*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 C _{p}** = 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** C_{p }= (Upper limit – lower limit)/6 sigma

when C_{p }> 1 process is capable; if C_{p }< 1 process is not capable; when C_{p }> 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