APPENDIKS

ABC SYSTEM:
a method for classifying inventory items according to their dollar value to the firm
based on the principle that only a few items account for the greatest dollar value of total
inventory.

ACTIVITY-BASED COSTING

Activity-based costing (ABC) is the practice of focusing on some unit of output, such
as a purchase order or an assembled automobile, and attempting to determine as
precisely as possible what factors contribute to the cost of that output. By analyzing the
different cost contributors such as labor, materials, administrative overhead, rework,
and so forth, you can identify which key cost drivers are candidates for reduction.

ACCEPTABLE QUALITY LEVEL (AQL):

the fraction of defective items deemed acceptable in a lot.

ACCEPTANCE SAMPLING:
a statistical procedure for taking a random sample in order to determine whether or not a lot
should be accepted or rejected.

AGGREGATE PRODUCTION PLANNING (APP):

the process of determining the quantity and timing of production over an intermediate time
frame.

ASSEMBLE-TO-ORDER:
1. products or services created in standard modules to which options are added according to
customer specifications.
2. a manufacturing environment in which major subassemblies are produced in advance of a
customer's order and are then configured to order.

AVERAGE OUTGOING QUALITY (AOQ):

the expected number of defective items that will pass on to the customer with a sampling plan.

BALANCE DELAY:
the total idle time of the line.

BATCH PRODUCTION:
a type of process that produces a variety of jobs in groups or batches.

batch production:
the low-volume production of customized products.

benchmark:
a level of quality achievement established by one company that other companies seek to
achieve, i.e., a goal.

benchmarking:
measuring current performance against where a company wants performance to be or against a
competitor's performance.

best operating level:

the percent of capacity utilization at which unit costs are lowest.

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 beta distribution:
a probability distribution traditionally used in CPM/PERT for estimating the mean and variance
of project activity times.

block diagram:
a schematic layout diagram that includes the size of each work area.

breakdown maintenance:
a maintenance activity that involves repairs needed to make a failed machine operational.

c-chart:
a control chart based on the number of defects in a sample.

capacity planning:
a long-term strategic decision that establishes the overall level of productive resources for a firm.

capacity requirements planning (CRP):

a computarized system that projects the load from a given material plan onto the capacity of a
system and identifies underloads and overloads.

capacity:
the productive capability of a worker, machine, work center, or system.

cause-and-effect diagram:
a graphical description of the elements of a specific quality problem.

cellular layout:
a layout that groups dissimilar machines into cells that process parts with similar shapes or
processing requirements.

center-of-gravity techniques:
a quantitative method for locating a facility at the center of movement in a geographic area based
on weight and distance.

coefficient of determination:
the correlation coefficient squared; it measures the portion of the variation in the dependent
variable that can be attributed to the independent variable.

coefficient of optimism (a):

a measure of a decision maker's optimism, from 0 (completely pessimistic) to 1 (completely
optimistic), used in the Hurwicz decision criterion.

competitiveness:
the degree to which a nation can produce goods and services that meet the test of international
markets while simultaneously maintaining or expanding the real incomes of its citizens.

computer-aided design (CAD):

a software system that uses computer graphics to assist in the creation, modification, and analysis
of a design.

computer-aided engineering (CAE):

engineering analysis performed at a computer terminal with information from a CAD database.

computer-aided manufacturing (CAM):

the use of programmable automation in the manufacture of a product.

computer-aided process planning (CAPP):

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 a specialized software system that attempts to automate the development of process plans.

computer-integrated manufacturing (CIM):

the total integration of design, manufacture, and delivery of a product through the use of
computer technology.

concurrent design:
a new approach to design that involves the simultaneous design of products and processes by
design teams.

constraints:
linear relationships of decision variables representing the restrictions placed on the decision
situation by the operating environment.

consumer's risk (b ):
the probability of accepting a lot in which the fraction of defective items exceeds the most
(LTPD) the consumer is willing to accept.

continuous inventory system:

a system in which the inventory level is continually monitored; when it decreases to a certain
level, a fixed amount is ordered.

continuous process:
the production of a very high-volume commodity product with highly automated equipment.

continuous production:
a type of process used to produce very high volume commodity products.

core competencies:
the essential capabilities that create a firm's sustainable competitive advantage.

correlation:
a measure of the strength of the causal relationship between the independent and dependent
variables in a linear regression equation.

cost index:
the ratio of quality cost to manufacturing cost.

