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80-20 Pareto principle A principle that states that 20% of problem types account for 80% of all

occurrences.

Abandonment A situation when a customer, havin waited in !ueue for some time,leaves the process but before bein served.

Abnormal variability "npredictable variability that disturbs the state of statistical e!uilibrium

of the process by chanin parameters of its distribution in an

une#pected way

Activity $he simplest form of transformation the buildin bloc& of a process.

Activity time $he time re!uired by a typical flow unit to complete the activity once.

Areation,

principle of

A statistical principle that states that the standard deviation of the sum

of random variables is less than the sum of the individual standarddeviations.

American system of

manufacturin

$he manufacturin system beun in 1810 that introduced the use of

interchaneable parts, thereby eliminatin the need to custom fit parts

durin assembly.

Andon 'iterally, andon means a display board. (n the $oyota Production

)ystem, a wor&er is empowered to stop the line by pullin a cord. A

display board identifies the station that pulled the cord enablin thesupervisor to locate it easily.

Availability lossfactor

*esource availability loss as a fraction of scheduled availability.

Averae flow rate $he averae number of flow units that flow throuh +into and out of the

process per unit over time. Also called throughput.

Averae flow time $he averae of the flow times across all flow units that e#it the process

durin a specific span of time.

ac&loed$he situation in which customers must wait to have their demandsatisfied.

atch $he sie of an order or production in response to the economies ofscale.

enchmar&in $he process of continually searchin for the best methods, practices,

and processes, and adoptin or adaptin the ood features to become/the best of the best.

loc&ae An event that occurs when resources are prevented from

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producin more flow units because there is no place to store the already

processed flow units, or because additional processin has not beenauthoried.

loc&in A situation that occurs because input buffers have only limited capacityto accommodate arrivals waitin to be processed.

ottlenec& )lowest resource pool also see $heoretical bottlenec& and ffective

bottlenec&.

uffer $he part of the process that stores flow units that have finished with one

activity but are waitin for the ne#t activity to start.

uffer capacity $he ma#imum number of customers that can wait in !ueue.

ull whip effect $he phenomenon of upstream variability manification that indicates alac& of synchroniation amon supply chain members.

usiness process A networ& of activities performed by resources that transform inputs

into outputs.

usiness stratey $he aspect of strateic plannin that defines the scope of each divisionor business unit in terms of the attributes of the products that it will

offer and the mar&et sements that it will serve.

apacity utiliation of

a resource pool

$he deree to which resources are utilied by a process $he ratio of

throuhput and theoretical capacity of resource pool.

apital i#ed assets such as land, buildin, facilities, e!uipment, machines, andinformation systems.

ascadin *epresentin a iven process at several levels of detail simultaneously

in a process flow chart.

ausal models orecastin methods that assume data plus other factors influence

demand.

ause-effect diaram An illustration that shows a chain of cause-effect relationships that

allows one to find the root-causes of the observed variability also called

fishboneorIshikawadiagram.

ellular layout A layout of resources where all stations that performs successive

operations on a product +or product family are rouped toether and

oranied accordin to the se!uence of activities.

haneover $he cleanin, resettin, or retoolin of e!uipment in order for it to

process a different product. Also calledsetup.

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hase demand

stratey

A stratey to deal with demand fluctuations whereby a firm produces

!uantities to e#actly match demand.

hec& sheet A tally of the types and fre!uency of problems with a product or aservice e#perienced by customers.

oefficient of

variation

A measure of variability relative to its mean. (t is obtained by

computin the ratio of the standard deviation to the mean.

ollaborativePlannin, orecastin,

and *eplenishment

+P*

An initiative in the consumer oods industry desined to coordinateplannin, forecastin and replenishment across the supply chain.

ompetitive product

space

A representation of the firm4s product portfolio as measured alon four

dimensions or product attributes -- product cost, response time, variety,and !uality

ontinuous

improvement

5noin incremental improvement in process performance. Also see

kaizen.

ontinuous

*eplenishment

Proram +*P

A partnership proram under which the supplier automatically

replenishes its customer inventories based on contractually areed upon

levels.

