GREY-OUT AREAS MORE APPLICABLE TO PREVIOUS MODULES
A
Annual ordering cost calculation = (annual projected usage/lot size) * cost per order
Annual carrying cost calculation = (lot size/2) * unit cost * carrying rate (% of unit cost)
Available to Promise (ATP) for period 1: on hand – customer order due before next MPS
Available to Promise (ATP) for period 2: MPS scheduled receipt – customer orders due before next MPS
Average inventory = order quantity/2 + safety stock = (starting inventory + ending inventory)/2
Average inventory in transit = (transit time in days) * (annual demand)/365
B
Backlog = total forecast + opening backlog – ending backlog or
Backlog = previous backlog + input – output
Bias = sum of deviations (actuals – forecast)/number of observations
C
Carrying cost = capital (not product cost) + storage + risk costs
Capacity available = shifts per day * hours per day * days per period * productivity factor
Capacity demonstrated = historical output * standard hours to produce
Capacity required = Setup time + Run time (no. of units * hours per unit)/ required quantity * standard hours to produce the product
Capability ratio Cp = Specification range/Process capability = (USL – LSL)/6σ where
USL = upper specification limit or upper tolerance and LSL = lower specification limit or lower tolerance
Capability index 
Cost of distribution (total) = transportation costs + warehousing costs + materials handling costs + packaging costs + costs of carrying inventory
Critical ratio = actual time remaining / lead time remaining = (Due Date – Today’s Date)/(Manufacturing Lead Time Left)
D
Days of supply = inventory on hand / average daily usage
Deseasonalized demand = actual seasonal demand/seasonal index
E
Economic Order Quantity 
; Where
A Annual Usage in units; S Ordering cost in $; i Annual inventory carrying cost as decimal; C unit cost
Exponential smoothing = α * latest demand + (1 – α) * previous forecast; α is smoothing constant
Efficiency = standard hours of work/hours actually worked * 100%
F
G
Gross margin = revenue – cost of goods sold
Gross profit = revenue – cost of products sold
H
I
Inventory turns = annual cost of goods sold/average inventory in dollars
J
K
L
M
Mean Absolute Deviation MAD – sum of absolute deviations (actuals – forecast)/number of observations
Manufacturing Lead Time = Queue time + Setup time + Run time + Wait time + Move time
N
Net income = gross margin – general and administrative expenses
Net requirements = gross requirements – scheduled receipts – available inventory
No. of kanbans for RM and FG including SS = (safety stock + demand * lead time)/container capacity
No. of kanbans for WIP = (demand * lead time * safety factor)/container capacity; where stable safety factor 1 to 1.1; variable safety factor 1.2 to 1.4
O
Ordering cost = order receipt clerical cost + order preparation cost + set-up cost
Order point = demand during lead time + safety stock
Order quantity = target inventory – on hand quantity
Order time = setup time + run time
Owner’s equity= assets – liabilities
P
Period-order quantity = EOQ/average weekly usage
Projected Available Balance (PAB) before demand time fence = prior period PAB or on-hand balance + MPS – customer orders
Projected Available Balance (PAB) after demand time fence = prior period PAB + MPS – greater of customer orders or forecast
Process Capability index Cp = (Upper limit – lower limit)/6 sigma
when Cp > 1 process is capable; if Cp < 1 process is not capable; when Cp > 2 then we have a Six Sigma process (3,4 defects per million pieces)
Productivity factor = utilization * efficiency
Projected Available Balance (PAB)in first period = Current on-hand inventory + MPS Receipts – Safety Stock – Orders
Projected Available Balance (PAB)after first period before time fence = Prior period PAB + MPS receipts – Customer Orders
Projected Available Balance (PAB)after first period after demand fence = Prior period PAB + MPS receipts – Greater of Forecast/Customer Orders
Purchasing lead time = order preparation + quoting + supplier lead time + transportation time + stocking time (inspection if necessary)
Q
R
Rated capacity = available hours * efficiency * utilization
S
Safety Stock SSin Distribution Network (recalculation) 
; where X is centralized safety stock and N is number of distribution centers (used when increasing number of centers)
Seasonal index = period average demand/average demand for all periods (deseasonalized demand)
Shrinkage factor = 100% – (Yield factor/Yield factor)
Standard Deviation Sigma
; n number of observations = 1,25 * MAD
T
Target inventory = delivery lead time demand + periodic review duration demand + safety stock
Total cost for order lot size = carrying cost + order cost
Tracking signal = sum of forecasting errors/Mean Absolute Deviation
U
Utilization = hours actually worked/available hours * 100% = actual output/design capacity (max output attainable)
V
W
X
Y
Z