CRASHING:
a method for shortening the project duration by reducing the time of one or more critical activities
at a cost.

CUMULATIVE LEAD TIME:

the total length of time required to manufacture a product; also, the longest path through a
product structure.

CYCLE COUNTING:
a method for auditing inventory accuracy that counts inventory and reconciles errors on a cyclical
schedule rather than once a year.

CYCLE TIMING

The time it takes to process an item is known as the delay or processing time. Cycle
time is the time an item takes to travel through a group of blocks.

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 If there is no blocking in a model (that is, if all items leave their blocks exactly at the
end of their delay time), the cycle time is the sum of the delay times for the section
being measured.
In most situations, this would rarely occur, and cycle time is usually more than the sum
of the processing times. For instance, it is common that an item cannot leave a block
because the next block is still processing its item.

cycle time:
the maximum amount of time an item is allowed to spend at each workstation if the targeted
production rate is to be achieved; also, the time between successive product completions.

decision support system (DSS):

an information system with which a manager interacts in order to reach a decision through an
iterative process.

decision variables:
mathematical symbols that represent levels of activity of an operation.

Delphi method:
a procedure for acquiring informed judgments and opinions from knowledgeable individuals to
use as a subjective forecast.

dependent demand:
typically component parts or materials used in the process to produce a final product.

design for assembly (DFA):

a set of procedures for reducing the number of parts in an assembly, evaluating methods of
assembly, and determining an assembly sequence.

design for environment (DFE):

designing a product from material that can be recycled or easily repaired rather than discarded.

design for manufacture (DFM):

designing a product so that it can be produced easily and economically.

disaggregation:
the process of breaking down the aggregate plan into more detailed plans.

DNC machines:
several NC machines under direct or distributed numerical control of a single computer.

efficiency:
how well a machine or worker performs compared to a standard output level. elemental standard
time

empowerment:
the authority and responsibility of the workers to alert management about job-related problems.

enterprise planning systems:

software that orchestrates the activities of an entire enterprise at distributed locations around the
globe.

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 ENTERPRISE RESOURCE PLANNING (ERP):
an updated MRP II system with relational database management, graphical user interface, and
client/server architecture, and expanded to cover enterprise-wide activities.

EQUAL LIKELIHOOD (LA PLACE) CRITERION:

a decision criterion in which each state of nature is weighted equally.

EXPECTED VALUE OF PERFECT INFORMATION:

the maximum value that a decision maker would be willing to pay for perfect information about
future states of nature.

EXPECTED VALUE:
a weighted average of decision outcomes in which each future state of nature is assigned a
probability of occurrence.

EXPEDITING:
the process of speeding up orders so that they are completed in less than their average lead time.

EXPONENTIAL SMOOTHING:
an averaging method that weights the most recent data more strongly than more distant data.

EXTERNAL FAILURE COSTS:

costs of poor quality incurred after the product gets to the customer; that is, customer service,
lost sales, and so on.

EXTERNAL SETUP:
setup activities that can be performed in advance while the machine is operating.

FACILITY LAYOUT:
the arrangement of machines, departments, workstations, and other areas within a facility.

FAILURE MODE AND EFFECTS ANALYSIS (FMEA):

a systematic approach for analyzing the causes and effects of product failures.

FAULT TREE ANALYSIS (FTA):

a visual method for analyzing the interrelationships among failures.

FEASIBLE SOLUTION SPACE:

an area that satisfies all constraints in a linear programming model simultaneously.

FINITE QUEUE:
a waiting line that has a limited capacity.

FINITE SCHEDULING:
an approach to scheduling that loads jobs in priority order and delays those jobs for which current
capacity is exceeded.

FIXED-POSITION LAYOUT:
a layout in which the product remains at a stationary site for the entire

MANUFACTURING CYCLE.
fixed-time-period system:
also known as a periodic system; an inventory system in which a variable amount is ordered after
a predetermined, constant passage of time.

FLEXIBLE MANUFACTURING SYSTEM (FMS):

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 programmable equipment connected by an automated material handling system and controlled by
a central computer.

FLOW TIME:
the time that it takes for a job to "flow" through the system; that is, its completion time.

FORM DESIGN:
the phase of product design concerned with how the product looks.

FUNCTIONAL DESIGN:
the phase of product design concerned with how the product performs.

GENERAL-PURPOSE MACHINES:
machines that perform basic functions such as turning, drilling, and milling.

