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2D bar code- Two-dimensional bar code based on a flat set of rows of encrypted data in the form of bars and spaces, normally in a rectangular or square pattern.
3D bar code- Three-dimensional bar code based on a physically embossed or stamped set of encrypted data interpreted by variations in height rather than contrast between spaces and bars (as used in 2D bar codes). Often used in environments where labels can not be easily attached to items.
40/30/30 rule- A rule that specifies the sources of quality problems as due to 40% from product design, 30% from manufacturing and 30% from vendors.
5S- A set of workplace organization rules designed to increase efficiency and help enable lean manufacturing, as defined by: Sort- separate and categorize needed and unneeded materials and tools; Set in Order- arrange tools and other items for ease of use; Shine (or scrub)- maintain high level of cleanliness; Standardize- create a systematic plan to perform the first three steps; Sustain- devise methods to turn performing the steps on an ongoing basis into a habit.
80/20 rule- Rule based on Pareto's Law stating that 80% of an end result (quality problems, inventory valuation, distribution of wealth) comes from a source of 20% (items, number of people, etc.).
ABC analysis- An inventory classification scheme that ranks items based on past (or projected) annual usage times cost or price, with A items accounting for the top 10-20% in terms of number of items and 60-70% of dollar volume, B items the next 20-25% of items and 20-30% of dollar volume, and C items as the bottom 60-70% of items and only 15-30% of the dollar volume. A Class D is sometimes used for obsolete or non-moving items. ABC categories are often used in specifying the amount of attention and control paid to specific items, (with the tightest control over A items), in exception reporting and in selecting items for periodic inventory cycle counts (A items are counted the most frequently).
abnormal demand- An unusually high product demand outside normal parameters that may be due to a promotion, price break or substitution. Forecast systems can filter abnormal demand outside calculated standard deviation parameters based on past history, and not assume the same demand will occur in the future.
absorption- The allocation of specific pools or groups of fixed costs to associated units of production by a predetermined percentage or dollar amount, based on unit cost, machine or labor hours, or other factors.
acceptable quality level (AQL)- A calculated or historical level of quality test results that indicates the future acceptance limits for production or purchased material.
acceptance sampling- Predetermined rules for choosing and analyzing samples of production or purchased material based on third-party agreements or previous experience with product, equipment, date, vendor or other characteristics.
accessory- An item or service selected on an order designed for use with a base item. An accessory is not required to be ordered, while an option usually must be selected from the available choices (ex.- in ordering a laptop computer a carrying case is an accessory, while one option selection from the hard drive choices must be taken).
accounts payable- A current liability; the financial obligation created by the receipt of items and services not yet paid for. Also used to refer to the department that matches vendor invoices to receipts, prioritizes and selects invoices for payment, and performs the check processing/disbursement cycle.
accounts receivable- A current asset; the expected value to be received from customers for items shipped and services performed but not yet paid for. Also used to refer to the department that applies cash received from customers against open invoices and manages invoice adjustments and credit memos.
accrual accounting- Recognizing revenues and expenditures as they occur, rather than when actual payment is received or made (as in the cash accounting method).
acknowledgement- Documentation from a vendor to a customer that verifies receipt of an order and associated date, quantity, item and terms information.
active ingredient- The material or chemical in a batch or formula responsible for producing the desired result and giving the product its main characteristic. Other substances enhance or buffer the active ingredient, and may be classified as inert.
activity- A discrete unit of work that consumes organizational resources.
activity based costing (ABC)- A cost accounting methodology that assigns costs to activities based on their use of resources, and assigns costs to cost objects (products, functions, projects) based on their use of activities. It attempts to precisely allocate overhead based on the real factors that create costs.
activity based management (ABM)- An overall approach to cost management that focuses on the relationships between activities, cost drivers and resources to identify and separate value-added and non-value added systems and functions.
activity driver- The factor used to measure usage of a defined activity. ex.- the materials support activity of a forklift driver retrieving goods from the warehouse could be driven either based on number of trips, or total time required on trips.
actual cost- The real cost associated with purchasing materials and services, and paying internal personnel. A standard cost system tracks actual usage, as defined by hours or units consumed, based on a standard value, to calculate and track variances versus the standard hours or units; an actual cost system (often used in to-order environments) attempts to assign the true cost of every purchase, material issue and labor activity to jobs and products.
actual cost of work performed (ACWP)- A project cost measurement that tracks the actual costs associated with tasks performed in a given time frame and compares them to budget costs to track rate variances.
actual demand- Demand in the form of booked customer orders and interplant orders (not actual sales). Actual demand is netted against forecasted demand for a given time period to generate requirements for material planning systems.
adaptive smoothing- A version of exponential smoothing where the smoothing (alpha) factor is automatically adjusted, or adapted, based on interpretations of observed forecast error.
ad hoc query- A report or inquiry constructed as required that accesses data files and fields selected at the time of creation. A decision support tool that may be saved and run again in the future (as a predefined query).
advanced planning and scheduling (APS)- A real-time tool combining material and capacity planning at the same time, as opposed to separate batch material and capacity runs. APS tools use finite scheduling and material availability data to schedule orders and demand. They can typically be used to evaluate the effect of adding single new orders into an existing schedule, and are often used as a short-term tool in conjunction with longer-term family level planning.
advanced shipping notification (ASN)- A message, usually sent through EDI, from a vendor to a customer at the time of the vendor shipment that notifies the customer of the order, item and quantity information. Some customers may refuse receipt or penalize the vendor if the ASN is not communicated at shipment time or within a specified time frame.
