsible should never forget that the
product must be wanted by the customer and must be attractive to him. See
especially "Quality, function, deployment".
VOIP: voice over Internet protocol - ie the technical procedure which permits the
use of the Internet for free (or cheap) voice telephony.
Volenti Non Fit Injuria (legal): (Latin: no harm can be done to a willing person)
The principal that if someone is fully aware of the risks of an action, but
nevertheless willingly undertakes it, he alone is liable for any injury he subsequently
sustains. A duty of care is not owed to such a person.
Volume Movement: a metric used in stores and warehouse planning, being "the
volume of an item stored and picked per month". In storage planning, volume
movement is of greater importance than pick popularity - see pick density. Two
typical statistics relating to volume movement in the store/warehouse are that 15%
of all items account for 80% of total volume movement, and 50% of items account
for less than 0.5% of volume movement.
VOR: vehicle off (the) road, implying the need for immediate spares availability
and fast attention by those making repairs.
VPM: (1) Virtual Product Model; (2) Value Per Million opportuniities.
W
3 way match: a company's internal validation of a supplier's invoice, a physical
receipt and the company's purchase order. (If all details match, payment can be
authorised.)
5W2H: "What, Why, Where, When, Who" + "How, How Much" ... A checklist for
proceeding with an investigation, especially one assessing whether a process adds
value or contributes to customer satisfaction. For example: (1) What - what is being
done, and could it be eliminated as an activity?; (2) Why - why is the task necessary,
and can we clarify its purpose?; (3) Where ...
W3: www (ie the world wide web). Also W3C, world wide web consortium.
Wages: money paid by the company to an employee in accordance with his contract
of service - see pay.
WAP: Wireless Application Protocol, the technical rules and procedures which
allow mobile phones or hand-held computers to access the Internet.
Warehouse (see also Stores): Usually a building furnished with racking for
holding finished goods stock to enable customers' orders to be picked, packed and
despatched. See also Bonded Warehouse.
WASP: (1) A schedule of procedures for dealing with job applicants at interviews
.... thus: W = welcome; A = acquiring (knowledge); S = supplying (information); and
P = parting. See Rodgers Seven Point Plan and Fraser's Five Point Plan. (2) White
Anglo-Saxon Protestant, a term occasionally used in the US, not always respectfully,
to denote citizens having a racial and religious affinity with the Nation's founding
fathers.
Wave Picking: Also known as batch order picking, wave picking is the
simultaneous picking of multiple customer orders, done to improve the efficiency of
the overall picking operation ( for example, by reducing travelling time). As might
be supposed, there are numerous schemes for carrying out wave picking. For
example, a batch of picking requirements constituting all the orders for a morning a
can be "exploded" into different picking lists for each storeroom or zone, and each
zone's pick list then sorted into stock location sequence. Each of these lists might
then be split into "sub-lists", each sub-list estimated to require approximately the
same product picking time. The storemen or warehousemen must deliver the picked
items from his sub-list to a designated order sorting area.
Waybill: A document recording the destination, route and sender of a load, and,
where applicable, the consignee. Waybills are often used for tracking the progress of
a load (or tracing its whereabouts if it becomes lost).
WDA; WDV: (1) Writing Down Allowance; (2) Written Down Value - (1) the
permitted amount a fixed asset is to be allowed to depreciate in the company's book
of accounts. (2) the cost of an asset less its accumulated depreciation - ie the asset's
current "book value".
WebPLAN: A supply chain simulator (qv) for exploding bills of material very
quickly.
Wedge: (aka decoder) a hardware device that allows a user to connect a bar code
scanner or other device (such as a weighing machine) to a computer terminal. To do
so, a keyboard wedge interface is usually employed, allowing any data scanned to be
output as ASCII characters directly onto a computer screen.
Weights & Marks: Like controlled convergence, the weights & marks procedure
is a means of evaluating and deciding between several contending options, where a
true evaluation cannot be made on strictly quantitative terms. Examples of the use
of weights & marks might be in deciding on a software package (from several
alternatives), choosing a supplier (from among several vendors) or choosing an
engineering design from several alternative contenders. Weights & marks proceeds
in three stages. First, all the desirable attributes, or characteristics, that the finally
chosen selection should possess are written down in a list, and each one is weighted
as to its degree of importance or desirability (10 = vitally important, 1=
inconsequential). The weighting process cannot be scientific, but it is informed.
Secondly, each contending choice is considered in turn in relation to each weighted
attribute and the contender duly marked as to how well it is judged it fulfils the
attribute required. Finally, for each alternative contender, each attribute mark is
multiplied by its corresponding weight to give a partial score; all partial scores are
then added to give an overall score. What is useful about weight & marks is the
controlled procedure itself and the requirement of those participating in it to "make
a statement" by assigning numerical values to the weights and the marks. The final
scores themselves are not especially valuable, and it is not unknown for the person
charged with presenting the final selection destroy them. Members of the selection
team must beware of pre-empting their final choice because of excessive enthusiasm
for one contender.
