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Fourteenth Edition

APICS Dictionary
The essential supply chain reference
APICS Dictionary

John H. Blackstone Jr., PhD, CFPIM, Jonahs Jonah
Department of Management
Terry College of Business
University of Georgia
APICS Dictionary

Fourteenth edition2013
Thirteenth edition2010
Twelfth edition2008
Eleventh edition2005
Tenth edition2002
Ninth edition1998
Eighth edition1995
Seventh edition1992
Sixth edition1987
Fifth edition1982
Fourth edition1980
Third edition1970
Second edition1966
First edition1963

Copyright 2013 by APICS

International Standard Book Number: 978-0-9882146-1-3

All rights reserved. No part of this publication covered by copy-

right herein may be reproduced or copied in any form or by any
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without written permission from the publisher.

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Thank you to the following volunteers for their careful review of

the APICS Dictionary, 14th edition.

Louise Beauchamp, CFPIM; Stephen N. Chapman, PhD, CFPIM;

Rick Donahoue, CPIM, CSCP; Ann K. Gatewood, CFPIM, CIRM,
CSCP; Rebecca B. Hallock, CPIM; Mark C. Hardison, CFPIM, CSCP;
William R. Leedale, CFPIM, CIRM, CSCP; Frank L. Montabon, PhD,
CPIM, CIRM, CSCP; Murray R. Olsen, CFPIM, CIRM; Anthony L.
Patti, PhD, CFPIM; Andrea M. Prudhomme, PhD, CPIM, CIRM,
CSCP; and Fran Scher.

The Institute of Industrial Engineers provided permission to in-

clude several definitions reprinted from the text Industrial Engi-
neering Terminology, revised edition, Copyright 1991, Institute of
Industrial Engineers, 3577 Parkway Lane, Suite 200, Norcross,
Georgia 30092.
The American Society of Quality provided permission to include
several terms from Karen Bemowskis The Quality Glossary,
published in the February 1992 issue of Quality Progress.
The Theory of Constraints International Certification Organization
provided permission to include several terms from the TOCICO
The Spectrum Publishing Company provided permission to use
terms from the book, Synchronous Management, by Michael
Umble, CFPIM, and M.L. Srikanth.
The Association for Manufacturing Excellence provided the defini-
tion for kaizen blitz, which is trademarked.
The Supply Chain Council provided the definition for Supply Chain
Operations Reference model (SCOR), which is trademarked. For
the latest information about SCOR, visit the Supply Chain Coun-
cils website,
abandonment acceptance sampling

absorption costingAn approach to inventory valuation

A in which variable costs and a portion of fixed costs are

assigned to each unit of production. The fixed costs are
usually allocated to units of output on the basis of direct
abandonmentGiving up a route by a carrier. For exam-
labor hours, machine hours, or material costs. Syn: allo-
ple, a railroad.A
cation costing. See: activity-based costing.A
ABBAbbreviation for activity-based budgeting.A
ABCAbbreviation for activity-based cost accounting.A
ABC analysisSyn: ABC classification.A
accelerated depreciationA depreciation method involv-
ing high write-offs in the early years of an assets life
and lower write-offs later. This method lowers the value
of an asset faster than straight-line depreciation.A
ABC classificationThe classification of a group of items
in decreasing order of annual dollar volume (price mul- acceptThe receipt of an item as being complete and
tiplied by projected volume) or other criteria. This array sound.A
is then split into three classes, called A, B, and C. The A acceptable outgoing quality level (AOQL)A demarca-
group usually represents 10 percent to 20 percent by tion between the level of defects in a lot at which the lot
number of items and 50 percent to 70 percent by pro- will be accepted or rejected.A
jected dollar volume. The next grouping, B, usually
represents about 20 percent of the items and about 20 acceptable quality level (AQL)When a continuing se-
percent of the dollar volume. The C class contains 60 ries of lots is considered, a quality level that, for the
percent to 70 percent of the items and represents purposes of sampling inspection, is the limit of a satis-
about 10 percent to 30 percent of the dollar volume. factory process average.A
The ABC principle states that effort and money can be acceptable sampling planA specific plan that indicates
saved through applying looser controls to the low-dollar- the sampling sizes and the associated acceptance or
volume class items than will be applied to high-dollar- nonacceptance criteria to be used.A
volume class items. The ABC principle is applicable to
acceptance criteriaThose performance requirements
inventories, purchasing, sales, and so on. Syn: ABC
and conditions that must be reached before projects or
analysis, distribution by value. See: 80-20, Pareto anal-
products are accepted.A
ysis, Paretos law.A
ABC frequency of accessA warehouse location that is acceptance number1) A number used in acceptance
determined by both a products ABC classification and sampling as a cutoff at which the lot will be accepted or
rejected. For example, if x or more units are bad within
by the frequency with which it is removed or replaced.A
the sample, the lot will be rejected. 2) The value of the
ABC inventory controlAn inventory control approach test statistic that divides all possible values into accep-
based on the ABC classification.A tance and rejection regions.A
ABMAbbreviation for activity-based management.A acceptance planHow an organization determines
abnormal demandDemand in any period that is out- which product lots to accept or reject based on sam-
side the limits established by management policy. This ples. See: acceptance sampling.A
demand may come from a new customer or from exist- acceptance sampling1) The process of sampling a
ing customers whose own demand is increasing or de- portion of goods for inspection rather than examining
creasing. Care must be taken in evaluating the nature the entire lot. The entire lot may be accepted or rejected
of the demand: is it a volume change; is it a change in based on the sample even though the specific units in
product mix; or is it related to the timing of the order? the lot are better or worse than the sample. There are
See: outlier.A two types: attributes sampling and variables sampling.
ABPAbbreviation for activity-based planning.A In attributes sampling, the presence or absence of a
characteristic is noted in each of the units inspected. In
absentee policyThe policy that discusses allowed job
variables sampling, the numerical magnitude of a cha-
absences and the penalties from too many absences.A
racteristic is measured and recorded for each inspected
absentee rateA ratio comparing the number of unit; this type of sampling involves reference to a conti-
employee-days lost with the total number of available nuous scale of some kind. 2) A method of measuring
employee-days of employment during some base pe- random samples of lots or batches of products against
riod, usually one month.A predetermined standards.A

APICS Dictionary, 14th edition 1

accessibility activity

accessibility1) In transportation, the facility with which example, the Registrar Accreditation Board accredits
a carrier provides service from one point to another. 2) those organizations that register companies to the ISO
In warehousing, the ability to get to and within the point 9000 Series Standards.A
of storage easily.A
accumulation binA place, usually a physical location,
accessorial chargesA bill for services, such as inside used to accumulate all components that go into an as-
deliveries, which are made in addition to transportation sembly before the assembly is sent out to the assembly

A charges.A
accessoryA choice or feature added to the good or
floor. Syn: assembly bin.A
accuracyThe degree of freedom from error or the de-
service offered to the customer for customizing the end gree of conformity to a standard. Accuracy is different
product. An accessory enhances the capabilities of the from precision. For example, four-significant-digit num-
product but is not necessary for the basic function of bers are less precise than six-significant-digit numbers;
the product. In many companies, an accessory means however, a properly computed four-significant-digit
that the choice does not have to be specified before number might be more accurate than an improperly
shipment but can be added at a later date. In other computed six-significant-digit number.A
companies, this choice must be made before shipment.
acid testSyn: quick asset ratio.A
See: feature.A
acid test ratioSyn: quick asset ratio.A
accidental death and disability (AD&D)Insurance that
often is part of an employee benefit package, providing acknowledgmentA communication by a supplier to ad-
payment for either accidental death or disability.A vise a purchaser that a purchase order has been re-
ceived. It usually implies acceptance of the order by the
accident preventionThe application of basic scientific
and technical principlesincluding education and train-
ingfor the detection, analysis, and minimization of ha- acquisition costThe cost required to obtain one or
zards, with the objective of avoiding accidents.A more units of an item. It is order quantity times unit
cost. See: ordering cost.A
acclimatizationThe physiological, emotional, and be-
havioral adjustment to changes in the environment. action messageAn output of a system that identifies
Proper performance depends on adequate acclimatiza- the need for, and the type of action to be taken to cor-
tion to the workplace, including significant mechanical rect, a current or potential problem. Examples of action
features such as seat height and lighting. Heat, cold, messages in an MRP system include release order, re-
humidity, and light are important physiologically.A schedule in, reschedule out, and cancel. Syn: exception
message, action report.A
accountabilityBeing answerable for, but not necessari-
ly personally charged with, doing the work. action planA process to obtain results identified by
Accountability cannot be delegated, but it can be one or more objectives.A
action reportSyn: action message.A
accountingThe function of maintaining, analyzing, and
activationPutting a resource to work.A
explaining the financial records and status of an
organization.A active data gatheringData gathered when a company
initiates conversation with the customer.A
account managerA manager who has direct responsi-
bility for a customers interest.A active inventoryThe raw materials, work in process,
and finished goods that will be used or sold within a
accounts payableThe value of goods and services ac-
given period.A
quired for which payment has not yet been made.A
active loadWork scheduled that may not be on hand.A
accounts receivableThe value of goods shipped or
services rendered to a customer on which payment has active tagA radio frequency identification tag that
not yet been received. Usually includes an allowance for broadcasts information and contains its own power
bad debts.A source. See: radio frequency identification (RFID).A
accreditationCertification by a recognized body of the activity1) In activity-based cost accounting, a task or
facilities, capability, objectivity, competence, and integr- activity, performed by or at a resource, required in pro-
ity of an agency, service, operational group, or individual ducing the organizations output of goods and services.
to provide the specific service or operation needed. For A resource may be a person, machine, or facility.

2 APICS Dictionary, 14th edition

activity analysis activity-on-node network (AON)