affinity diagram- A process similar to brainstorming in which group participants silently write down ideas which are later gathered and organized into natural categories. Used in situations where the problem may be complex or uncertain and both independent and group participation is beneficial.
aging- The separation of invoices, orders, inventory and production lots into time buckets based on due dates, receipt dates, expiration dates, or other factors. Used to focus attention on past due and most urgent items.
aggregate planning- Sales, revenue, inventory and production planning done at total organization, facility or family levels. Typically done as part of the long-term production planning and budgeting process to identify overall production, facility and personnel requirements.
aggregator- A system or service that combines data or items with similar characteristics (geographic area, target market, size, etc.) into larger entities. Value is derived from cost savings, or the ability to reach a larger market and charge higher prices from bundling multiple goods or services.
allocation- A reservation of material based on an accepted order or system- generated planned order. The on-hand balance of an item, less the allocation, leaves the balance available for production or to promise to customer orders.
allowance factor- A percentage, unit or dollar amount added to a calculation of an exact specification to allow for an imperfect process or observed history (ex.- a material scrap factor or labor performance standard). The exact specification is not changed so that the theoretically-possible result is still visible.
alpha smoothing factor- In exponential smoothing, the factor used to smooth or filter the data from the most recent period. (ex.- an alpha factor of 0.1 means to give the most recent data period a weighting of 0.1 and the previous period(s) a weighting of 0.9). A higher alpha indicates the future forecast will more closely resemble recent history, and is more likely to vary greatly with each recalculation.
alternate operation- A manufacturing operation done instead of the standard or normal operation. Typically used due to short term material or capacity shortages.
amortization- A variety of practices such as depreciation, depletion, or writeoffs to expense the initial cost of a capital investment over multiple fiscal periods.
analysis of variation (ANOVA)- A statistical method used for a single dependent variable that performs comparisons and tracks the effects of a number of discrete factors (independent variables), each of which may have a number of levels and may interact to affect the dependent variable.
andon board- A lighted board used in production areas to provide a visual signal that indicates an actual or potential problem at a specific workstation.
annualized- Short term or current period data used to project results for a hypothetical full year that filters out seasonality and abnormalities.
anticipated delay report- A report of production or purchase orders that are projected to be delayed past the current schedule date. It should include the orders, products and facilities affected and provide reasons for the delay to allow later analysis of recurring problems.
application service provider (ASP)- A third party that provides ERP or other business applications on a hosted basis to customers and users. Instead of buying a license from the software vendor, the customer contracts for Internet or other access to specific applications and usage volumes with the third party, who is responsible for software maintenance, upgrades and security.
application software- Software written to provide manufacturing, financial, distribution or support functions (as opposed to systems software that regulates the operation of hardware and network systems).
ARIMA modeling- The Auto Regressive Integrated Moving Average forecast technique based on time series analysis and regression modeling; often useful in creating short-term forecasts.
arrival notice- Documentation containing shipment arrival date and location information sent by a carrier to a designated third party.
assemble to order (ATO)- A manufacturing environment where the final product is assembled based on the receipt of a customer order (instead of to stock). The assembly is normally performed using standard components, modules and subassemblies that are already stocked based on forecasts developed from past usage history. An ATO environment allows each customer order to specify a custom combination of previously-defined standard options.
association rules- Rules that relate objects or events based on if this, then that logic.
attribute chart- Results of quality tests that charts the percent and number of products or quality characteristics that do not conform to specification.
assortment- In a retail environment, the selection of merchandise stocked or offered at a retail outlet or distribution center. The target customer base and physical product characteristics determine the depth and breadth of an assortment and the length of time it is carried.
audit trail- A system or report that provides the transactions and background data that created a current status.
authorized work- 1) Production orders at a given work center or line that have been released and scheduled; production of other items or quantities is considered unscheduled and may not be included in incentive programs 2) Vendor production that occurs in a given time frame or zone based on agreement with the customer that allows adding labor value to vendor raw materials.
auto-create- Software system functions that automatically generate purchase or production orders based on system suggestions, instead of requiring manual review and creation by a planner or buyer. Many systems contain time fences that only allow auto-creation beyond a specified future date.
auto ID- Automatic identification and tracking of material movement and inventory by data collection devices, using bar codes or other methods.
automated guided vehicle system (AGVS)- Warehouse and logistics equipment, such as robots or picking systems with no operator, that are routed to planned inventory or production locations by software and network commands.
automated storage/retrieval system (AS/RS)- A system that uses automatic machines and controls to locate, transport, store and retrieve materials as directed by order requirements.
automated test equipment (ATE)- Test systems integrated into the production process that operate and report without human intervention.
automatic substitution- Software functions that automatically substitute a pre-approved alternate component or product for picking to a production or customer order when the primary item is not available.
autoregressive model- A time series analysis model based on previous weighted outputs of a system.
auto-reschedule- Software planning functions that automatically move existing purchase or production orders to new dates based on calculated requirements, without manual intervention. Many systems use time fences to limit the use of auto-rescheduling beyond a defined date in the future to avoid disruption of short-term schedules and commitments.
available to promise (ATP)- End items that can be promised to customer order requirements for a given period based on an uncommitted or available status, calculated as: on-hand inventory, less booked customer orders, plus expected master schedule receipts for the period. Cumulative ATP includes past due orders and indicated total availability for successive periods.
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