ontinuous review,

reorder point policy

An order policy wherein a process manaer, havin initially ordered a

fi#ed !uantity, monitors inventory level continuously and then reorders

once available inventory falls to a pre-specified reorder point.

ontrol band A rane within which any variation is to be interpreted as normal,

unavoidable aspect of any process.

ontrol chart A run chart of process performance with control limits overlaid to iveit decision-ma&in power.

ontrol limits $he lower and upper rane of the control band.

orporate stratey $he aspect of strateic plannin that defines the businesses in which the

corporation will participate and specifies how &ey corporate resources

will be ac!uired and allocated to each business.

ritical activities Activities that lie on the critical path.

ritical path $he lonest path in the flow chart.

ycle inventory $he averae inventory that results from intermittent procurement or

production practices.

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ycle inventory $he averae inventory arisin from a specific batch sie

ycle service level $he probability that there will be no stoc&out within an order cycle Also

calledservice level.

7elayeddifferentiation

A stratey in which part of a process is delayed in order to reduce theneed for safety inventory. Also calledpostponement.

7emand manaement

strateies

Actions by a firm that attempt to influence demand pattern.

7ivision of labor $he brea&down of labor into its components and the distribution of

labor amon people and machines to increase efficiency of production.

7ue date !uotation $he practice of promisin a time frame within which the product will be

delivered after an order has been placed.

conomic order!uantity

$he optimal order sie that minimies total fi#ed and variable costs.

conomies of scaleA process e#hibits economies of scale when the averae unit cost of

output decreases with volume.

ffective bottlenec& $he resource pool with least effective capacity.

ffective capacity ofa process

$he effective capacity of the effective bottlenec&.

ffective capacity of

a resource unit

$he ma#imum flow rate of a resource unit if it were fully utilied durin

its net availability that is if there were no periods of resource idleness.

veryday low pricin

+7'P

$he retail practice of charin constant, everyday low prices with no

temporary discounts.

veryday low

purchase prices

+7'PP

$he wholesale practice of charin constant, everyday low prices with

no temporary discounts.

eedbac& control $he process of periodically monitorin the actual process performance,

comparin it to planned levels of performance, investiatin causes ofthe observed discrepancy between the two, and ta&in corrective actionsto eliminate those causes.

ill rate $he fraction of total demand satisfied from inventory on hand.

ishbone 7iaram )ee cause-effect diaram.

i#ed order cost $he administrative cost of processin an order, transportin material,

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receivin the product+s, and inspectin the delivery, reardless of order

sie.

i#ed setup cost $he time and materials re!uired to setup a process

le#ible9anufacturin

)ystem +9)

A reprorammable manufacturin system capable of producin a larevariety of parts.

le#ible massproduction

A method of hih-volume production that allows differences inproducts.

low rate $he number of flow units that flow throuh a specific point in the

process per unit of time.

low shop A type of process architecture that uses specialied resources to producea low variety of products at hih volumes.

low time $he total time that a flow unit spends within process boundaries.

low time efficiency $he ratio between theoretical flow time and the averae flow time that

indicates the amount of waitin time associated with the process.

low unit $he item bein analyed within a process view. #amples of flow units

include an input unit such as a customer order, or an output unit such asa finished product. A flow unit can also be the financial value of the

input or output.

ocused process A process in which products all fall within a small reion of thecompetitive product space. $his process supports a focused stratey.

ocused stratey A business process that is committed to a limited, conruent set of

ob:ectives in terms of demand and supply.

orecastin $he process of predictin the future.

orward buyin $he ta&in advantae of price discounts to purchase for future needs.

unctional layout A type of process desin that roups oraniational resources by

processin activity or /function; in /departments.; Also calledprocesslayout.

unctional

specialiation

A process and oraniational structure where people are specialied by

function, meanin each individual is dedicated to a specific tas&. +$he

other oraniational structure isproduct specialization.

unctional stratey $he part of strateic plannin that defines the purpose of mar&etin,

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