GROUP TECHNOLOGY (GT):

the grouping of parts into families based on similar shapes or processing
requirements.

HURWICZ CRITERION:
a decision criterion in which the decision payoffs are weighted by a coefficient of optimism, a.

IN-PROCESS (BUFFER) INVENTORY:

stocks of partially completed items kept between stages of a production process.

INDEX NUMBERS:
ratios that measure quality costs relative to some base accounting values such as sales or product
units.

INFINITE QUEUE:
a waiting line that grows to any length.

INFINITE SCHEDULING:
an approach to scheduling that initially assumes infinite capacity and then manually "levels the
load" of resources that have exceeded capacity.

INPUT/OUTPUT (I/O) CONTROL:

a procedure for monitoring the input to and output from a work center to regulate the flow of
work through a system.

INTERNAL FAILURE COSTS:

costs of poor-quality products discovered during the production process; that is, scrap, rework,
and the like.

INTERNAL SETUP:
setup activities that can be performed only when the machine is stopped.

INVENTORY MASTER FILE:

a file that contains inventory status and descriptive information on every item in inventory.

JIDOKA:
authority given to the workers to stop the assembly line when quality problems are encountered.

JOB:

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 a defined set of tasks that comprise the work performed by employees that contributes to the
production of a product or delivery of a service.

JOB MOTIONS:
basic physical movements that comprise a job element.

JOB ROTATION:
the capability of workers to move to different jobs.

JUST-IN-TIME (JIT):
both a philosophy and an integrated system for production management that emphasizes the
elimination of waste and the continuous improvement of operations.

KAIZEN:
a Japanese term for a system of continuous improvement.

KANBAN:
a card corresponding to a standard quantity of production (or size container) used in the pull
system to authorize the production or withdrawal of goods.

KANBAN SQUARE:
a marked area designated to hold a certain amount of items; an empty square is the signal to
produce more items.

LABOR INDEX:
the ratio of quality cost to direct labor hours.

LEAD TIME OFFSETTING:

the process of subtracting an item's lead time from its due date to determine when an order
should be released; also called time phasing.

LEAN PRODUCTION:
a term used to describe JIT and the Toyota production system.

LEAN PRODUCTION:
an adaptation of mass production that prices quality and flexibility.

LEARNING CURVE:
a graph that reflects the improvement rate of workers as a job is repeated and more units are
produced.

LEVEL PRODUCTION:
an aggregate planning strategy that produces units at a constant rate and uses inventory to
absorb variations in demand.

LINE BALANCING:
a layout technique that attempts to equalize the amount of work assigned to each workstation on
an assembly line.

LINEAR DECISION RULE (LDR):

a mathematical technique that solves a set of four quadratic equations to determine the optimal
workforce size and production rate.

LOAD LEVELING:
the process of smoothing out the work assigned across time and the available resources.

LOAD PERCENT:

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 the ratio of load to capacity.

LOAD PROFILE:
a chart that compares released orders and planned orders with work center capacity.

LOAD-DISTANCE TECHNIQUE:
a quantitative method for evaluating various facility locations using a value that is a measure of
weight and distance.

LOAD:
refers to the standard hours of work assigned to the facility.

LOADING:
the process of assigning work to individual workers or machines.

LOCATION FACTOR RATING:

a system for weighting the importance of different factors in the location decision, scoring the
individual factors, and then developing an overall location score that enables a comparison of
different location sites.

LOT TOLERANCE PERCENT DEFECTIVE (LTPD):

the maximum percentage defective items in a lot that the consumer will knowingly accept.

MAINTAINABILITY:
the ease with which a product is maintained or repaired.

MAKE-TO-ORDER:
products or services made to customer specifications after an order has been received.

MAKE-TO-STOCK:
products or services created in anticipation of demand.

MANAGEMENT COEFFICIENTS MODEL:

an aggregate planning technique that uses regression analysis to improve the consistency of
production planning decisions.

MANAGEMENT INFORMATION SYSTEM (MIS):

a system specifically designed to channel large quantities and numerous types of information
through an organization.

MANUFACTURING CELL:
a group of dissimilar machines brought together to manufacture a family of parts with similar
shapes or processing requirements.

MANUFACTURING RESOURCE PLANNING (MRP II):

an extension of MRP that plans all the resources necessary for manufacturing; includes financial
and marketing analysis, feedback loops, and an overall business plan.

MASS PRODUCTION:
1. a type of process that produces large volumes of a standard product or
service for a mass market.
2. the high-volume production of a standard product for a mass market.
3. the high-volume production of a standardized product for a mass market.