White Goods: Such consumer items as fridges, freezers, washing machines and
other relatively large domestic items. Contrast "brown goods".
White Noise: In sales demand and forecasting, the presence in the demand data of
random order placements not in accordance with the general pattern or level of
demand. Contrast black noise, a humorous term meaning data processing and data
file mistakes in demand data.
WIP (Work in Progress) (US - Work in Process): WIP is material on the shop
floor or on the plant, in the process of transformation and therefore currently being
worked on. An important distinction must be made in considering WIP between the
financial view and the view of inventory control. The financial view is that material
at every stage of its progress, at which value is added, from after the point of raw
material, up to but not including the point of finished goods, constitutes WIP. As
such a value must be ascribed to it. This would include, say, a component which
required four operations according to its bill of materials, and which at a moment in
time had had only two of those operations performed on it so far. The inventory
view of WIP is that it is material in transition, and is definable (if at all) not by its
stage of manufacture but by its location and the degree to which it has been
committed to the manufacturing process. That is, WIP is not based on the physical
state of the material. Instead, it is based on the Bill of Materials and the
transactional state of materials. For example, suppose one picks material M and
issues it to a production order. Material M is now WIP. However, suppose instead
one delivers material M to the work centre but does not issue it to production.
Material M remains as stock and is not WIP. In summary, in inventory control,
stock is transformed by the manufacturing process into WIP and so ceases to be
"stock". It becomes stock again only when each manufacturing step, or operation, is
complete and reported. (That is, in a multi-operation manufacturing route, material
will become successively stock and WIP several times as each step is completed and
reported.) Note that for planners employing a conventional manufacturing planning
system, material which constitutes WIP will always have started as "stock" and will
always end as "stock". For them, this is an important principle to remember - thus
physically, it is possible to purchase a component and move it directly into WIP. This
is not possible, however, if, say, MRP is being used. Under MRP, a formal planning
record must first be created for it ... ie planning insists that as far as the system is
concerned, it must first be formally received, or set up and recorded, as stock and
only then issued to WIP. Under lean manufacturing, however, all material is held as
on-hand stock until final manufacture is achieved. When this occurs and is reported,
the on-hand final stock balance is increased and the inventory balances of the stock
records of the component materials are decreased by backflushing. For good
explanations of WIP, you are referred to Inventory Record Accuracy, by Roger
Brooks & Larry Wilson (pp 36 - 48 and pp 143 - 145) and Inventory Accuracy, by
David Piasecki (pp 299 - 301). These books are obtainable from the APICS book
service and from Amazon (either US or UK).
Work Centre (WC): a specific production facility, consisting of one or several men
and one or several machines. Work centres may be organised within the factory by
type (eg drilling machines) - functional organisation, or by families of parts made -
group organisation.
Work Centre, alternate: a work centre that can be used in case of an overload or
breakdown at the primary work centre.
Work Centre, critical: there are many definitions of this term. They include: (1) a
WC working close to its maximum capacity; (2) a bottleneck WC; (3) a WC
processing the work of an important part of the factory, where a breakdown would
be especially serious; and (4) a WC comprising a unique machine for which no
alternative is available.
Work Centre Efficiency: for a given work centre, the ratio of standard hours to
actual hours used, based on historical usage. Efficiencies are scrutinised by the shop
supervisor as indicating which WC capacities should be adjusted.
Work Centre, Gateway: a gateway work centre is one through which work
arrives on the shop floor for the first time (ie the work is not already on the shop
floor and so is not arriving from another work centre - ie it is not arriving from an
intermediate work centre). The significance of a gateway WC is that the release of the
work must be controlled to prevent queues and hence excessive leadtimes - see
importantly input/output control.
WORM: Write Once, Read Many. Spoken of in the context of the GEN2 protocol,
used nowadays in conjunction with RFID tags. WORM software allows users first to
encode the tags (= write once), which then become "locked", and after which can be
read any number of times.
X
X.12 : a technical standard for the transmission of EDI messages over
telecommunications links, more properly known as ANSI ASC X.
Xbarbar: (X with two minus signs on top of it) see Grand Average.
Y
Yellow Belt: A not entirely serious term for someone with a reasonable knowledge
of Six Sigma, but who has not undergone the lengthier training associated with
Green Belt or Black Belt status. GMCS has a one-day UK training course that
unofficially entitles attendees to term themselves yellow belts.
Z
Z Score: A measure of company stability derived from various financial indices,
used to gauge the possibility of a company's future success or failure.
Zero Redundancy: The expectation that the services and manufactured goods
employed by a user or consumer will all be trouble free at all points of use - from
acquisition to disposal - with regard to quality.
Zornig H. H. (Colonel): A person whose name begins with Z, and at one time
director of the Ballistic Research Laboratories, Aberdeen, Maryland. Credited with
having formulated the term Operating Characteristic, an important term used in
sampling.