GREY-OUT AREAS MORE APPLICABLE TO PREVIOUS MODULES
A
Administration time is the time between the recognition of need for a replenishment order and the release of manufacturing order to stock
Assemble to order (ATO) – product is made from standard components kept as stock and assembled according to customer order. Controlled flow of work is measured by a time-phased production rate with appropriate inventory buffer maintaining balanced movement of items running on production line or continuous flow (automated, reduces labor involvement)
Available-to-promise (ATP) is the part of inventory and planned production which is available to be promised to customers for delivery
B
Backflushing (post-deduct) – determining number of parts that must be subtracted from inventory records based on parts withdrawn from inventory and parts that have been consumed in a manufacturing line calculated according to BOMs (in JIT reduces number of transactions that must be recorded)
Backlog is the orders received but not yet shipped
Backward scheduling determines the latest start and finish date that will result in on-time completion of the project
Base or horizontal forecast with baseline demand, average demand for horizontal or seasonal patterns and the projected demand for the first period for trend or trend-seasonal patterns
Bias is systematic error where actual demand is consistently above or below the forecast demand
Bill of Distribution shows the source of supply for each warehouse; definition of the channels of inventory movements and replenishment
Bill of Resources (Bill of Labor) is one of the techniques of resource planning, it uses bill of material structure to identify the capacity of key resources required to produce one unit of product family. The production plan quantity is multiplied be the amount of each resource indicated in the bill of resources to determine the resources required, used when resources are not aligned with product families
Bullwhip effect is when demand fluctuations implicate increase of requirements in different areas of supply chain which leads to excessive inventories within entire network impacting most supplier of raw materials
Business planning answers questions regarding volumes, places, methods, and responsibilities that move the firm forward attaining a strategic goal
C
Capacity is an amount of work that can be done in a specified time period (the capability of worker, machine, work center, plant or organization to produce output per time), rate of doing work, not the quantity of work done. Capacity available is a measure of the expected output of a resource
Capacity Planning using Overall Factors (CPOF) is one of the techniques of resource planning, it takes place when production plan quantity is multiplied by the total amount of resources required to build one unit of the family to arrive at the total resource requirement, used in stable environments when the resources are aligned with product families
Carrying Costs are the opportunity costs (rate of return), storage facility costs, costs of stocking and handling, taxes and insurance, obsolescence or spoilage, thefts
Central Storage is easy of control, inventory record accuracy easier to maintain, specialized storage can be used, reduced safety stock since users don’t need to carry their own safety stock
Chase Strategy in making supply plan when production plan is reflecting demand, appropriate when the costs of changing the level of production are high
Collaborative forecasting allows the customer and supplier to communicate and adjust the forecast based on the data of both firms. It is the process of collecting and reconciling in collaboration from within and outside organization to come up with a single projection of demand. It provides for supply chain partners to jointly manage business processes that are important for the determination of demand, supply and measurement information
Competitive bidding is a selection of supplier with the lowest price (concerns a product well specified and widely available)
Constraint is any element or factor that prevents a system from achieving a higher level of performance with respect to its objective. Constraints can be physical, such as machine center or lack of material or they can be managerial, such as policies and procedures. A secondary constraint, such as tooling, can constrain the capacity of another resource
Co-products are those products produced by the same manufacturing process which are different but have similar characteristics to each other. Co-products can usually be predicted and planned in the scheduling process
Critical chain method – in Theory of Constraints a network planning technique for the analysis of project’s completion time, used for planning and controlling project activities. It considers not only longest chain of tasks to complete the project but also considers the demand for the common resources needed for the project. When no resource constraints then critical chain = critical path
Critical Path Method (CPM) is a network planning technique that uses a single estimate of the most likely duration for each activity based on infinite loading of the resources
Customer Chain is the sequence of customers who in turn consume the output of each other
Cyclic inventory count (usually daily) – most important to audit the system and find the causes of record inaccuracy eliminating them. It takes inventories on sample of specific items at regular intervals. The count frequency is set by the number of items in inventory and the desired level of control. ABC classification is frequently used to set the frequency count
Cyclical forecast related to the business cycle of product or industry
D
Decomposition in forecasting refers to time series data being separated into trend, seasonality, and cyclic data
Decoupling inventory – type of inventory that creates independence between supply and the use of material
Delivery cycle time is the actual time from receipt of the customer order to the time of product shipment
Delivery lead time is the actual time from the receipt of the customer order to the delivery of the product
Demand Time Fence is a boundary between the frozen and the flexible zone
Demonstrated Capacity is an average of historical data/ proven capacity calculated from actual performance data
Design for manufacturability employs cross functional teams to move market driven products to customers quickly and at a lower cost
Dispatching rules: first come, first served; earliest job due date; earliest operation due date; shortest process time; Critical Ratio CR