MASTER PRODUCTION SCHEDULE (MPS):

a schedule for the production of end items (usually final products). It drives the MRP process
that schedules the production of component parts.

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 MATERIAL KANBAN:
a rectangular-shaped kanban used to order material in advance of a process.

MATERIAL REQUIREMENTS PLANNING (MRP):

a computerized inventory control and production planning system for generating purchase
orders and work orders of materials, components, and assemblies.

MEAN SQUARED ERROR (MSE):

the average of the squared forecast errors.

MIXED-MODEL ASSEMBLY LINE:

an assembly line that processes more than one product model.

MODULAR BILL OF MATERIAL:

a special bill of material used to plan the production of products with many optional features.

MODULAR DESIGN:
combining standardized building blocks or modules in a variety of ways to create unique
finished products.

MOST LIKELY TIME (M):

the subjective estimate of the time that would occur most frequently if the activity were repeated
many times.

MOTION STUDY:
the study of the individual human motions used in a task

MOVING AVERAGE:
average demand for a fixed sequence of periods including the most recent period.

MULTIFUNCTIONAL WORKERS:
workers who have been trained to perform more than one job or function.

NETTING:
the process of subtracting on-hand quantities from gross requirements to produce net
requirements.

OBJECTIVE FUNCTION:
a linear mathematical relationship that describes the objective of an operation in terms of
decision variables.

ON-DEMAND (DIRECT-RESPONSE) DELIVERY:

requires the supplier to deliver goods when demanded by the customer.

OPERATING CHARACTERISTIC (OC) CURVE:

a graph that measures the probability of accepting a lot for different proportions of defective
items.

OPERATIONS MANAGEMENT:
the design and operation of productive systems.

OPTIMISTIC TIME (A):

the shortest possible time to complete the activity if everything went right.
ORDER CYCLE:
the time between the receipt of orders in an inventory system.

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 ORDER QUALIFIERS:
the characteristics of a product or service that qualify it to be considered for purchase.

ORDER SPLITTING:
the processing of a single order in separate batches at multiple machines simultaneously.

ORDER WINNER:
the characteristic of a product or service that wins orders in the marketplace.

PARETO ANALYSIS:
a method for identifying the causes of poor quality, which usually shows that most quality
problems result from only a few causes.

PATTERN TEST:
a statistical test to determine if the observations within the limits of a control chart display a
nonrandom pattern.

PERIODIC INVENTORY SYSTEM:

a system in which the inventory level is checked after a specific time period and a variable
amount is ordered, depending on the inventory in stock.

PREVENTION COSTS:
costs incurred during product design and manufacturing that prevent nonconformance to
specifications.

PREVENTIVE MAINTENANCE:
a system of daily maintenance, periodic inspection, and preventive repairs designed to reduce
the probability of machine breakdown.

PROCESS CAPABILITY:
the capability of a process to accommodate design specifications of a product.

PROCESS LAYOUT:
a layout that groups similar activities together into work centers according to the process or
function they perform.

PROCESS PLANNING:
the conversion of designs into workable instructions for manufacture, along with associated
decisions on component purchase or fabrication and process and equipment selection.

PROCESS STRATEGY:
an organization's overall approach for physically producing goods and services.

PRODUCER'S RISK (A):

the probability of rejecting a lot that has an acceptable quality level (AQL).

PRODUCT LAYOUT:
a layout that arranges activities in a line according to the sequence of operations that are needed
to assemble a particular product.

PRODUCT STRUCTURE FILE:

a file that contains computerized bills of material for all products. production flow analysis
(PFA):
a group technology technique that reorders part routing matrices to identify families of parts
with similar processing requirements.

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 PRODUCTION INDEX:
the ratio of quality cost to final product units.

PRODUCTIVITY:
a measure of effectiveness in converting resources into products, generally computed as output
divided by input.

PRODUCTIVITY:
the ratio of output to input.

QUALITY ASSURANCE:
the management of quality throughout the organization.

QUALITY FUNCTION DEPLOYMENT (QFD):

a structured process that translates the voice of the customer into technical design requirements.

QUALITY OF CONFORMANCE:
the degree to which the product or service meets the specifications required by design during the
production process.

QUALITY OF DESIGN:
the degree to which quality characteristics are designed into a product or service.

QUALITY-PRODUCTIVITY RATIO:
a productivity index that includes productivity and quality costs.

