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Glossary

0-9​

5S​

  • 5S is a methodology used in manufacturing to organize and maintain a clean, efficient, and safe workplace. The five S's stand for Sort, Set in Order, Shine, Standardize, and Sustain. This method helps improve productivity and reduce waste by identifying and eliminating unnecessary items, creating clear workspaces, and establishing standard procedures for maintaining cleanliness and organization.

A​

Alternative work center​

  • An alternative work center is a secondary or backup location where an employee or group of employees can work if their primary work center is unavailable or unsuitable. This could happen due to unforeseen circumstances such as a natural disaster, equipment failure, or a temporary closure of the primary work center.

B​

Backflush costing​

  • Backflush costing is a method of cost accounting that is commonly used in manufacturing environments. It is a type of costing system that uses information about the production process to calculate the cost of finished goods.

  • In a backflush costing system, the cost of raw materials is not tracked as they are used in production. Instead, the cost of materials and other production costs are "backflushed" at the end of the production process. This means that the cost of goods sold is calculated based on the number of finished goods produced and the standard cost of the materials and other costs used in the production process.

  • Backflush costing is often used in lean manufacturing environments, where the goal is to minimize inventory levels and reduce the amount of time spent on tracking and accounting for production costs. It can also be used in situations where it is difficult or impractical to track the cost of individual components or materials used in the production process.

  • One potential drawback of backflush costing is that it may not provide an accurate picture of the true cost of production. This is because it relies on estimates and assumptions about the cost of materials and other production costs, rather than tracking actual costs as they are incurred.

Bill of materials​

  • A bill of materials (BOM) is a document that lists all of the components, subassemblies, and raw materials that are required to manufacture a product. The BOM provides a detailed breakdown of each part, along with its quantity and unit of measure, and is typically used by manufacturers to plan production, estimate costs, and track inventory.

  • The BOM serves as a blueprint for the production process and is an essential tool for ensuring that all the necessary materials are available when they are needed. It can also be used to identify potential supply chain bottlenecks or issues that may arise during production.

  • The BOM can be structured in different ways, depending on the complexity of the product and the manufacturing process. In a hierarchical BOM, the components are arranged in a tree-like structure, with the finished product at the top and the individual parts and raw materials

C​

Custom code​

  • A custom code can be alphanumeric and may include a combination of letters, numbers, and symbols. It is typically assigned to an entity during the creation or registration process and is used to uniquely identify that entity within the business's systems and processes.

D​

Delivery order​

  • A delivery order for a sales order is a document that authorizes the transportation of goods from one location to another. The seller generates the sales order, often in response to a purchase order. The sales order confirms the terms of a transaction between a buyer and seller. It details the quantity, price, delivery time frame, and more.

E​

Error catalog​

  • An error catalog is a collection of common errors or issues that can arise during the MRP planning process. The error catalog typically includes a list of error codes or messages that indicate the specific issue or problem, as well as recommended solutions or actions to resolve the error.

F​

FIFO​

  • First In, First Out, commonly known as FIFO, is an asset-management and valuation method in which assets produced or acquired first are sold, used, or disposed of first.

Fishbone diagram​

  • The Fishbone diagram, also known as Ishikawa diagram or cause-and-effect diagram, is a tool used in manufacturing for problem-solving and quality improvement. It is a visual representation of all possible causes related to an issue or problem, organized into categories or "bones" on a fish-shaped diagram. The main categories typically include the six Ms: Manpower, Materials, Methods, Machines, Measurements, and Mother Nature (Environment). By identifying and analyzing all potential causes, this tool helps teams to understand the root cause of an issue and develop effective solutions to prevent it from recurring.

G​

General ledger​

H​

I​

Item​

  • An "item" in MRP refers to a raw material, component, sub-assembly or finished product that is needed to manufacture a product. Each item is assigned a unique identification number, and the MRP system uses this number to track the item's inventory levels, usage rates, lead times, and other relevant information.

Item group​

  • This contains variants of the same item.

J​

JIT​

  • JIT is an acronym for Just-In-Time. It refers to an inventory management strategy used by many companies to streamline their production with raw material orders. The main objective of deploying just-in-time inventory management is to increase overall production efficiency, reduce waste, and reduce production costs.