Distribution channel is the distribution route from raw materials to consumption that a product travels
Distribution Requirements Planning (DRP) centralized push system of replenishment linking the producing central warehouse with all levels in the distribution network, dependencies between stocking locations and supply points are done by the use of bill of distribution
Distribution Resources Planning (DRP II) capacity tool for the total distribution system in a collaborative effort to share information, manage costs, and most importantly, support the customer. It uses DRP output to measure current operations support and to project any adjustments in resources needed to execute the plan
Drum-Buffer-Rope approach where production flow is determined by constraints; Drum refers to the drumbeat or pace of production and it represents the master schedule for the operation; Buffer is established to ensure that the constraint is never starved for inventory; Rope is a communication process from the constraint to the gating operation that checks or limits material released into the system to support the constraint
E
Excess capacity is the output capability at a non-constraint resource that exceeds the productive and protective capacity required
Exploding is the process of multiplying the requirements by the usage quantity and recording the appropriate requirements throughout the product tree
Exponential smoothing (first-order smoothing) is a forecasting technique assuming that no trends exist in historical data (to accommodate trends use second-order smoothing introducing second soothing constant but if trend is accelerating or decelerating with time triple-order smoothing is used)
F
Filtering in demand management is a process of adjusting outliers in the forecast
Final Assembly Scheduling (FAS) is time phased by either part number or customer order by due date and by quantity. FAS serves as a basis for releasing materials from the stockroom to the assembly area, scheduling assembly and test operations, and scheduling the production and procurement of any components that are not under the control of the MPS but are needed for final assembly
Finite loading (accumulate capacity required only up to the capacity available, never exceed capacity) it is most appropriate when there is more schedule flexibility than capacity flexibility (for MTS environments where delivery date to distribution center or customer is less important)
Firmed Planned Order (FPO) represents an unreleased order that cannot be changed by software, normally used when moving to the firm zone or in slushy zone
First In First Out is inventory valuation technique where inventory is valued based on the latest products to enter inventory
Flexible (Slushy) Time Zone where changes in priorities and mix are allowed and they typically require negotiations between Operations and Marketing
Fixed (Frozen) Time Zone where changes typically require management approval
Focus Forecasting systematic approach used to select the best forecasting method
Forecast error is the difference between actual demand and forecast demand
Forward Scheduling determines the earliest technically feasible start and end dates for each task
Forecasting methods can be qualitative (involves an analysis of one or more judgments or opinions, used when historical data is scarce or invalid for making future projections) or quantitative (rely on the statistical analysis of data to generate a future forecast); intrinsic (extrapolate past demand of a product into the future by finding the underlying components in the demand pattern) or extrinsic (utilized to predict trends for product families where one product drives forecast for another product e.g. housing market for furniture market)
Free on Board (FOB) Point refers to place and time that the title transfers from the supplier to the purchaser. If a product is shipped FOB Origin, the buyer acquires the title the moment the material is transferred to the carrier. If the item is shipped FOB Destination, the title and all responsibility is transferred to the buyer when material is delivered to the buyer.
G
H
Hedge Stock is inventory used to protect against the uncertainty of demand and is similar to safety stock, except a hedge incorporates timing
Hybrid strategy in making supply plan is appropriate for product families with seasonal demand and constrains of both inventory and production. Hybrid approach for development of Production Plan it’s a Trial-and-Error Method
I
Idle capacity is capacity that is normally not used in a system of linked resources. From a theory of constraints perspective, idle capacity consists of protective capacity and excess capacity
Indented bill of materials represents all the components from the end item to the raw materials. Each level is indented to show the relationship of each level to the level above and below
Infinite loading (accumulate the capacity required without regard to the capacity available) appropriate where there is higher level of capacity flexibility than order/schedule flexibility
Input/output control is about controlling queue, work-in-process and lead times (controlling capacity)
Input rate controlled by release of orders to the shop floor and Output rate controlled by increasing or decreasing capacity of work center
Intermittent manufacturing where goods are made at intervals in lots or batches processing many different parts by using general purpose machinery
Interoperation time includes queue, wait and move
J
K
Kanban is the system that will send a signal called Kanban to authorize the movement of material or product from the supplying location to consuming location. Kanban can also be used to signal the authorization to produce additional product (limiting inventory buildup up to the number of kanbans)
L
Level strategy in making supply plan when production plan is covering demand fluctuating by building up inventories, applicable when costs of changing level of production are high
Linearity – scheduling to less than full capacity (rest of time used to react to problems occurred, cleaning, lubricating machinery and solving problems)
Load is an amount of released and planned work assigned to facility for particular time period (sum of all required capacities)
Low-level code is the lowest level on which a part resides in all bills of materials (end item is level 0). It is used in MRP process to verify that all requirements are identified prior to planning an item (ensures that an item is not specified as a component anywhere in its product structure and the netting and replenishment planning is done only one time after all of its requirements have been identified).