Activities are grouped into pools by type of activity and requirements (for both financial and operational sys-
allocated to products. 2) In project management, an tems) based on future demand for products or services
element of work on a project. It usually has an antic- by specific customer needs. Demand for resources is
ipated duration, anticipated cost, and expected re- related to resource availability; capacity overages and
source requirements. Sometimes major activity is shortfalls are corrected. Activity-based budgeting de-
used for larger bodies of work.A rives from the outputs of ABP.A
activity analysisIn project management, the identifica-
tion and description of activities within an organization
for the purpose of activity-based costing.A
activity codeIn project management, a value that al-
lows filtering or ordering of activities in reports.A
activity definitionThe specific work to be performed
activity attributesMultiple features associated with that defines a project deliverable.A
each activity to be performed. These include predeces- activity dictionaryIn activity-based cost accounting, a
sor activities, successor activities, and resource set of standard definitions of activities including de-
requirements.A scriptions, business process, function source, cost driv-
activity-based budgeting (ABB)In activity-based cost ers, and other data important to activity-based
accounting, a budgeting process employing knowledge planning.A
of activities and driver relationships to predict workload activity driverIn activity-based cost accounting, a
and resource requirements in developing a business yardstick of demands placed on an activity by given cost
plan. Budgets show the predicted consumption and objects. Its purpose is to assign activity costs to cost
cost of resources using forecast workload as a basis. objects.A
The company can use performance to budget in eva-
activity durationThe planned difference between the
luating success in setting and pursuing strategic goals;
start and finish dates of a project activity.A
this activity is part of the activity-based planning
process.A activity identifierA unique alphanumeric code that dif-
ferentiates one project activity from other activities.A
activity-based cost accountingA cost accounting sys-
tem that accumulates costs based on activities per- activity levelA description of how reactive one activity
formed and then uses cost drivers to allocate these is to changes in the level of another activity or cost
costs to products or other bases, such as customers, object.A
markets, or projects. It is an attempt to allocate over- activity listA record of planned activities in a project,
head costs on a more realistic basis than direct labor or including an activity description and an activity
machine hours. Syn: activity-based costing, activity- identifier.A
based cost accounting. See: absorption costing.A
activity network diagramOne of the seven new tools of
activity-based costing (ABC)In activity-based cost ac- quality. A drawing including nodes that represent opera-
counting, a model, by time period, of resource costs tions to be performed and arrows representing prece-
created because of activities related to products or ser- dence relationships. This drawing represents all of the
vices or other items causing the activity to be carried activities to be finished to complete a project. Also
out. Syn: activity-based cost accounting, activity-based known as a critical path diagram or PERT chart.A
costing model.A
activity-on-arc networkSyn: activity-on-arrow network.A
activity-based costing systemA set of activity-based
activity-on-arrow network (AOA)A project management
cost accounting models that collectively define data on
network in which the passage of time, via activities,
an organizations resources, activities, drivers, objects,
takes place on the arrows. The start of an activity is
and measurements.A
represented by the tail of the arrow, while the comple-
activity-based management (ABM)The use of activity- tion of the activity is represented by the tip of the arrow.
based costing information about cost pools and drivers, The sequence of the arrows represents the sequence of
activity analysis, and business processes to identify activities. Arrows are connected by nodes, which are
business strategies; improve product design, manufac- usually circles. Syn: activity-on-arc network, arrow dia-
turing, and distribution; and remove waste from opera- gram method, event-on-arrow network.A
tions. See: activity-based cost accounting.A
activity-on-node network (AON)A project management
activity-based planning (ABP)In activity-based cost ac- network in which the passage of time, via activities,
counting, a continuing definition of activity and resource takes place on circles called nodes. Each node contains

APICS Dictionary, 14th edition 3

activity ratio advanced planning and scheduling (APS)

a number representing the estimated duration of the compared with demonstrated capacity (practical capaci-
activity it represents. Nodes are connected by arrows ty) or budgeted capacity.A
that give precedence relationships. Syn: event-on-node
AD&DAbbreviation for accidental death and
network, precedence diagram method.A
activity ratioA financial ratio to determine how an or-
adaptable websiteIn e-commerce, a site that a visitor
ganizations resources perform relative to the revenue
can change to customize.A

A the resources produce. Activity ratios include inventory

turnover, receivables conversion period, fixed-asset
turnover, and return on assets.A
adaptive control1) The ability of a control system to
change its own parameters in response to a measured
change in operating conditions. 2) Machine control
activity resource estimatingEstimating the types and
units in which feeds and/or speeds are not fixed. The
amounts of resources that will be needed for various
control unit, working from feedback sensors, is able to
project activities.A
optimize favorable situations by automatically
activity sequencingThe process of defining and docu- increasing or decreasing the machining parameters.
menting dependencies among project activities.A This process ensures optimum tool life or surface finish
and/or machining costs or production rates.A
actual cost of work performedThe direct costs actually
incurred in, and the indirect costs applied to, accom- adaptive smoothingA form of exponential smoothing in
plishing work performed within a given time period. which the smoothing constant is automatically adjusted
These costs should reconcile with the contractors as a function of forecast error measurement.A
incurred-cost ledgers, which are regularly audited by the
adaptive websiteIn e-commerce, a site that records a
visitors behavior, uses artificial intelligence software to
actual costsThe labor, material, and associated over- learn this behavior, and chooses what to present to
head costs that are charged against a job as it moves the visitor based on this learning.A
through the production process.A
additive manufacturingSyn: 3D printing.A
actual cost systemA cost system that collects costs
additivesA special class of ingredients characterized
historically as they are applied to production and allo-
either by being used in minimal quantities or by being
cates indirect costs to products based on the specific
introduced into the processing cycle after the initial
costs and achieved volume of the products.A
actual demandActual demand is composed of cus-
adjudicateTo hear and decide an issue under legal
tomer orders (and often allocations of items, ingre-
dients, or raw materials to production or distribution).
Actual demand nets against or consumes the fore- adjustable capacityCapacity, such as labor or tools,
cast, depending upon the rules chosen over a time hori- that can be changed in the short term.A
zon. For example, actual demand will totally replace administrative contracting officerA government em-
forecast inside the sold-out customer order backlog ho- ployee who ensures compliance with the terms and
rizon (often called the demand time fence) but will net conditions of contracts.A
against the forecast outside this horizon based on the
chosen forecast consumption rule.A advanced planning and scheduling (APS)Techniques
that deal with analysis and planning of logistics and
actual durationThe difference between the actual start manufacturing during short, intermediate, and long-
date of a project activity and the current date (if the ac- term time periods. APS describes any computer pro-
tivity is still in progress) or the difference between the gram that uses advanced mathematical algorithms or
actual start date of a project activity and the actual logic to perform optimization or simulation on finite ca-
completion date (if the activity is completed).A pacity scheduling, sourcing, capital planning, resource
actual finish dateIn project management, the date on planning, forecasting, demand management, and oth-
which an activity in a project was actually completed.A ers. These techniques simultaneously consider a range
of constraints and business rules to provide real-time
actual start dateIn project management, the date on
planning and scheduling, decision support, available-to-
which an activity in a project was actually started.A
promise, and capable-to-promise capabilities. APS often
actual volumeActual output expressed as a volume of generates and evaluates multiple scenarios.
capacity. It is used in the calculation of variances when Management then selects one scenario to use as the

4 APICS Dictionary, 14th edition

advanced planning system (APS) agility

official plan. The five main components of APS sys- and production planning (or for sales and operations
tems are (1) demand planning, (2) production planning, planning) purposes. See: product group forecast.A
(3) production scheduling, (4) distribution planning, and
aggregate inventoryThe inventory for any grouping of
(5) transportation planning.A
items or products involving multiple stockkeeping units.
advanced planning system (APS)Syn: advanced plan- See: base inventory level.A
ning and scheduling.A aggregate inventory managementEstablishing the
advanced production system (APS)Syn: advanced
planning and scheduling.A
overall level (dollar value) of inventory desired and im-
plementing controls to achieve this goal.A A
advance material requestOrdering materials before aggregate lead timeSyn: cumulative lead time.A
the release of the formal product design. This early re- aggregate planA plan that includes budgeted levels of
lease is required because of long lead times.A finished goods, inventory, production backlogs, and
advance ship notice (ASN)An electronic data inter- changes in the workforce to support the production
change (EDI) notification of shipment of product.A strategy. Aggregated information (e.g., product line,
family) rather than product information is used, hence
advertisingSponsored promotions that are nonper- the name aggregate plan.A
sonal in nature.A
aggregate planningA process to develop tactical plans
aestheticsA dimension of product quality that intends to support the organizations business plan. Aggregate
to appeal to the senses.A planning usually includes the development, analysis,
affidavitA sworn written statement.A and maintenance of plans for total sales, total produc-
tion, targeted inventory, and targeted customer backlog
affinity diagramA total quality management tool whe- for families of products. The production plan is the re-
reby employees working in silence generate ideas and sult of the aggregate planning process. Two approaches
later categorize these ideas.A to aggregate planning exist: (1) production planning and
affirmative actionA hiring policy that requires employ- (2) sales and operations planning. See: production
ers to analyze the workforce for underrepresentation of planning, sales and operations planning, sales plan.A
protected classes. It involves recruiting minorities and aggregate production plan (APP)A long-range plan that
members of protected classes, changing management is used to determine timing and quantity of total future
attitudes or prejudices toward them, removing discrimi- production for a family of products. Syn: long-term pro-
natory employment practices, and giving preferential duction plan.A
treatment to protected classes.A
aggregate reporting1) Reporting of process hours in
aftermarketA secondary market for parts and acces- general, allowing the system to assign the actual hours
sories used to repair or enhance an item.A to specific products run during the period based on
after-sale serviceSyn: field service.A standards. 2) Also known as gang reporting, the report-
ing of total labor hours.A
agency tariffRates for a variety of carriers published in
a single document.A aggregate unit of capacityCombined capacity unit of
measure when a variety of outputs exist.A
agentOne who acts on behalf of another (the principal)
aggregationThe concept that pooling random variables
in dealing with a third party. Examples include a sales
reduces the relative variance of the resulting aggre-
agent and a purchasing agent.A
gated variable. For example, the relative variance in
agglomerationHaving a common location with a varie- sales of all models of automobiles sold by a firm is less
ty of other companies.A than that for a single model.A
aggregate demandDemand that is grouped (e.g., all agile manufacturingThe ability to respond quickly to
sedans) for making forecasts or plans. See: aggregate unpredictable changes in customer needs by reconfigur-
forecast.A ing operations.A
aggregate forecastAn estimate of sales, often time- agilityThe ability to successfully manufacture and
phased, for a grouping of products or product families market a broad range of low-cost, high-quality products
produced by a facility or firm. Stated in terms of units, and services with short lead times and varying volumes
dollars, or both, the aggregate forecast is used for sales that provide enhanced value to customers through cus-

APICS Dictionary, 14th edition 5

AGVS analog

tomization. Agility merges the four distinctive compe- alternate feedstockA backup supply of an item that
tencies of cost, quality, dependability, and flexibility.A either acts as a substitute or is used with alternate
AGVSAbbreviation for automated guided vehicle
system.A alternate operationReplacement for a normal step in
AIAbbreviation for artificial intelligence.A the manufacturing process. Ant: primary operation.A
alternate partWhen a buyer can purchase similar

AIDCAbbreviation for automatic identification and data
capture.A products from different suppliers. This increases the
buyers power as the buyer does not have to rely on just
AISAbbreviation for automated information system.A one supplier.A
algorithmA prescribed set of well-defined rules or alternate routingA routing that is usually less preferred
processes for solving a problem in a finite number of than the primary routing but results in an identical item.
steps (e.g., the full statement of the arithmetic proce- Alternate routings may be maintained in the computer
dure for calculating the reorder point).A or off-line via manual methods, but the computer soft-
alliance developmentStrengthening the capabilities of ware must be able to accept alternate routings for spe-
a key supplier.A cific jobs.A
allocated itemIn an MRP system, an item for which a alternate work centerThe work center where an opera-
picking order has been released to the stockroom but tion is not normally performed but can be performed.
not yet sent from the stockroom.A Ant: primary work center.A
allocated materialSyn: reserved material.A American customer satisfaction indexA metric cos-
ponsored by the University of Michigan and the
allocation1) The classification of quantities of items
American Society for Quality that measures the satisfac-
that have been assigned to specific orders but have not
tion of U.S. customers with the goods and services
yet been released from the stockroom to production. It
available to them from both domestic and foreign
is an uncashed stockroom requisition. 2) A process
used to distribute material in short supply. Syn: assign-
ment. See: reservation.A American National Standards Institute (ANSI)The par-
allocation costingSyn: absorption costing.A ent organization of the interindustry electronic inter-
change of the business transaction standard. This
allocative efficiencyThe use of resources to produce group is the clearinghouse on U.S. electronic data inter-
those goods and services most wanted by consumers.A change standards.A
allowable costA reasonable cost specifically permitted American Society for Quality (ASQ)Founded in 1946, a
under Federal Acquisition Regulation (FAR) not-for-profit educational organization with more than
requirements.A 100,000 individual and organizational members who
allowance1) In work measurement, a time value or are interested in quality improvement.A
percentage of time by which the normal time is in- American Standard Code for Information Interchange
creased, or the amount of nonproductive time applied, (ASCII)Standard seven-bit character code used by
to compensate for justifiable causes or policy require- computer manufacturers to represent 128 characters
ments that necessitate performance time not directly for information interchange among data processing sys-
measured for each element or task. Usually includes tems, communications systems, and other information
irregular elements, incentive opportunity on machine- system equipment. An eighth bit is added as a parity bit
controlled time, minor unavoidable delays, rest time to to check a string of ASCII characters for correct
overcome fatigue, and time for personal needs. 2) In transmission.A
assembly, the minimum clearance or maximum interfe-
rence distance between two adjacent objects.A amortizationThe process of recovering (via expensing)
a capital investment over a period of time. See: capital
allowed timeA normal time value increased by appro- recovery.A
priate allowances.A
analogAs applied to an electrical or computer system,
alpha factorSyn: smoothing constant.A
the capability of representing data in continuously vary-
alpha releaseAn extremely early version of a product ing physical phenomena (as in a voltmeter) and convert-
released to obtain feedback about its suitability.A ing them into numbers.A