  • The just-in-time (JIT) inventory system is a management strategy that aligns raw-material orders from suppliers directly with production schedules. Companies employ this inventory strategy to increase efficiency and decrease waste by receiving goods only as they need them for the production process, which reduces inventory costs. This method requires producers to forecast demand accurately.

Job traveler​

K​

L​

Landed cost​

  • Landed cost refers to the total cost of a product that has been purchased and imported from a foreign country, including the cost of the product itself, transportation fees, customs duties, taxes, insurance, and other fees associated with importing the product.

Lead​

Lead time​

  • Lead time refers to the amount of time it takes to complete a process or task from the time it is initiated until its completion. In the context of manufacturing, lead time refers to the time it takes to manufacture a product from the time an order is placed until the product is delivered to the customer. Lead time includes various activities such as ordering raw materials, processing them, manufacturing the product, quality control, packaging, and shipping. Accurately estimating lead time is important for businesses to effectively plan their production schedules and manage their inventory levels.

Lean manufacturing​

  • Lean manufacturing is a production method aimed primarily at reducing times within the production system as well as response times from suppliers and to customers. It is closely related to another concept called just-in-time manufacturing (JIT manufacturing in short). Just-in-time manufacturing tries to match production to demand by only supplying goods which have been ordered and focuses on efficiency, productivity (with a commitment to continuous improvement) and reduction of “wastes” for the producer and supplier of goods.

  • Lean manufacturing adopts the just-in-time approach and additionally focuses on reducing cycle, flow and throughput times by further eliminating activities which do not add any value for the customer. The five core principles of lean manufacturing are defined as value, the value stream, flow, pull and perfection.

LIFO​

  • Last in, first out (LIFO) is a method used to account for inventory. Under LIFO, the costs of the most recent products purchased (or produced) are the first to be expensed.

M​

Make to order​

  • Make to Order (MTO) is a business production strategy that typically allows consumers to purchase products that are customized to their specifications. It is a manufacturing process in which the production of an item begins only after a confirmed customer order is received. This type of manufacturing strategy is referred to as a pull-type supply chain operation because products are only made when there is firm customer demand.

Make to stock​

  • Make to Stock (MTS) is a traditional production strategy that is used by businesses to match inventory with anticipated consumer demand. Instead of setting a production level and then attempting to sell goods, a company using MTS would estimate how many orders its products could generate, and then supply enough stock to meet those orders.

  • The MTS method requires an accurate forecast of this demand to determine how much stock it produces. If demand for the product can be estimated accurately, the MTS strategy is an efficient choice for production. However, if the forecast is inaccurate a company can be left with too little or too much inventory, which can impact the bottom line.

Manufacturing order​

  • A manufacturing order is a document, group of documents, or schedule conveying authority to manufacture specified parts or products in specified quantities. This order can be planned or released. It contains basic information like order type, order documents, start date, finish date, order quantity, status, priority, start and finish points, etc.

Mold​

  • Mold refers to a tool or device used in the manufacturing process to shape raw materials, such as plastics or metals, into a specific form or design. Molds are commonly used in industries such as injection molding, blow molding, and die casting, among others.

Move time​

  • Move time refers to the amount of time required to move materials from one location to another within the production process. This can include moving raw materials from the warehouse to the production line, transferring work-in-progress materials from one work center to another, or moving finished goods to the warehouse or shipping area.

  • Move time is an important factor to consider in production planning, as it can impact the overall lead time of the production process and the ability to meet customer demand. MRP systems can help to optimize move time by identifying the most efficient routes and scheduling moves based on available resources and capacity.

  • Factors that can impact move time include the distance between production locations, the availability of resources such as equipment or labor, and the efficiency of the transportation process. By minimizing move time and optimizing production flow, manufacturers can improve efficiency, reduce costs, and enhance customer satisfaction by minimizing lead times and ensuring timely delivery of products.

O​

Opportunity​

Overhead​

  • In business, overhead refers to the ongoing expenses that are necessary for operating the business but are not directly tied to the production or sale of goods or services. These expenses are typically fixed, meaning they do not vary with changes in production or sales volume, and they are not directly related to generating revenue.