Lot-for-Lot commonly used in JIT environments where planned orders are equal to the net requirements in each period
Lot size stock is an excess stock arising from purchasing in quantities greater than the current demand
M
Make to order (MTO) – start of production after order is received; little design time required and inventory held as raw material (broad range of end products from narrow set of components).
Concerning multipurpose equipment organized into work centers to process product on an order-by-order basis (labor sensitive)
Make to stock (MTS) when business makes a narrow range of end products from a relatively broad set of components. Controlled flow of work is measured by a time-phased production rate with appropriate inventory buffer maintaining balanced movement of items running on production line or continuous flow (automated, reduces labor involvement)
Master Planning of Resources (MPR) produces S&OP plan as output and its objective is to balance demand with supply while optimizing resources and performing at the lowest operating cost
Master Production Schedule (MPS) time phased build plan by part number including due dates and quantities of specific end items
Material Requirements Planning (MRP) begins with MPS which determines quantity of all material required to produce those items, as well as the date that the materials are required. Time-phased MRP is accomplished by exploding the BOM and offsetting requirements by the appropriate lead-times
Master Scheduling Hedge same as safety stock uses inventory to buffer against MPS change, uses element of timing and quantity associated
Maximum demonstrated capacity is the highest amount of actual output produced in the past when all efforts have been made to optimize resources
Mean is the AVERAGE of a group of values
Median is the “MIDDLE” value in the list of numbers
Min-Max system where Min is reorder point and the Max is the reorder point plus ordering quantity
Mixed manufacturing is the mixing of make-to-stock and make-to-order using single set of plant and equipment
Mode is the MOST frequent value in a group of values
Modular bill is the technique of creating a bill of material based on the common components of a product used to simplify planning of complex products with many options
Move time is the time spent moving the item from one operation to the next
Multilevel scheduling in industries with wide variety offeatures and options where is hardly possible to master schedule every possible configuration typically master scheduling is performed for the product family or subfamily and then complete products based on FAS
N
O
Offsetting is the process of placing the exploded requirements in their proper periods based on lead time
Operation time determines the capacity required at the work center
Ordering Cost includes any cost associated with placing orders on the factory or suppliers
(receivers taking material, setup cost, cost of material planners, cost of buyers)
Outliers are data points that differ significantly from past demand and can be caused by a variety of events
P
Pegging report – where-used report but showing only parents for which there is an existing requirement
Pegging (Full) – maintains relationship with the highest level order in addition to the method of single pegging (end items like products can be checked by each order)
Periodic inventory count (usually annual) – to satisfy financial auditors that the inventory represents the value of inventory; for planners it’s an opportunity to correct any inaccuracies in the records
Pick time is the time to pull and stage the materials and move to operations
Productivity is the actual output of production compared to the actual input of resources
Product load profile is a listing of the required capacity and key resources to manufacture one unit of a selected item or family. Product load profiles are used to perform RCCP to calculate the approximate capacity requirements of the MPS
Program Evaluation Review Technique (PERT) is a network planning technique that uses a weighted average of the optimistic, most likely, and pessimistic estimates for the duration of each task based on infinite loading of the resources
Phantom BOM – represents an item that is physically built but not stocked before being used in the next step or level of manufacturing
Planning bill – artificial grouping of components for planning purposes showing the percentage split of each type of component on one bill (average product)
Planning time fence is a boundary between the flexible and free zone
Point-of-use storage where materials are readily accessible to users, material handling is reduced or eliminated, central storage costs are reduced, material is accessible at all times
Priority refers to maintaining the correct due dates on orders
Priority control is the communication of start and completion dates to manufacturing department to execute plan
Process Capability index measures whether process variation is satisfactory
Process Train is a representation of the flow of materials through a process industry manufacturing system. Within this process train equipment that performs a basic manufacturing step such as mixing or packaging is called a process unit. Process units are combined into stages and stages are combined into process trains
Product Layout (Flow Process Layout) where the system is set up for a limited range of similar products,
can be repetitive where units are discrete e.g. automobiles, or continuous where units are not discrete e.g. gasoline
Productive capacity is the maximum of the output capabilities of a resource or the market demand for that output for a given period of time
Project (fixed position) manufacturing used for large complex projects such as ships or buildings
Protective capacity is quantifiable capacity that can be made available at a non-constraint work center to protect against fluctuation of the constraint work center
Pyramid forecasting is combining qualitative and quantitative forecasting methods to achieve better results. Basically product code level is generated utilizing intrinsic techniques and then is aggregated (rolled-up) to total business forecast where qualitative factors are analyzed and the forecast adjusted to reflect these factors