6 APICS Dictionary, 14th edition

analysis of variance (ANOVA) application-to-application

analysis of variance (ANOVA)A statistical analysis sys- ing sales, planned sales promotion programs, seasonal
tem that estimates what portion of variation in a de- fluctuations, plant shutdowns, and vacations.A
pendent variable is caused by variation in one or more
anticipation orderAn order placed before an item has
independent variables. It also produces a number used
been made available for delivery.A
to infer whether any or all of the independent-
dependent variable relationships have statistical signi- anti-dumping dutyAn imposed responsibility in which a
ficance (i.e., have not been caused by randomness in company sells imported goods at prices below what is
the data).A

analytic workplace designA design based on estab-

charged in their domestic market.A
any-quantity rateA situation in which no quantity dis-
lished biomechanical and behavioral concepts, includ- count is available for large shipments.A
ing the known operating characteristics of people. AOAAbbreviation for activity-on-arrow network.A
Produces a workplace situation well within the range of
human capacity and does not generally require modifi- AONAbbreviation for activity-on-node network.A
cation, improvement, or preliminary experimental AOQAbbreviation for average outgoing quality.A
AOQL1) Abbreviation for average outgoing quality limit.
analyze phaseOne of the six sigma phases of quality. 2) Abbreviation for acceptable outgoing quality level.A
It consists of the following steps: (a) define performance
objective, (b) identify independent variables, and (c) APICSFounded in 1957 as the American Production
analyze sources of variability. See: design-measure- and Inventory Control Society, APICS The Association for
analyze-improve-control process.A Operations Management builds operations manage-
ment excellence in individuals and enterprises through
andonA sign board with signal lights used to make superior education and training, internationally recog-
workers and management aware of a quality, quality, or nized certifications, comprehensive resources, and a
process problem.A worldwide network of accomplished industry
annual inventory countSyn: physical inventory.A professionals.A

annualized contractA negotiated agreement with a APPAbbreviation for aggregate production plan.A
supplier for one year that sets pricing, helps ensure a apparent authorityAuthority perceived by a third party
continuous supply of material, and provides the supplier to flow from a principal to an ostensible agent when in
with estimated future requirements.A fact no agency relationship exists.A
annual percentage rateIn finance, the rate of interest appellantOne who appeals a court decision to higher
paid for a loan after compounding is considered. Syn: authority.A
effective interest rate.A
application packageA computer program or set of pro-
annual physical inventorySyn: physical inventory.A grams designed for a specific application (e.g., inventory
annuityA stream of fixed payments for a stipulated control, MRP).A
time, yearly or at other intervals.A application service provider (ASP)A firm that produces
ANOVAAcronym for analysis of variance.A outsourced services for clients.A

ANSIAcronym for American National Standards applications softwareA computer program or set of
Institute.A programs designed to assist in the performance of a
specific task, such as word processing, accounting, or
anticipated delay reportA report, normally issued by inventory management. See: application system.A
both manufacturing and purchasing to the material
application systemA set of programs of specific in-
planning function, regarding jobs or purchase orders
structions for processing activities needed to compute
that will not be completed on time. This report explains
specific tasks for computer users, as opposed to operat-
why the jobs or purchases are delayed and when they
ing systems that control the computers internal opera-
will be completed. This report is an essential ingredient
tions. Examples are payroll, spreadsheets, and word
of the closed-loop MRP system. It is normally a
processing programs. See: application software.A
handwritten report. Syn: delay report.A
application-to-applicationThe exchange of data be-
anticipation inventoriesAdditional inventory above ba-
tween computers without reentry of data.A
sic pipeline stock to cover projected trends of increas-

APICS Dictionary, 14th edition 7

appraisal assembly chart

appraisal1) An evaluation of employee performance. useful in identifying potential problems and improve-
2) In total quality management, the formal evaluation ment opportunities.A
and audit of quality.A
arrow diagram methodSyn: activity-on-arrow network.A
appraisal costsThose costs associated with the formal
evaluation and audit of quality in the firm. Typical costs artificial intelligence (AI)1) Computer programs that
include inspection, quality audits, testing, calibration, can learn and reason in a manner similar to humans.

A and checking time.A The problem is defined in terms of states and operators
to generate a search space that is examined for the
appreciation of a currencyAn increase in the buying
best solution. In contrast, conventional programming
power of a countrys currency in terms of other coun-
collects and processes data by algorithm or fixed step-
tries goods and services.A
by-step procedures. 2) An area in computer science that
approved vendor list (AVL)A list of parties that have attempts to develop AI computer programs.A
been approved by a company as its suppliers. This list
ASCAbbreviation for accredited standards
usually is based on product quality and financial stabili-
ty of the firm.A
APRAbbreviation for annual percentage rate.A ASCIIAcronym for American Standard Code for
Information Interchange.A
APS1) Abbreviation for advanced planning and sche-
duling. 2) Abbreviation for advanced planning system.A ASNAbbreviation for advance ship notice.A

AQLAbbreviation for acceptable quality level.A ASPAbbreviation for application service provider.A
arbitrageRisk-free buying of an asset in one market ASQAbbreviation for American Society for Quality.A
and simultaneous selling of an identical asset at a profit
in another market.A ASQCAbbreviation for American Society for Quality
Control, now simply American Society for Quality (ASQ).A
arbitrationThe process by which an independent third
party is brought in to settle a dispute or to preserve the AS/RSAbbreviation for automated storage/retrieval
interest of two conflicting parties.A system.A
arithmetic meanSyn: mean.A assaysTests of the physical and chemical properties of
arrivalIn queuing theory, a unit that arrives for service, a sample.A
such as a person or part.A
assemble-to-orderA production environment where a
arrival dateThe date purchased material is due to ar- good or service can be assembled after receipt of a cus-
rive at the receiving site. The arrival date can be input, it tomers order. The key components (bulk, semi-finished,
can be equal to the current due date, or it can be calcu- intermediate, subassembly, fabricated, purchased,
lated from the ship date plus transit time. See: due packing, and so on) used in the assembly or finishing
date.A process are planned and usually stocked in anticipation
arrival rateIn queuing theory, the value or distribution of a customer order. Receipt of an order initiates as-
describing how often a person or thing arrives for sembly of the customized product. This strategy is use-
service.A ful where a large number of end products (based on the
selection of options and accessories) can be assembled
arrow1) In activity-on-arrow networks, the graphic from common components. Syn: finish-to-order. See:
presentation of an activity. The tail of the arrow make-to-order, make-to-stock.A
represents the start of the activity. The head of the ar-
row represents the finish. Unless a timescale is used, assemblyA group of subassemblies and/or parts that
the length of the arrow stem has no relation to the dura- are put together and that constitute a major subdivision
tion of the activity. Length and direction of the arrow are for the final product. An assembly may be an end item
usually a matter of convenience and clarity. 2) In or a component of a higher level assembly.A
activity-on-node networks, an arrow represents a prece-
assembly binSyn: accumulation bin.A
dence requirement.A
assembly chartOverview of a product containing as-
arrow diagramA technique to determine the relation-
sembly and subassembly operations, materials, and
ships and precedence of different activities and the
time estimate for project completion. The technique is

8 APICS Dictionary, 14th edition

assembly lead time authentication key

assembly lead timeThe time that normally elapses be- personnel do not verify the delivery quantity. This tech-
tween the issuance of a work order to the assembly nique is used to eliminate invoices.A
floor and work completion.A
assuranceOne of the dimensions of service quality.
assembly lineAn assembly process in which equip- The ability of employees to inspire trust and
ment and work centers are laid out to follow the se- confidence.A
quence in which raw materials and parts are assured source of supplyA guaranteed supply source
assembled. See: line, production line.A

assembly orderA manufacturing order to an assembly

generally created by a contract.A
asynchronous processA condition with two related
department authorizing it to put components together processes run to finish independently of each other.A
into an assembly. See: blend order.A
A3 methodA means of compactly describing a busi-
assembly parts listAs used in the manufacturing ness process.A
process, a list of all parts (and subassemblies) that
make up a particular assembly. See: batch card, manu- ATPAbbreviation for available-to-promise.A
facturing order.A attachmentAn accessory that has to be physically at-
tached to the product. See: feature.A
assetsAn accounting/financial term (balance sheet
classification of accounts) representing the resources attractability efficiencyIn e-commerce, a measure of
owned by a company, whether tangible (cash, how well an organization persuades people who are
inventories) or intangible (patent, goodwill). Assets may aware of its website to actually use the site. See: con-
have a short-term time horizonsuch as cash, accounts version efficiency.A
receivable, and inventoryor a long-term value (such as
attractorIn information systems, a website that, over
equipment, land, and buildings). See: balance sheet,
time, continues to attract a large number of visitors.A
liabilities, owners equity.A
attribute1) Quality control value that is either a yes/no
asset valueThe adjusted purchase price of the asset value or is counted rather than being measured on a
plus any costs necessary to prepare the asset for use.A continuous scale. See: variable, attribute data. 2) A
assignable causeA source of variation in a process description of an item or service that specifies either a
that can be isolated, especially when its significantly presence or an absence, such as on-time versus
larger magnitude or different origin readily distinguishes late.A
it from random causes of variation. Syn: special cause. attribute dataGo/no-go information. The control charts
See: common causes, assignable variation.A based on attribute data include percent chart, number
assignable variationVariation made by one or more of affected units chart, count chart, count-per-unit chart,
causes that can be identified and removed. See: as- quality score chart, and demerit chart. See: attribute,
signable cause, common causes.A attribute inspection.A

assigned materialSyn: reserved material.A attribute inspectionInspection for a go/no-go decision

or yes/no decision or to count the number of defects on
assigneeOne who receives a transfer of contract rights a unit. See: attribute, attribute data.A
from a party to the contract.A
attrition factorThe budget fraction apportioned for re-
assignmentSyn: allocation.A placement personnel training because of projected per-
assignorOne who sells contract rights to a third sonnel losses (retirements, promotions, and
person.A terminations).A

associative forecastingUses one or more variables auditAn objective comparison of actions to policies
that are believed to affect demand in order to forecast and plans.A
future demand.A audit trailTracing the transactions affecting the con-
assortment warehousingA warehousing technique that tents or origin of a record.A
stores the goods close to the customer to ensure short authenticationIn information systems, the act of iden-
customer lead times.A tifying a person or confirming the source of a message.A
assumed receiptA receiving technique based on the authentication keyIn information systems, a key that
assumption that a shipment is as expected. Receiving ensures that data in an electronic business transaction