QUANTITY DISCOUNT:
a pricing schedule in which lower prices are provided for specific (higher) order quantities.

RANDOM VARIATIONS:
movements in demand that are not predictable and follow no pattern.
RELIABILITY:
the probability that a given part or product will perform its intended function for a specified
period of time under normal conditions of use.

REVERSE ENGINEERING:
carefully dismantling and inspecting a competitor's product to look for design features that can
be incorporated into your own product.

ROBUST DESIGN:
the design of a product or a service that can withstand variations in environmental and operating
conditions.

SALES INDEX:
the ratio of quality cost to sales.

SAMPLING PLAN:
the guidelines for taking a sample including the AQL, LTPD, n, and c.

SCHEDULING:
the determination of when labor, equipment, and facilities are needed to produce a product or
provide a service.
SEQUENCING:
the process of assigning priorities to jobs so that they are processed in a particular order.

SERVICE LEVEL:

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 the probability that the amount of inventory on hand during the lead time is sufficient to meet
expected demand.

SHOP FLOOR CONTROL (SFC):

scheduling and monitoring day-to-day production in a job shop; also known as production
control or production activity control.

SHORTAGE COSTS:
temporary or permanent loss of sales that will result when customer demand cannot be met.

SIGNAL KANBAN:
a triangular kanban used as a reorder point to signal production at the previous workstation.

SLACK:
the amount by which a project activity can be delayed without delaying any of the activities that
follow it or the project as a whole.

SLACK VARIABLE:
a variable added to a linear programming constraint to make it an equality.

SOURCING:
the selection of suppliers.

STANDARD TIME:
the time required by an "average" worker to perform a job once under normal circumstances and
conditions.

STATISTICAL PROCESS CONTROL (SPC):

a statistical procedure for monitoring the quality of the production process using control charts.

STOCKOUT:
an inventory shortage occurring when demand exceeds the inventory in stock.

SUPPLY CHAIN:
the facilities, functions, and activities involved in producing and delivering a product or service,
from suppliers (and their suppliers) to customers (and their customers).

SYNCHRONOUS MANUFACTURING:
a finite scheduling approach that differentiates between bottleneck and nonbottleneck resources
and between transfer batches and process batches.

TARDINESS:
the difference between a job's due date and its completion time for those jobs completed after
their due date.

TARIFFS (DUTIES):
taxes on imported goods.

TASKS:
individual, defined job activities that consist of one or more elements.

TIME SERIES METHODS:

a class of statistical methods that uses historical demand data over a period of time to predict
future demand.

TOTAL EMPLOYEE INVOLVEMENT (TEI):

a system that involves every employee at every level in continuous improvement efforts.

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 TOTAL PRODUCTIVE MAINTENANCE (TPM):
an approach to machine maintenance that combines the practice of preventive maintenance with
the concepts of total quality and employer involvement.
TRACKING SIGNAL:
a measure computed by dividing the cumulative error by MAD; used for monitoring bias in a
forecast
.
UNDERCAPACITY SCHEDULING:
the allocation of extra time in a schedule for nonproductive tasks such as problem solving or
maintenance.

UNIFORM PRODUCTION LEVELS:

the result of smoothing production requirements on the final assembly line.

UNIT LOAD:
the quantity in which material is normally moved; it could represent a single unit, pallet, or bin
of material.

UTILIZATION:
the percentage of available working time that a worker spends working or a machine is running.

VALUE ANALYSIS (VA):

an analytical approach for eliminating unnecessary design features and functions.

VARIABLE MEASURE:
a product characteristic that can be measured, such as weight or length.

VIRTUAL REALITY:
a visual form of communication in which the user experiences animation as an active
participant.

VISUAL CONTROL:
procedures and mechanisms for making problems visible.

WASTE:
anything other than the minimum amount of equipment, materials, parts, space, and time that are
absolutely essential to add value to the product.

WITHDRAWAL KANBAN:
a card authorizing the withdrawal and movement of a container of goods.

WORK BREAKDOWN STRUCTURE (WBS):

a methodology for subdividing a project into different hierarchical levels of components.

WORK SAMPLING:
a technique for determining the proportion of time a worker or machine spends on job activities.

YIELD MANAGEMENT:
a term used in the airline and hotel industries to describe the process of determining the
percentage of seats or rooms to be allocated to different fare classes.

YIELD:
a measure of productivity; the sum of good quality and reworked units.

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