  • Examples of overhead expenses include rent or mortgage payments on facilities, utilities, insurance, property taxes, salaries and wages for administrative staff, office supplies, and equipment maintenance.

Overhead rate​

  • The overhead rate is a cost allocated to the production of a product or service. Overhead costs are expenses that are not directly tied to production such as the cost of the corporate office. To allocate overhead costs, an overhead rate is applied to the direct costs tied to production by spreading or allocating the overhead costs based on specific measures.

  • The formula for calculating the overhead rate is as follows: Overhead Rate = Overhead Costs ÷ Allocation Measure. The allocation measure could be direct labor hours, machine hours, or any other type of measurement that’s necessary to make the product or service.

P​

Purchase order​

  • A purchase order (PO) is a commercial document that a buyer sends to a supplier or vendor to request goods or services to be provided under specified terms and conditions. It is a legally binding agreement between the buyer and the supplier that outlines the details of the purchase, including the description of goods or services, quantity, price, payment terms, delivery date, and other terms and conditions of the sale.

  • A purchase order is typically created by the purchasing department or the buyer and sent to the supplier. Once the supplier accepts the purchase order, it becomes a contract between the two parties. The purchase order serves as a record of the transaction, allowing the buyer to track the purchase and verify that the goods or services were delivered as agreed.

  • The purchase order process is an important part of procurement management, as it helps ensure that the buyer receives the goods or services they need in a timely and cost-effective manner, while also protecting both the buyer and the supplier by establishing clear terms and conditions for the sale.

Putaway rule​

  • The putaway rule is a rule or guideline used in warehouse management for organizing the placement of goods or products in a warehouse. The putaway rule typically involves specifying a specific location in the warehouse where goods should be placed based on various factors such as product characteristics, demand patterns, and the type of storage available.

  • There are several types of putaway rules, including:

    1. Random Putaway: Products are placed randomly in any available storage location within the warehouse.

    2. Fixed Location Putaway: Products are assigned a specific location in the warehouse based on their attributes, demand, or other factors.

    3. Zone Putaway: Products are assigned to specific zones or areas within the warehouse based on product characteristics, demand, or other factors.

    4. Bulk Storage Putaway: Products are stored together in bulk based on similar characteristics, making it easier to pick and move them in large quantities.

Q​

Quality inspection​

  • Quality inspection is an activity that involves measuring, examining, testing or gauging one or more characteristics of a product and comparing the results with specified requirements in order to establish whether conformity is achieved for each characteristic.

  • The quality inspector usually follows a pre-established checklist that is based on the product specifications. Inspected products can be the components used for production, semi-finished goods, or finished goods before shipment to a customer.

Quarantine​

Queue time​

  • Queue time refers to the time that a material is expected to wait in a queue before it can be processed or used in production. This can occur when there are constraints in the production process, such as limited resources or capacity, that prevent the material from being immediately processed.

  • Queue time can impact the overall lead time of a production process, which in turn can affect the delivery times and customer satisfaction. To minimize queue time, it is important to identify bottlenecks in the production process and take steps to optimize production flow and capacity.

  • MRP systems typically take into account queue time when calculating lead times and material requirements, and can provide visibility into potential bottlenecks in the production process.

R​

Run time​

  • Run time refers to the amount of time required to complete the production of a specific quantity of a product or batch of materials. Run time is an important factor to consider in production planning, as it directly affects the amount of time needed to produce a given quantity of goods.

  • Accurately estimating run time is essential for developing realistic production schedules and determining the amount of materials needed to meet customer demand. This information can be input into an MRP system, which can then help to optimize the production process by identifying potential bottlenecks and scheduling production runs based on available resources and capacity.

  • Factors that can impact run time include the complexity of the product being produced, the efficiency of the production process, and the availability of resources such as labor, equipment, and raw materials.

  • By accurately estimating run time and optimizing production processes, manufacturers can minimize lead times and ensure that customer orders are fulfilled in a timely and cost-effective manner.