APICS Dictionary, 14th edition 9

authorized deviation available-to-promise (ATP)

are not changed. It can also be used as a form of digital automatic reliefA set of inventory bookkeeping me-
signature.A thods that automatically adjusts computerized inventory
records based on a production transaction. Examples of
authorized deviationPermission for a supplier or the
automatic relief methods are backflushing, direct-
plant to manufacture an item that is not in conformance
deduct, and pre-deduct processing.A
with the applicable drawings or specifications.A
automatic reschedulingRescheduling done by the
autodiscriminationThe ability of a bar code reader to

A read several different types of symbols consecutively.A

automated assembly systemA system that produces
computer to automatically change due dates on sche-
duled receipts when it detects that due dates and need
dates are out of phase. Ant: manual rescheduling.A
completed products or assemblies without the contribu-
automationThe substitution of machine work for hu-
tion of direct labor.A
man physical and mental work, or the use of machines
automated clearinghouseA U.S. nationwide system for for work not otherwise able to be accomplished, entail-
electronic payments preferred by a myriad of banks, ing a less continuous interaction with humans than pre-
consumers, and corporations. This system can carry vious equipment used for similar tasks.A
payment information in a standardized, computer ac-
autonomationAutomated shutdown of a line, process,
cessible format.A
or machine upon detection of an abnormality or
automated flow lineA production line that has ma- defect.A
chines linked by automated parts transfer and handling autonomous work groupA production team that oper-
machines.A ates a highly focused segment of the production
automated guided vehicle system (AGVS)A transporta- process to an externally imposed schedule but with little
tion network that automatically routes one or more ma- external reporting, supervision, interference, or help.A
terial handling devices, such as carts or pallet trucks, auxiliary itemAn item required to support the opera-
and positions them at predetermined destinations with- tion of another item.A
out operator intervention.A
availabilityThe percentage of time that a worker or
automated information system (AIS)Computer hard- machine is capable of working. The formula is
ware and software configured to automate calculating, S B
computing, sequencing, storing, retrieving, displaying, availability 100%
communicating, or otherwise manipulating data and where S is the scheduled time and B is the downtime.A
textual material to provide information.A
available capacitySyn: capacity available.A
automated process controls systemA system that can available inventoryThe on-hand inventory balance mi-
measure the performance of a process, compare the nus allocations, reservations, backorders, and (usually)
result to predetermined standards, and then make ad- quantities held for quality problems. Often called begin-
justments to the process.A ning available balance. Syn: beginning available bal-
automated quality control inspection systemA system ance, net inventory.A
that employs machines to help inspect products for available timeThe number of hours a work center can
quality control.A be used, based on management decisions regarding
automated storage/retrieval system (AS/RS)A high- shift structure, extra shifts, regular overtime, obser-
density, rack inventory storage system with vehicles vance of weekends and public holidays, shutdowns, and
automatically loading and unloading the racks.A the like. See: capacity available, utilization.A

automatic identification and data capture (AIDC)A set available-to-promise (ATP)The uncommitted portion of
of technologies that collect data about objects and then a companys inventory and planned production main-
send these data to a computer without human interven- tained in the master schedule to support customer-
tion. Examples include radio frequency wireless devices order promising. The ATP quantity is the uncommitted
and terminals, bar code scanners, and smart cards.A inventory balance in the first period and is normally cal-
culated for each period in which an MPS receipt is
automatic identification system (AIS)A system that can
scheduled. In the first period, ATP includes on-hand in-
use various means, including bar code scanning and
ventory less customer orders that are due and overdue.
radio frequencies, to sense and load data in a
Three methods of calculation are used: discrete ATP,
cumulative ATP with look-ahead, and cumulative ATP

10 APICS Dictionary, 14th edition

available work backorder

without look-ahead. See: discrete available-to-promise, average variable costThe ratio of total variable costs
cumulative available-to-promise.A over units produced.A
available workWork that is actually in a department AVLAbbreviation for approved vendor list.A
ready to be worked on as opposed to scheduled work
avoidable costA cost associated with an activity that
that may not yet be physically on hand. Syn: live load.A
would not be incurred if the activity was not performed
average chartA control chart in which the subgroup (e.g., telephone cost associated with vendor support).A
average, X-bar, is used to evaluate the stability of the
process level. Syn: X-bar chart.A
avoidable delayThe delay controlled by a worker and
therefore not allowed in the job standard.A
average collection periodSyn: receivables conversion
award auditsSite visits associated with award pro-
grams such as the Malcolm Baldrige National Quality
average cost per unitThe estimated total cost, includ- Award or similar state-sponsored award programs.A
ing allocated overhead, to produce a batch of goods di-
awareness efficiencyIn e-commerce, a measurement
vided by the total number of units produced.A
of how well an organization informs people who have
average cost systemIn cost accounting, a method of access to the web that the organizations website
inventory valuation for accounting purposes. A weighted exists.A
average (based on quantity) of item cost is used to de-
termine the cost of goods sold (income statement) and
inventory valuation (balance sheet). Average cost pro-
vides a valuation between last-in, first-out and first-in,
first-out methods. See: first in, first out; last in, first BACAcronym for budget at completion.B
out.A backflushA method of inventory bookkeeping where
average fixed costThe total fixed cost divided by units the book (computer) inventory of components is auto-
produced. This value declines as output increases.A matically reduced by the computer after completion of
activity on the components upper-level parent item
average forecast error1) The arithmetic mean of the
based on what should have been used as specified on
forecast errors. 2) The exponentially smoothed forecast
the bill of material and allocation records. This ap-
error. See: bias, forecast error.A
proach has the disadvantage of a built-in differential
average inventoryOne-half the average lot size plus between the book record and what is physically in
the safety stock, when demand and lot sizes are ex- stock. Syn: explode-to-deduct, post-deduct inventory
pected to be relatively uniform over time. The average transaction processing. See: pre-deduct inventory
can be calculated as an average of several inventory transaction processing.B
observations taken over several historical time periods;
backflush costingThe application of costs based on
for example, 12-month ending inventories may be aver-
the output of a process. Backflush costing is usually as-
aged. When demand and lot sizes are not uniform, the
sociated with repetitive manufacturing environments.B
stock level versus time can be graphed to determine
the average.A backhaulingThe process of a transportation vehicle
returning from the original destination point to the point
average outgoing quality (AOQ)The expected average
of origin. The 1980 Motor Carrier Act deregulated inter-
quality level of outgoing product for a given value of in-
state commercial trucking and thereby allowed carriers
coming product quality.A
to contract for the return trip. The backhaul can be with
average outgoing quality limit (AOQL)The maximum a full, partial, or empty load. An empty backhaul is
average outgoing quality over all possible levels of in- called deadheading. See: deadhead.B
coming quality for a given acceptance sampling plan
backlogAll the customer orders received but not yet
and disposal specification.A
shipped. Sometimes referred to as open orders or the
average payment periodThe average time between order board. See: order backlog, past due order.B
receipt of materials and payment for those materials.A
backorderAn unfilled customer order or commitment.
average total costThe ratio of total costs (the sum of A backorder is an immediate (or past due) demand
total fixed costs and total variable costs) over units against an item whose inventory is insufficient to satisfy
produced.A the demand. See: stockout.B

APICS Dictionary, 14th edition 11

back room bar code

back roomIn service operations, the part of the opera- lanced scorecard might include customer perspective,
tion that is completed without direct customer contact. business process perspective, financial perspective,
Many service operations contain both back room and and innovation and learning perspectives. It formally
front room operations. See: front room.B connects overall objectives, strategies, and measure-
ments. Each dimension has goals and measurements.B
backroom costsIndirect costs for operations that do
not add direct value to a product and may or may not be balance-of-stores recordA double-entry record system

B necessary to support its production.B

back schedulingA technique for calculating operation
start dates and due dates. The schedule is computed
that shows the balance of inventory items on hand and
the balances of items on order and available for future
orders. Where a reserve system of materials control is
used, the balance of material on reserve is also
starting with the due date for the order and working
backward to determine the required start date and/or
due dates for each operation. Syn: backward balance of tradeA plus or minus amount found by
scheduling. Ant: forward scheduling.B comparing a countrys exports of merchandise to its
backsourcingCompany processes that, previously
handled externally, have been reassigned internally.B balance sheetA financial statement showing the re-
sources owned, the debts owed, and the owners share
backup/restoreThe procedure of making backup
of a company at a given point in time. See: funds flow
copies of computer files or disks and, in case of loss of
statement, income statement.B
or damage to the original, using the backups to restore
the files or disks. In such a case, the only work lost is balancing operationsIn repetitive just-in-time produc-
that done since the backup was made.B tion, matching actual output cycle times of all opera-
tions to the demand or use for parts as required by final
backup supportAn alternate location or maintainer
assembly and, eventually, as required by the market.B
that can provide the same service response or support
as the primary location or maintainer.B balancing the lineIn repetitive manufacturing, regulat-
ing the assignments given to each workstation in order
backward integrationThe process of buying or owning
to ensure that all tasks at each workstation on the line
elements of the production cycle and channel of distri-
are done in as close to the same time as possible.B
bution back toward raw material suppliers. See: vertical
integration.B Baldrige AwardSyn: Malcolm Baldrige National Quality
backward passIn the critical path method of project
planning, working from the finish node backward Baldrige liteA state or company quality award program
through the network logic to the start node to determine modeled after the Malcolm Baldrige National Quality
the various late start dates and late finish dates. See: Award but with a simplified application process.B
critical path method, forward pass.B
Baldrige-qualifiedA designation claimed by companies
backward schedulingSyn: back scheduling.B that have been granted a site visit by the Malcolm
Baldrige National Quality Award examiners.B
bad-debt loan ratioIn financial management, the frac-
tion of accounts receivable that is never recovered.B balkingWhen customers will not join a queue when
they learn how long it is. See: reneging.B
balance1) The act of evenly distributing the work ele-
ments between the two hands performing an operation. bandwidthIn telecommunications, a measurement of
2) The state of having approximately equal working how much data can be moved along a communications
times among the various operations in a process, or the channel per unit of time, usually measured in bits per
stations on an assembly line. See: balance delay.B second.B
balance delay1) The idle time of one hand in an oper- bannerIn e-commerce, a portion of a web page that
ation caused by uneven workload balancing. 2) The idle contains advertising or the name of a website. The ban-
time of one or more operations in a series caused by ner usually contains a hypertext connection to a web
uneven workload balancing. See: balance, lost time page of the company doing the advertising.B
bar codeA series of alternating bars and spaces
balanced scorecardA list of financial and operational printed or stamped on parts, containers, labels, or other
measurements used to evaluate organizational or media, representing encoded information that can be
supply chain performance. The dimensions of the ba- read by electronic readers. A bar code is used to facili-