Q
Queue time is the time an order waits at a work center before that operation is started. Typically, queue time is the longest lead-time element
R
Random forecast exists in all demand patterns representing the impact from a collection of uncontrollable factors in any demand system
Rated capacity is the expected output capacity of a resource
Reorder Point System (Double) – first one (call ‘Must order point’) in a normal statistical order point system, second one (called ‘May order point’) is established to cover the first order point plus the expected usage during the item’s manufacturing lead-time
Resource bill – shows quantity of critical resources needed to make one average unit of product group
Resource Profiles is one of the techniques of resource planning, builds on the resource bills and indicates the timing of the demand for each resource as well as quantity, used when resources are not aligned with product families, the production planning periods and production lead-times are very different and same resource is used multiple times in producing a single product
Rough Cut Capacity Planning (RCCP) used to balance the known product mix loads against availability at critical work centers, contributes to an MPS that is realistic in its delivery promises to its customers
Run time is the time to complete an operation on an item after the setup has been completed
S
Safety capacity is planned to provide additional capacity needed to meet supply and demand variability (advantage is no need to keep safety stock)
Safety factor exists to provide for flexibility within the manufacturing scheduling process, compensate for variability of demand and precision of data and unpredictability of events and also to protect desired level of customer service (for 84% service level safety factor is 1)
Safety lead time offsets the planned order receipt date from the net requirement date by the duration of the safety lead time
Safety Stock is a quantity of stock to keep in inventory to protect against unexpected fluctuations in supply and demand (it’s not planned to be used), the relationship between customer service level and safety stock in an integral piece of the organization. In order to reduce SS you would need to reduce variability of supply and demand OR the level of service desired OR the time covered
Sales and Operations Planning (S&OP) its objective is to link the strategic plan and operational plan with the functional plans; consists of 5 steps: FCT generation, Demand Planning, Supply planning, Pre-S&OP planning, Executive S&OP
Scheduled receipt is when an order that has been issued either to manufacturing or to a supplier
Seasonal forecast represents fluctuations in demand due to the time of the year; may be daily, weekly, monthly, quarterly or annually
Seasonal index is an indication of seasonal variation for a product, estimate how much of demand during the season will be above or below the average demand for the product
Setup time is the time required to prepare the resource to perform the specified operation
Shop order master file contains record of each active manufacturing order
Shop order detailed file contains record of each operation needed to make the item
Shrinkage refers to a loss of the parent and all the components required to build the parent
Slack Time is the difference between the early (forward scheduling) and late (backward scheduling) start dates. Slack time positive = start of operation may be delayed by that amount of time without affecting the completion date for the project. Slack time negative = project is behind schedule.
Specialized BOM allows to reduce engineering lead times where the engineered product can be patterned after an existing product which has been made in the past. The intention is to establish a bill of materials for something close to the engineering product
Stockkeeping Unit (SKU) is a combination of item identification and location, in many industry segments used for inventory control
Strategic Planning is all about vision, mission statement and core values for the business
Super bills are at the top level of the product structure and aggregate lower level components into modules and finally make up an average end item
Surge capacity is capacity available to meet sudden unexpected increases in demand by expanding production with existing personnel and equipment; both safety and surge capacity represent a buffer that increases capacity flexibility
T
Theoretical capacity is a maximum output capacity allowing no adjustments
Tracking forecast is comparing actual demand with the forecast
Tracking signal – detects bias in a forecasting model, monitors quality of forecast
Transportation inventory = pipeline inventory = movement inventory
Trend forecast consists of either an upward or a downward movement of the demand pattern over time
Two-Bin system is used for low-value items with short lead-times such as screws where the inventory is kept in 2 containers and the active container is used to satisfy demand. When the active container becomes empty the replenishment order is placed. The second container has enough inventory to cover the expected demand through lead-time plus safety stock
U
V
Value Chain refers to total value generated by a company: value activities (primary and support) and margin
Vendor-Managed inventory (VMI) when the supplier takes responsibility for monitoring product demand and maintaining appropriate levels of goods in the seller’s facility
Vendor-Owned inventory (VOI) occurs when the supplier provides consigned goods to the seller
W
Wait time is the time after the completion of one process until the item is moved to the next operation
Work center load report shows future capacity requirements based on released and planned orders for each time period, rated capacity and over/under capacity
X
Y
Yield is expected useable output (considering scrap factor being component specific or shrinkage factor) where the scrap factor data is stored in the bill of material file
Z