S​

Sales order​

  • A sales order is a document that represents a customer's request to purchase products or services from a business. It typically includes information such as the type and quantity of products or services ordered, the agreed-upon price, delivery date, shipping address, and payment terms. A sales order is usually initiated by the customer and serves as a contract between the customer and the business, outlining the terms of the sale. Once a sales order is received, the business can begin the process of fulfilling the order, which typically involves preparing the products for shipment and delivering them to the customer. The sales order is an important document in the sales process as it helps ensure that both the business and the customer are on the same page regarding the details of the transaction.

Set up time​

  • Set-up time refers to the time required to prepare a machine or work center to process a new batch of materials or a different product. Set-up time is an important factor to consider in production planning, as it directly impacts the overall production lead time and can affect the ability to meet customer demand.

  • By minimizing set-up time, manufacturers can improve production efficiency and reduce costs. One way to achieve this is by using tools such as quick-changeover techniques or Single Minute Exchange of Die (SMED) methods, which aim to reduce the time needed to switch from one product or batch to another.

  • MRP systems typically take into account set-up time when calculating production schedules and material requirements. By accurately estimating set-up time, manufacturers can plan for the most efficient use of their resources and minimize the impact on lead times and customer delivery dates.

Shop floor control​

  • Shop Floor Control is a set of practices and technologies used to manage and optimize manufacturing operations on the factory floor. The ultimate goal of Shop Floor Control is to improve productivity, reduce waste, and increase efficiency in the production process.

Six sigma​

  • Six Sigma (6σ) is a set of techniques and tools for process improvement. It was introduced by American engineer Bill Smith while working at Motorola in 1986. Six Sigma strategies seek to improve manufacturing quality by identifying and removing the causes of defects and minimizing variability in manufacturing and business processes.

Standard costing​

  • Standard costing is a cost accounting technique that involves setting predetermined costs for direct materials, direct labor, and overhead for a particular period. These predetermined costs are known as standard costs and are used as a basis for comparing actual costs incurred during the period.

  • The standard costs are usually based on historical data and are adjusted for expected changes in the cost of materials, labor, and overhead. Once the standard costs are established, they are used to create a budget for the period. The budget can be used to plan production, control costs, and evaluate performance.

  • During the period, actual costs are compared to the standard costs. Any variances between the two are analyzed to identify the causes and take corrective action if necessary. For example, if actual labor costs are higher than standard labor costs, the company may investigate whether the employees are working efficiently or whether the standard labor rate needs to be adjusted.

  • Standard costing is widely used in manufacturing and production industries to control costs and improve efficiency. It is also used in service industries, such as healthcare and hospitality, to manage costs and improve quality.

T​

Ticket​

W​

Warehouse transfer​

  • Warehouse transfer refers to the movement of goods or inventory from one warehouse to another. This can happen for a variety of reasons, such as to optimize inventory levels, to consolidate operations, or to relocate to a new facility.

Wait time​

  • Wait time refers to the time that materials spend waiting in inventory or in the production process before they can be used or processed. Wait time can be caused by a variety of factors, including production bottlenecks, limited resources, or delays in the supply chain.

  • Wait time can have a significant impact on lead times and production schedules, as it can cause delays and increase the time needed to fulfill customer orders. To minimize wait time, manufacturers can use MRP systems to accurately forecast demand and plan for the necessary materials and resources to meet that demand.

  • By optimizing inventory levels and production schedules, manufacturers can reduce wait time and ensure that materials are available when needed. This can help to improve overall efficiency, reduce costs, and enhance customer satisfaction by minimizing lead times and ensuring timely delivery of products.

Work center​

  • A work center is a designated area within a manufacturing or production facility where a specific set of operations are carried out. It is a physical location where raw materials, equipment, employees, and other resources are brought together to perform a specific task or set of tasks. Work centers are used to optimize the production flow and to manage the workforce by minimizing the wait time between operations and maximizing the utilization of the workforce and equipment.

  • Within a work center, multiple machines or workstations may be set up to perform different operations in a sequential manner, with each operation contributing to the completion of the final product. Work centers can be organized based on the type of product being produced, the volume of output required, or the type of process involved.

  • Overall, work centers play a crucial role in optimizing the production process by streamlining workflow, improving efficiency, and minimizing downtime.

Work shift​

  • A work shift refers to a specific period of time during which an employee is scheduled to work

Write-off​