12 APICS Dictionary, 14th edition

bar coding batch card

tate timely and accurate input of data to a computer than the average. For forecasting purposes, the base
system.B series is superimposed upon the average demand and
trend in demand for the item in question. Syn: base in-
bar codingA method of encoding data using bar code
dex. See: seasonal index, seasonality.B
for fast and accurate readability.B
bar graphA graphical method of displaying data by base stock systemA method of inventory control that
grouping observations into specific clusters.B includes, as special cases, most of the systems in prac-

barrier to entryFactors that prevent companies from

entering into a particular market, such as high initial
tice. In this system, when an order is received for any
item, it is used as a picking ticket, and duplicate copies,
called replenishment orders, are sent back to all stages
investment in equipment.B of production to initiate replenishment of stocks.
baseband coaxA coaxial cable offering a single chan- Positive or negative orders, called base stock orders,
nel for text, voice, or video transmission.B are also used from time to time to adjust the level of the
base stock of each item. In actual practice, replenish-
base demandThe percentage of a companys demand
ment orders are usually accumulated when they are is-
that derives from continuing contracts and/or existing
sued and are released at regular intervals.B
customers. Because this demand is well known and
recurring, it becomes the basis of managements plans. basic producerA manufacturer that uses natural re-
Syn: baseload demand.B sources to produce materials for other manufacturing. A
base indexSyn: base series.B typical example is a steel company that processes iron
ore and produces steel ingots; other examples are
base inventory levelThe inventory level made up of companies that make wood pulp, glass, and rubber.B
aggregate lot-size inventory plus the aggregate safety
stock inventory. It does not take into account the antici- basic seven tools of quality (B7)Tools that help organi-
pation inventory that will result from the production zations understand their processes to improve them.
plan. The base inventory level should be known before The tools are the cause-and-effect diagram (also known
the production plan is made. Syn: basic stock. See: ag- as the fishbone diagram or the Ishikawa diagram),
gregate inventory.B check sheet, flowchart, histogram, Pareto chart, control
chart, and scatter diagram. Syn: seven tools of quality.
baselineIn project management, the approved time-
See: seven new tools of quality.B
phased plan for the schedule or cost of a piece of work,
including approved changes.B basic stockSyn: base inventory level.B
baseline measuresA set of measurements (or metrics) batch1) A quantity scheduled to be produced or in
that seeks to establish the current or starting level of production. See: process batch, transfer batch. 2) For
performance of a process, function, product, firm, and discrete products, the batch is planned to be the stan-
so on. Baseline measures are usually established be- dard batch quantity, but during production, the stan-
fore implementing improvement activities and dard batch quantity may be broken into smaller lots.
programs.B See: lot. 3) In nondiscrete products, the batch is a
baseload demandSyn: base demand.B quantity that is planned to be produced in a given time
period based on a formula or recipe that often is devel-
base point pricingA type of geographic pricing policy oped to produce a given number of end items. 4) A type
where customers order from designated shipping points of manufacturing process used to produce items with
without freight charges if they are located within a spe- similar designs and that may cover a wide range of or-
cified distance from the base point. Customers outside der volumes. Typically, items ordered are of a repeat
area boundaries pay base price plus transportation nature, and production may be for a specific customer
costs from the nearest base point.B order or for stock replenishment. See: project
base seriesA standard succession of values of manufacturing.B
demand-over-time data used in forecasting seasonal
batch bill of materialsA recipe or formula in which the
items. This series of factors is usually based on the rela-
statement of quantity per is based on the standard
tive level of demand during the corresponding period of
batch quantity of the parent. Syn: batch formula.B
previous years. The average value of the base series
over a seasonal cycle will be 1.0. A figure higher than batch cardA document used in the process industries
1.0 indicates that the demand for that period is more to authorize and control the production of a quantity of
than the average; a figure less than 1.0 indicates less material. Batch cards usually contain quantities and lot

APICS Dictionary, 14th edition 13

batch formula big data

numbers of ingredients to be used, processing va- chmarking, product benchmarking, strategic

riables, pack-out instructions, and product disposition. benchmarking.B
See: assembly parts list, batch sheet, blend formula,
benchmark measuresA set of measurements (or me-
fabrication order, manufacturing order, mix ticket.B
trics) that is used to establish goals for improvements in
batch formulaSyn: batch bill of materials.B processes, functions, products, and so on. Benchmark
measures are often derived from other firms that dis-
batch manufacturingA type of manufacturing process

B in which sets of items are moved through the different

manufacturing steps in a group or batch.B
play best-in-class achievement.B
bench stocksSyn: floor stocks.B

batch numberSyn: lot number.B bespokeA custom-made product or service. The term
originally was applied to clothing, but now applies to
batch pickingA method of picking orders in which or-
software as well.B
der requirements are aggregated by product across or-
ders to reduce movement to and from product best-in-classAn organization, often from another in-
locations. The aggregated quantities of each product dustry, recognized for excellence in a specific process
are then transported to a common area where the indi- area. See: process benchmarking.B
vidual orders are constructed. See: discrete order pick- best practicesIn benchmarking, the measurement or
ing, order picking, zone picking.B performance standard by which similar items are eva-
batch processing1) A manufacturing technique in luated. Defining a best practice identifies opportunities
which parts are accumulated and processed together in to improve effectiveness. The process of comparing an
a lot. 2) A computer technique in which transactions are actual result to a best practice may be applied to re-
accumulated and processed together or in a lot. Syn: sources, activities, or cost objects.B
batch production.B beta distributionA type of probability distribution often
batch productionSyn: batch processing.B used to model activity times.B

batch sensitivity factorA multiplier that is used for the beta releaseA version of a product sent to certain cus-
rounding rules in determining the number of batches tomers prior to general release in order to receive feed-
required to produce a given amount of product.B back on product performance.B

batch sheetIn many process industries, a document beta testA term used to describe the pilot evaluation
that combines product and process definition. See: of a good or service (i.e., the second evaluation).B
batch card.B biasA consistent deviation from the mean in one direc-
baudThe number of bits transmitted per second.B tion (high or low). A normal property of a good forecast
is that it is not biased. See: average forecast error.B
Bayesian analysisStatistical analysis where uncertain-
ty is incorporated, using all available information to bidA quotation specifically given to a prospective pur-
choose among a number of alternative decisions.B chaser upon request, usually in competition with other
vendors. See: quotation.B
beginning available balanceSyn: available inventory.B
bid evaluationA comparison of supplier quotes for a
beginning inventoryA statement of the inventory count product based on price, quality, lead time, delivery per-
at the end of last period, usually from a perpetual inven- formance, and other criteria and, based on that compar-
tory record.B ison, selecting a supplier.B
benchmarkingComparing a companys costs, prod- bid pricingOffering a specific price for each job rather
ucts, and services to that of a company thought to have than setting a standard price that applies for all
superior performance. The benchmark target is often a customers.B
competitor but is not always a firm in the same industry.
bid proposalThe response to the written request from
Seven types of benchmarking have been cited: (1) com-
a potential customer asking for the submission of a qu-
petitive benchmarking, (2) financial benchmarking, (3)
otation or proposal to provide goods or services. The bid
functional benchmarking, (4) performance benchmark-
proposal is in response to a request for proposal (RFP)
ing, (5) process benchmarking, (6) product benchmark-
or request for quote (RFQ).B
ing, and (7) strategic benchmarking. See: competitive
benchmarking, financial benchmarking, functional ben- big dataA collection of data and technology that ac-
chmarking, performance benchmarking, process ben- cesses, integrates, and reports all available data by fil-

14 APICS Dictionary, 14th edition

big Q, little q bin transfer

tering, correlating, and reporting insights not attainable determine the items for which purchase requisitions
with past data technologies. It describes data and production orders must be released. A variety of
processing beyond the human scale. In the past, data- display formats exist for bills of material, including the
bases tended to be limitedthey only had to meet the single-level bill of material, indented bill of material,
demands of human users entering and retrieving data. modular (planning) bill of material, transient bill of
With the emergence of e-commerce and internet search material, matrix bill of material, and costed bill of
engines, database technology is evolving to manage material. 2) A list of all the materials needed to make
humans and computers. Today, with the amount of data
growing by 50 percent each year, it is information tech-
one production run of a product, by a contract
manufacturer, of piece parts/components for its
nology that is capable of managing, processing, and customers. The bill of material may also be called the
finding value.B formula, recipe, or ingredients list in certain process
big Q, little qA term used to contrast the difference
between managing for quality in all business processes bill-of-material accuracyThe degree to which a list of
and products (big Q) and managing for quality in a li- specified items conforms to administrative specifica-
mited capacitytraditionally in only factory products and tions and with correct quantities.B
processes (little q).B
bill-of-material explosionThe process of determining
bilateral contractAn agreement wherein each party component identities, quantities per assembly, and
makes a promise to the other party.B other parent/component relationship data for a parent
bill-backA penalty given to the supplier because a late item. Explosion may be single level, indented, or
delivery or poor quality resulted in extra costs.B summarized.B

billing and collection costsIn transportation, the costs bill-of-material processorA computer program for
related to issuing invoices or bills. These amounts can maintaining and retrieving bill-of-material information.B
be reduced by combining shipments in an order to limit bill-of-material structuringThe process of organizing
transportation frequency.B bills of material to perform specific functions.B
bill of activitiesIn activity-based cost accounting, a bill of operationsSyn: routing.B
summary of activities needed by a product or other cost
object. The bill of activities includes volume and cost of bill of resourcesA listing of the required capacity and
each activity.B key resources needed to manufacture one unit of a se-
lected item or family. Rough-cut capacity planning uses
bill of batchesA method of tracking the specific multi- these bills to calculate the approximate capacity re-
level batch composition of a manufactured item. The bill quirements of the master production schedule.
of batches provides the necessary where-used and Resource planning may use a form of this bill. Syn: bill
where-from relationships required for lot traceability.B of capacity. See: bill of labor, capacity planning using
bill of capacitySyn: bill of resources.B overall factors, product load profile, resource profile,
rough-cut capacity planning, routing.B
bill of distributionSyn: distribution network structure.B
bin1) A storage device designed to hold small discrete
bill of laborA structured listing of all labor require-
parts. 2) A shelving unit with physical dividers separat-
ments for the fabrication, assembly, and testing of a
ing the storage locations.B
parent item. See: bill of resources, capacity bill proce-
dure, routing.B bin location fileA file that specifically identifies the lo-
cation where each item in inventory is stored.B
bill of lading (uniform)A carriers contract and receipt
for goods the carrier agrees to transport from one place bin reserve systemSyn: two-bin inventory system.B
to another and to deliver to a designated person. In
bin tag1) A type of perpetual inventory record, de-
case of loss, damage, or delay, the bill of lading is the
signed for storekeeping purposes, maintained at the
basis for filing freight claims.B
storage area for each inventory item. 2) An identifying
bill of material (BOM)1) A listing of all the marking on a storage location.B
subassemblies, intermediates, parts, and raw materials
bin transferAn inventory transaction to move a quanti-
that go into a parent assembly showing the quantity of
ty from one valid location (bin) to another valid location
each required to make an assembly. It is used in
conjunction with the master production schedule to

APICS Dictionary, 14th edition 15

bin trips blowthrough

bin tripsUsually, the number of transactions per blend offIn process industries, the rework of material
stockkeeping unit per unit of time.B by introducing a small percentage into another run of
the same product.B
bitAcronym for binary digit. It can have only the values
0 or 1.B blend orderA manufacturing order to a blending de-
black beltIn six sigma, team leader for process im- partment authorizing it to mix the ingredients of a prod-
provement. Responsibilities include defining, measur- uct. See: assembly order.B

B ing, and controlling the improvement process.B

black box designWhen suppliers or company functions
blockageSee: blocking.B

block controlControl of the production process in

are given general design guidelines and are requested groups, or blocks, of shop orders for products under-
to complete the technical details.B going the same basic processes.B
blank check purchase orderAn order with a signed
block diagramA diagram that shows the operations,
blank check attached that is usually only good up to a
interrelationships, and interdependencies of compo-
specific amount.B
nents in a system. Boxes, or blocks (hence the name),
blanket orderSyn: blanket purchase order.B represent the components; connecting lines between
the blocks represent interfaces. There are two types of
blanket order releaseA message that is used to re-
block diagrams: (1) functional block diagrams, which
lease a quantity from a blanket order.B
show a systems subsystems and lower level products,
blanket purchase orderA long-term commitment to a their interrelationships, and interfaces with other sys-
supplier for material against which short-term releases tems and (2) reliability block diagrams, which are simi-
will be generated to satisfy requirements. Often blanket lar to functional block diagrams except they are
orders cover only one item with predetermined delivery modified to emphasize those aspects influencing relia-
dates. Syn: blanket order, standing order.B bility. See: flowchart.B
blanket rateA rate that does not depend on the dis- blocked operationAn upstream work center that is not
tance cargo is transported.B permitted to produce because of a full queue at a
blanket releaseThe authorization to ship and/or downstream work center or because no kanban autho-
produce against a blanket agreement or contract.B rizes production.B

blanket routingA routing that lists groups of operations blocked operationsA group of operations identified
needed to produce a family of items. The items may separately for instructions and documentation but re-
have small differences in size, but they use the same ported as one.B
sequence of operations. Specific times or tools for each
blockingThe condition requiring a work center that has
individual item can be included.B
parts to process to remain idle as long as the queue to
bleeding edgeAn innovative process that may be un- which the parts would be sent is full or kanbans autho-
usual enough to pose a risk to the customer or client.B rizing production are not present.B
blemishAn imperfection that is severe enough to be blocking bugA defect that prevents a thorough investi-
noticed but should not cause any real impairment with gation as to the cause, or that prevents shipment of a
respect to intended normal or reasonably foreseeable product.B
use. See: defect, imperfection, nonconformity.B
block schedulingAn operation scheduling technique
blend formulaAn ingredient list for a product in where each operation is allowed a block of time, such
process industries. See: batch card, manufacturing or- as a day or a week.B
der, mix ticket.B
block stackingA storage method in which pallets, cas-
blendingThe process of physically mixing two or more
es, or cartons are stacked upwards from the floor to
lots or types of material to produce a homogeneous lot.
whatever practical height is available without the use of
Blends normally receive new identification and require
block systemA system for selecting items to be cycle
blending departmentIn process industries, the name
counted by a group or block of numbers.B
of the department where the ingredients are mixed.
See: final assembly department.B blowthroughSyn: phantom bill of material.B

16 APICS Dictionary, 14th edition

blueprint brand name

blueprintIn engineering, a line drawing showing the bottom-up planningPlanning for resource require-
physical characteristics of a part.B ments by starting at the bottom of the bill of material or
services, estimating the resources required to produce
blue skyGoodwill associated with the acquisition of a
each product or service, and then adding the resources
company asset.B
body of knowledgeThe knowledge in a given area that
a person is expected to understand to be certified as a bottom-up replanningIn MRP, the process of using
boilerplateThe standard terms and conditions on a
pegging data to solve material availability or other prob-
lems. This process is accomplished by the planner (not
the computer system), who evaluates the effects of
purchase order or other document.B possible solutions. Potential solutions include com-
BOMAbbreviation for bill of material.B pressing lead time, cutting order quantity, substituting
material, and changing the master schedule.B
bona fideLatin for in good faith.B
boundedThe adjustment of a shop order quantity of a
bondA long-term debt of a firm.B
parent to use the remaining units of a component, raw
bond (performance)A guarantee of satisfactory work material, or lot.B
completion that is executed in connection with a con-
tract and that secures the performance and fulfillment Box-Jenkins modelA forecasting method based on re-
of all the undertakings, covenants, terms, conditions, gression and moving average models. The model is
and agreements contained in the contract.B based not on regression of independent variables, but
on past observations of the item to be forecast at vary-
bonded warehouseBuildings or parts of buildings des- ing time lags and on previous error values from fore-
ignated by the U.S. Secretary of the Treasury for storing casting. See: forecast.B
imported merchandise, operated under U.S. Customs
supervision.B BPMAbbreviation for business process management.B

booked ordersDemand that has been confirmed. See: BPRAbbreviation for business process reengineering.B
customer order, demand, order penetration point.B bracketed recallRecall from customers of suspect lot
bookingsThe value of all sales after discounts and re- numbers plus a specified number of lots produced be-
bates have been applied.B fore and after the suspect ones.B
book inventoryAn accounting definition of inventory brainstormingA technique that teams use to generate
units or value obtained from perpetual inventory ideas on a particular subject. Each person on the team
records rather than by actual count.B is asked to think creatively and write down as many
ideas as possible. The ideas are not discussed or re-
book valueThe accounting value of an asset.B
viewed until after the brainstorming session.B
Boolean algebraA form of algebra that, like ordinary
algebra, represents relationships and properties with branch and boundOperations research models for de-
symbols. However, Boolean algebra also has classes, termining optimal solutions based on the enumeration
propositions, on-off circuit elements, and operators of subsets of possible solutions, which implicitly enume-
(and, or, not, except, if, then). Boolean algebra is useful rate all possible solutions.B
in defining the logic of a complex system.B branch warehouseSyn: distribution center.B
bottleneckA facility, function, department, or resource branch warehouse demandSyn: warehouse demand.B
whose capacity is less than the demand placed upon it.
For example, a bottleneck machine or work center ex- brandingThe use of a name, term, symbol, or design,
ists where jobs are processed at a slower rate than they or a combination of these, to identify a product.B
are demanded. Syn: bottleneck operation.B brand loyaltyThe tendency of some consumers to stay
bottleneck operationSyn: bottleneck.B with a preferred product in spite of a competitors
bottom-up estimatingA method of estimation that
involves disaggregating a piece of work into brand managerThe person in charge of the marketing
components, estimating each component requirement, program for a given brand. Syn: product manager.B
and adding the resulting times and/or costs to arrive at
brand nameA word or combination of words used to
the estimate for the whole.B
identify a product and differentiate it from other prod-

APICS Dictionary, 14th edition 17

brand plan buffer

ucts; the verbal part of a trademark, in contrast to the broadcast systemA sequence of specific units to be
pictorial mark; a trademark word.B assembled and completed at a given rate. This se-
quence is communicated to supply and assembly activi-
brand planSyn: market plan.B
ties to perform operations and position material so that
brand recognitionThe degree to which customers rec- it merges with the correct assembled unit.B
ognize a particular brand identity and associate it with a
browserSoftware used on the web to retrieve and dis-
particular product line relative to other available

B brands.B
breadmanIn kanban, an arrangement in which the
play documents on-screen, connect to other sites using
hypertext links, display images, and play audio files.B
B7Abbreviation for the basic seven tools of quality.B
customer does not specify the quantity to be delivered
on a specific basis, but instead gives the supplier a set B2BAbbreviation for business-to-business
of guidelines. The delivery person determines the quan- commerce.B
tity according to these rules.B
B2CAbbreviation for business-to-consumer sales.B
break-bulkDividing truckloads of homogeneous items
bubble chartA diagram that attempts to display the
into smaller, more appropriate quantities for use.B
interrelationships of systems, functions, or data in a se-
break-bulk warehousingA form of cross-docking in quential flow. It derives its name from the circular sym-
which the incoming shipments are from a single source bols used to enclose the statements on the chart.B
or manufacturer.B
bucketA time period, usually a week.B
breakdown maintenanceRemedial maintenance that
bucketed systemAn MRP, DRP, or other time-phased
occurs when equipment fails and must be repaired on
system in which all time-phased data are accumulated
an emergency or priority basis. Syn: irregular mainten-
into time periods called buckets. If the period of accu-
ance, reactive maintenance.B
mulation is one week, then the system is said to have
break-even analysisA study of the number of units, or weekly buckets.B
amount of time, required to recoup an investment.B
bucketless systemAn MRP, DRP, or other time-phased
break-even chartA graphical tool showing the total va- system in which all time-phased data are processed,
riable cost and fixed cost curve along with the total rev- stored, and usually displayed using dated records rather
enue curve. The point of intersection is defined as the than defined time periods (buckets).B
break-even point (i.e., the point at which total revenues
budgetA plan that includes an estimate of future costs
exactly equal total costs). See: total cost curve.B
and revenues related to expected activities. The budget
break-even pointThe level of production or the volume serves as a pattern for and a control over future
of sales at which operations are neither profitable nor operations.B
unprofitable. The break-even point is the intersection of
budget at completion (BAC)The total planned budget
the total revenue and total cost curves. See: total cost
for a project.B
budgeted capacityThe volume/mix of throughput on
break-even timeThe total elapsed time of a technology
which financial budgets were set and overhead/burden
transfer beginning with a scientific investigation and
absorption rates established.B
ending when the profits from a new product offset the
cost of its development.B budgeted cost of work performedIn project manage-
ment, this term has been replaced with the term earned
breeder bill of materialA bill of material that
recognizes and plans for the availability and usage of
by-products in the manufacturing process. The breeder budgeted cost of work scheduledIn project manage-
bill allows for complete by-product MRP and product/by- ment, this term has been replaced with the term
product costing.B planned value.B

bricks and mortarA company that sells through a phys- buffer1) A quantity of materials awaiting further
ical location. Ant: clicks and mortar (selling over the processing. It can refer to raw materials, semifinished
internet).B stores or hold points, or a work backlog that is
purposely maintained behind a work center. 2) In the
broadbandA coaxial cable offering several channels
theory of constraints, buffers can be time or material
for text, voice, and/or video transmission.B
and support throughput and/or due date performance.

18 APICS Dictionary, 14th edition

buffer management business plan

Buffers can be maintained at the constraint, convergent bundlingCombining two or more products or services
points (with a constraint part), divergent points, and into a single transaction.B
shipping points.B
burdenSyn: overhead.B
buffer managementIn the theory of constraints, a burden rateA cost, usually in dollars per hour, that is
process in which all expediting in a shop is driven by normally added to the cost of every standard production
what is scheduled to be in the buffers (constraint, ship- hour to cover overhead expenses.B
ping, and assembly buffers). By expediting this material
into the buffers, the system helps avoid idleness at the
constraint and missed customer due dates. In addition,
burn rateThe rate at which a company consumes
cash. It can be used to determine when more cash
the causes of items missing from the buffer are identi- must be raised.B
fied, and the frequency of occurrence is used to priorit- business clustersWhen businesses locate in close
ize improvement activities.B proximity for competition purposes.B
buffer stockSyn: safety stock.B business cycleA period of time marked by long-term
fluctuations in the total level of economic activity.
build cycleThe time period between a major setup and
Measures of business cycle activity include the rate of
a cleanup. It recognizes cyclical scheduling of similar
unemployment and the level of gross domestic
products with minor changes from one product/model
to another.B
business environmentSyn: operating environment.B
build-up forecastsA qualitative forecasting technique
in which individuals who are familiar with specific mar- business intelligenceInformation collected by an or-
ket segments estimate the demand within these seg- ganization on customers, competitors, products or ser-
ments. The overall forecast then is obtained by vices, and processes. Business intelligence provides
calculating the sum of the forecasts for these organizational data in such a way that the organization-
segments.B al knowledge filters can easily associate with this data
and turn it into information for the organization.
bulk issueParts issued from stores to work-in-process Persons involved in business intelligence processes
inventory, but not based on a job order. They are issued may use application software and other technologies to
in quantities estimated to cover requirements of indi- gather, store, analyze, and provide access to data, and
vidual work centers and production lines. The issue may present that data in a simple, useful manner. The soft-
be used to cover a period of time or to fill a fixed-size ware aids in business performance management and
container.B aims to help consumers make better business deci-
bulk packingPlacing several small packages in a larger sions by offering them accurate, current, and relevant
container to prevent damage or theft.B information. Some businesses use data warehouses
because they are a logical collection of information ga-
bulk storageLarge-scale storage for raw materials, in- thered from various operational databases for the pur-
termediates, or finished products. Each vessel normally pose of creating business intelligence.B
contains a mixture of lots and materials that may be
business judgment ruleUnder common law, an ab-
replenished and withdrawn for use or pack-out
sence of liability for corporate directors and officers if
they have used rational business judgment and have no
bullwhip effectAn extreme change in the supply posi- conflict of interest.B
tion upstream in a supply chain generated by a small
business marketSyn: industrial market.B
change in demand downstream in the supply chain.
Inventory can quickly move from being backordered to business plan1) A statement of long-range strategy
being excess. This is caused by the serial nature of and revenue, cost, and profit objectives usually accom-
communicating orders up the chain with the inherent panied by budgets, a projected balance sheet, and a
transportation delays of moving product down the cash flow (source and application of funds) statement.
chain. The bullwhip effect can be eliminated by syn- A business plan is usually stated in terms of dollars and
chronizing the supply chain.B grouped by product family. The business plan is then
translated into synchronized tactical functional plans
bundleOne or more unassembled items shipped to-
through the production planning process (or the sales
gether as a set of items.B
and operations planning process). Although frequently

APICS Dictionary, 14th edition 19

business planning CAD

stated in different terms (dollars versus units), these largely over the internet. It includes traditional brick and
tactical plans should agree with each other and with the mortar businesses that also offer products online and
business plan. See: long-term planning, strategic plan. businesses that trade exclusively electronically.B
2) A document consisting of the business details (organ-
business unitA division or segment of an organization
ization, strategy, and financing tactics) prepared by an
generally treated as a separate profit-and-loss center.B
entrepreneur to plan for a new business.B
buyerAn individual whose functions may include sup-

C business planningThe process of constructing the

business plan. See: business plan.B
business processA set of logically related tasks or ac-
plier selection, negotiation, order placement, supplier
follow-up, measurement and control of supplier perfor-
mance, value analysis, and evaluation of new materials
tivities performed to achieve a defined business and processes. In some companies, the functions of
outcome.B order placement and supplier follow-up are handled by
business process management (BPM)A business dis- the supplier scheduler.B
cipline or function that uses business practices, tech- buyer behaviorThe way individuals or organizations
niques, and methods to create and improve business behave in a purchasing situation. The customer-
processes. BPM is a holistic approach to the use of ap- oriented concept finds out the wants, needs, and de-
propriate process-related business disciplines to gain sires of customers and adapts resources of the organi-
business performance improvements across the enter- zation to deliver need-satisfying goods and services.B
prise or supply chain. It promotes business effective-
buyer codeA code used to identify the purchasing per-
ness and efficiency while striving for innovation,
son responsible for a given item or purchase order.B
flexibility, and integration with technology. Most process
improvement disciplines or activities can be considered buyer cycleThe purchasing sequence that generally
as BPM.B follows the buyers product and budget cycles.B
business process outsourcingContracting with third buyer/plannerA buyer who also does material
parties to perform non-core activities within a business. planning. This term should not be confused with
Functions often outsourced include human resources, planner/ buyer, which is a synonym for supplier
accounts receivable, accounts payable, and payroll.B scheduler.B
business process reengineering (BPR)A procedure buyers marketA market in which goods can easily be
that involves the fundamental rethinking and radical secured and in which the economic forces of business
redesign of business processes to achieve dramatic or- tend to cause goods to be priced at the purchasers es-
ganizational improvements in such critical measures of timate of value.B
performance as cost, quality, service, and speed. Any
buying capacitySyn: capacity buying.B
BPR activity is distinguished by its emphasis on (1)
process rather than functions and products and (2) the buying downGiven a product that historically expe-
customers for the process.B rienced price swings, attempting to buy when the price
is low or down. See: hedging, speculative buying.B
business serviceThe software aspect of electronic
commerce. It performs activities, such as encryption, by-productA material of value produced as a residual
that are required to support business transactions.B of or incidental to the production process. The ratio of
by-product to primary product is usually predictable. By-
business strategyA plan for choosing how to compete.
products may be recycled, sold as-is, or used for other
Three generic business strategies are (1) least cost, (2)
purposes. See: co-product.B
differentiation, and (3) focus.B
byteA string of 8 bits used to represent a single cha-
business-to-business commerce (B2B)Business con-
racter in a computer code.B
ducted over the internet between businesses. The im-
plication is that this connectivity will cause businesses
to transform themselves via supply chain management
to become virtual organizationsreducing costs, improv- C
ing quality, reducing delivery lead time, and improving
cacheA high-speed device used within a computer to
due-date performance.B
store frequently retrieved data.C
business-to-consumer sales (B2C)Business being
CADAcronym for computer-aided design.C
conducted between businesses and final consumers

20 APICS Dictionary, 14th edition

CAD/CAM capacity buying

CAD/CAMThe integration of computer-aided design capability studySyn: process capability analysis.C

and computer-aided manufacturing to achieve
capable-to-promise (CTP)The process of committing
automation from design through manufacturing.C
orders against available capacity as well as inventory.
CAEAbbreviation for computer-aided engineering.C This process may involve multiple manufacturing or dis-
tribution sites. Capable-to-promise is used to determine
cageA secure area used to store valuable items.C
when a new or unscheduled customer order can be de-

CAITAbbreviation for computer-aided inspection and livered. Capable-to-promise employs a finite-scheduling
test.C model of the manufacturing system to determine when
calculated capacitySyn: rated capacity.C an item can be delivered. It includes any constraints
that might restrict the production, such as availability of
calculated usageThe determination of usage of com- resources, lead times for raw materials or purchased
ponents or ingredients in a manufacturing process by parts, and requirements for lower-level components or
multiplying the receipt quantity of a parent by the quan- subassemblies. The resulting delivery date takes into
tity per of each component or ingredient in the bill or consideration production capacity, the current manufac-
recipe, accommodating standard yields.C turing environment, and future order commitments. The
calendar timeThe passage of days or weeks as in the objective is to reduce the time spent by production
definition of lead time or scheduling rules, in contrast planners in expediting orders and adjusting plans be-
with running time.C cause of inaccurate delivery-date promises.C

calendar unitThe smallest unit of time in a project capacity1) The capability of a system to perform its
plan.C expected function. 2) The capability of a worker,
machine, work center, plant, or organization to produce
calibrationThe comparison of a measurement instru- output per time period. Capacity required represents
ment or system of unverified accuracy with a measure- the system capability needed to make a given product
ment instrument or system of a known accuracy to mix (assuming technology, product specification, etc.).
detect any variation from the required performance As a planning function, both capacity available and
specification.C capacity required can be measured in the short term
calibration frequencyThe interval in days between tool- (capacity requirements plan), intermediate term (rough-
ing calibrations.C cut capacity plan), and long term (resource
requirements plan). Capacity control is the execution
call centerA facility housing personnel who respond to
through the I/O control report of the short-term plan.
customer phone queries. These personnel may provide
Capacity can be classified as budgeted, dedicated,
customer service or technical support. Call center ser-
demonstrated, productive, protective, rated, safety,
vices may be in-house or outsourced.C
standing, or theoretical. See: capacity available,
CAMAcronym for computer-aided manufacturing.C capacity required. 3) Required mental ability to enter
into a contract.C
campaignA series of batches of the same product run
together (back to back).C capacity availableThe capability of a system or re-
source to produce a quantity of output in a particular
cancellation chargeA fee charged by a seller to cover
time period. Syn: available capacity. See: capacity,
its costs associated with a customers cancellation of
available time.C
an order. If the seller has started engineering work, pur-
chased raw materials, or started manufacturing opera- capacity bill procedureA rough-cut capacity planning
tions, these charges could also be included in the method that takes into account any shifts in product
cancellation charge.C mix. Bill of material and routing information are required
with direct labor-hour or machine-hour data available
can-order pointAn ordering system used when multiple
for each operation. See: bill of labor.C
items are ordered from one vendor. The can-order point
is a point higher than the original order point. When any capacity buyingA purchasing practice whereby a com-
one of the items triggers an order by reaching the must- pany commits to a supplier for a given amount of its ca-
order point, all items below their can-order point are al- pacity per unit of time. Subsequently, schedules for
so ordered. The can-order point is set by considering the individual items are given to the supplier in quantities to
additional holding cost that would be incurred should match the committed level of capacity. Syn: buying
the item be ordered early.C capacity.C

APICS Dictionary, 14th edition 21

capacity-constrained resource (CCR) capacity strategy

capacity-constrained resource (CCR)A resource that is range time horizon. Personnel costs include hiring and
not a constraint but will become a constraint unless training of direct laborers, supervisors, and support per-
scheduled carefully. Any resource that, if its capacity is sonnel in the areas related to the capacity increase.
not carefully managed, is likely to compromise the Equipment purchases to increase capacity are also
throughput of the organization. (Also called capacity considered. In contrast, costs related to decreasing ca-
constraint resource.)C pacity include layoffs, the fixed overhead spread over
fewer units, the impact of low morale, and the ineffi-

C capacity controlThe process of measuring production

output and comparing it with the capacity plan,
determining if the variance exceeds pre-established
ciencies of lower production levels.C

capacity requiredThe capacity of a system or resource

limits, and taking corrective action to get back on plan if needed to produce a desired output in a particular time
the limits are exceeded. See: input/output control.C period. Syn: required capacity. See: capacity.C
capacity cushionExtra capacity that is added to a sys- capacity requirementsThe resources needed to pro-
tem after capacity for expected demand is calculated. duce the projected level of work required from a facility
Syn: safety capacity. See: protective capacity.C over a time horizon. Capacity requirements are usually
capacity managementThe function of establishing, expressed in terms of hours of work or, when units con-
measuring, monitoring, and adjusting limits or levels of sume similar resources at the same rate, units of
capacity in order to execute all manufacturing production.C
schedules (i.e., the production plan, master production
capacity requirements planA time-phased display of
schedule, material requirements plan, and dispatch
present and future load (capacity required) on all re-
list). Capacity management is executed at four levels:
sources based on the planned and released supply au-
resource requirements planning, rough-cut capacity
thorizations (i.e., orders) and the planned capacity
planning, capacity requirements planning, and
(capacity available) of these resources over a span of
input/output control.C
time. See: load profile.C
capacity peggingDisplaying the specific sources of ca-
capacity requirements planning (CRP)The function of
pacity requirements. This is analogous to pegging in
establishing, measuring, and adjusting limits or levels of
MRP, which displays the source of material
capacity. The term capacity requirements planning in
this context refers to the process of determining in de-
capacity planningThe process of determining the tail the amount of labor and machine resources re-
amount of capacity required to produce in the future. quired to accomplish the tasks of production. Open
This process may be performed at an aggregate or shop orders and planned orders in the MRP system are
product-line level (resource requirements planning), at input to CRP, which through the use of parts routings
the master-scheduling level (rough-cut capacity plan- and time standards translates these orders into hours
ning), and at the material requirements planning level of work by work center by time period. Even though
(capacity requirements planning). See: capacity re- rough-cut capacity planning may indicate that sufficient
quirements planning, resource planning, rough-cut ca- capacity exists to execute the MPS, CRP may show that
pacity planning.C capacity is insufficient during specific time periods. See:
capacity planning.C
capacity planning using overall factors (CPOF)A rough-
cut capacity planning technique. The master schedule capacity simulationThe ability to do rough-cut capacity
items and quantities are multiplied by the total time re- planning using a simulated master production schedule
quired to build each item to provide the total number of or material plan rather than live data.C
hours to produce the schedule. Historical work center
percentages are then applied to the total number of capacity smoothingSyn: load leveling.C
hours to provide an estimate of the hours per work cen-
capacity strategyOne of the strategic choices that a
ter to support the master schedule. This technique eli-
firm must make as part of its manufacturing strategy.
minates the need for engineered time standards. Syn:
There are three commonly recognized capacity strate-
overall factors. See: bill of resources, capacity planning,
gies: lead, lag, and tracking. A lead capacity strategy
resource profile, rough-cut capacity planning.C
adds capacity in anticipation of increasing demand. A
capacity-related costsCosts generally related to in- lag strategy does not add capacity until the firm is oper-
creasing (or decreasing) capacity in the medium-to long- ating at or beyond full capacity. A tracking strategy adds

22 APICS Dictionary, 14th edition

capacity utilization cash flow statement

capacity in small amounts to attempt to respond to mum weight. Since carload rates usually include mini-
changing demand in the marketplace.C mum rates per unit of volume, the higher LCL (less than
carload) rate may be less expensive for a heavy but rel-
capacity utilizationGoods produced, or customers
atively small shipment.C
served, divided by total output capacity.C
carrierA company that provides air, sea, or land trans-
capitalMoney or resources used to invest in assets
portation services.C
that produce products.C
capital assetA physical object that is held by an organ-
ization for its production potential and that costs more
carrying costThe cost of holding inventory, usually de-
fined as a percentage of the dollar value of inventory
per unit of time (generally one year). Carrying cost de-
than some threshold value.C
pends mainly on the cost of capital invested as well as
capital budgetingActions relating to the planning and such costs of maintaining the inventory as taxes and
financing of capital outlays for such purposes as the insurance, obsolescence, spoilage, and space occupied.
purchase of new equipment, the introduction of new Such costs vary from 10 percent to 35 percent annual-
product lines, and the modernization of plant facilities.C ly, depending on type of industry. Carrying cost is ulti-
mately a policy variable reflecting the opportunity cost
capital expenditureMoney invested in a long-term as-
of alternative uses for funds invested in inventory. Syn:
set, one that is expected to last longer than one year.
holding costs.C
The investment is expected to generate a stream of fu-
ture benefits.C cartelA group of companies that agree to cooperate,
rather than compete, in producing a product or service,
capital-intensiveA situation in which the largest ex-
thus limiting or regulating competition.C
penditure in an operation is capital as opposed to labor.
See: labor-intensive.C cascaded systemsMultistage operations. The input to
each stage is the output of a preceding stage, thereby
capital rationingIn financial management, the process
causing interdependencies among the stages.C
of apportioning capital expenditures among prospective
projects to conserve limited investment funds.C cascading yield lossThe condition where yield loss
happens in multiple operations or tasks, resulting in a
capital recovery1) Charging periodically to operations
compounded yield loss. Syn: cumulative yield. See:
amounts that will ultimately equal the amount of capital
composite yield.C
expenditure. See: amortization, depletion, depreciation.
2) The replacement of the original cost of an asset plus CASEAcronym for computer-assisted software
interest. 3) The process of regaining the net investment engineering.C
in a project by means of revenue in excess of the cost cash budgetA budget based on planned cash receipts
from the project. (Usually implies amortization of prin- and disbursements of a plant, division, or firm.C
cipal plus interest on the diminishing unrecovered
balance.)C cash conversion cycle1) In retailing, the length of time
between the sale of products and the cash payments
capital structureThe combination of permanent short- for a companys resources. 2) In manufacturing, the
term debt, long-term debt, preferred stock, and com- length of time from the purchase of raw materials to the
mon equity used to finance a firm.C collection of accounts receivable from customers for the
CAPPAcronym for computer-aided process planning.C sale of products or services.C

carcassA nonserviceable item obtained from a cus- cash cowA highly profitable product in a low-growth
tomer which is intended for use in remanufacturing.C market. See: growth-share matrix.C

cargoA product shipped in an aircraft, railroad car, cash discountA price break offered for the early pay-
ship, barge, or truck.C ment of an invoice.C

cargo container capacityThe inside usable cubic vo- cash flowThe net flow of dollars into or out of the pro-
lume of a container.C posed project. The algebraic sum, in any time period, of
all cash receipts, expenses, and investments. Also
carbon footprintA measure of carbon emissions from a called cash proceeds or cash generated.C
person, organization, building, or operation.C
cash flow managementSyn: funds flow management.C
carload lotA shipment that qualifies for a reduced
cash flow statementSyn: funds flow statement.C
freight rate because it is greater than a specified mini-

APICS Dictionary, 14th edition 23

cash spin or free cash spin central limit theorem

cash spin or free cash spinThe advantage of reducing sification occurring in a sample. Syn: count chart, num-
inventory in the supply chain and reallocating the saved ber defective chart.C
capital in a more profitable direction.C
CCRAbbreviation for capacity-constrained resource.C
cash-to-cash cycle timeAn indicator of how efficiently a
cellA manufacturing or service unit consisting of a
company manages its assets to improve cash flow.
number of workstations and the materials transport
Inventory days + accounts receivable days accounts
mechanisms and storage buffers that interconnect

C payable days = cash-to-cash cycle time. See: cash con-

version cycle.C

cellular layoutAn equipment configuration to support

catalog channelA facility that receives orders based on
cellular manufacturing.C
a published book of offerings and ships from its ware-
house to the customer.C cellular manufacturingA manufacturing process that
produces families of parts within a single line or cell of
catchballA business process of floating ideas and machines controlled by operators who work only within
comments around in an iterative manner, much like the line or cell.C
tossing a ball back and forth.C
centerIn statistics, values near the middle of results
categorical planA method of selecting and evaluating from a process.C
suppliers that considers input from many departments
and functions within the buyers organization and sys- center-of-gravity approachA methodology for locating
tematically categorizes that input. Engineering, produc- distribution centers at approximately the location
tion, quality assurance, and other functional areas representing the minimum transportation costs be-
evaluate all suppliers for critical factors within their re- tween the plants, the distribution centers, and the
spective scopes of responsibility. For example, engi- markets.C
neering would develop a category evaluating suppliers center-of-gravity modelsSyn: gravity models.C
design flexibility. Rankings are developed across cate-
gories, performance ratings are obtained, and supplier centralized authorityLimiting the ability to make deci-
selections are made. See: weighted-point plan.C sions to a few managers.C

category managementIn marketing, an organizational centralized computer networkA network in which there
structure giving managers responsibility for planning is one computer (or possibly more) linked to all others in
and implementing marketing systems for certain prod- a given enterprise.C
uct lines.C centralized dispatchingThe organization of the dis-
causal forecastA type of forecasting that uses cause- patching function into one central location. This struc-
and-effect associations to predict and explain relation- ture often involves the use of data collection devices for
ships between the independent and dependent va- communication between the centralized dispatching
riables. An example of a causal model is an function, which usually reports to the production control
econometric model used to explain the demand for department, and the shop manufacturing
housing starts based on consumer base, interest rates, departments.C
personal incomes, and land availability.C centralized inventory controlInventory decision making
for all stockkeeping units exercised from one office or
cause-and-effect diagramA tool for analyzing process
department for an entire company.C
dispersion. It is also referred to as the Ishikawa diagram
(because Kaoru Ishikawa developed it) and the fish- centralized marketing systemAn organizational struc-
bone diagram (because the complete diagram resem- ture in which a central marketing group manages func-
bles a fish skeleton). The diagram illustrates the main tionally divided areas, such as advertising, sales, and
causes and subcauses leading to an effect (symptom). marketing research.C
The cause-and-effect diagram is one of the seven tools
centralized purchasingA system in which all purchas-
of quality. Syn: fishbone chart, Ishikawa diagram.C
ing decisions are made from a corporate purchasing
caveat emptorA Latin phrase meaning Let the buyer office.C
beware. (i.e., the purchase is at the buyers risk.)C
central limit theoremA theorem that states that a dis-
c chartA control chart for evaluating the stability of a tribution consisting of sample means can be assumed
process in terms of the count of events of a given clas- to be normally distributed, even if the population from

24 APICS Dictionary, 14th edition

central point scheduling change management

which the samples are drawn is not normally high level of professional knowledge in production and
distributed.C inventory management.C
central point schedulingA variant of scheduling that Certified Purchasing Manager1) Certification from The
employs both forward and backward scheduling, start- Institute for Supply Management (ISM), formerly NAPM.
ing from the scheduled start date of a particular This is no longer being tested (C.P.M.). 2) Certification
operation.C from the American Purchasing Society (CPM).C
central processing unit (CPU)The electronic processing
unit of a computer, where mathematical calculations
certified supplierA status awarded to a supplier who
consistently meets predetermined quality, cost, delivery, C
are performed.C financial, and count objectives. Incoming inspection
may not be required.C
central storageUsing a central location for storing all
inventory items in order to obtain more control of inven- Certified Supply Chain ProfessionalThe APICS designa-
tory and to improve inventory record accuracy.C tion that recognizes a high level of professional know-
CEPAbbreviation for cost equalization point.C ledge in supply chain management.C

certificated carrierA regulated for-hire air carrier that ceteris paribusLatin for all other things being the
provides service under an operating certificate.C same.C

certificate of analysisA certification of conformance to CFPIMAbbreviation for Certified Fellow in Production

quality standards or specifications for products or mate- and Inventory Management.C
rials. It may include a list or reference of analysis results chain of customersThe sequence of customers who in
and process information. It is often required for transfer turn consume the output of each other, forming a chain.
of the custody of materials.C For example, individuals are customers of a department
certificate of complianceA suppliers certification that store, which in turn is the customer of a producer, who
the supplies or services in question meet specified re- is the customer of a material supplier.C
quirements.C chain reactionA chain of events proposed by W.
certificate of originA document attesting to a ship- Edwards Deming: improve quality, and costs will go
ments country of origin.C down because of less scrap and rework, while revenues
will go up because the company will be able to sell more
certificate of public convenience and necessityA certif- product at higher prices. Thus, better quality means
icate that grants authority to a particular carrier, enabl- more profitability.C
ing that carrier to act as a common carrier in serving
and transporting commodities to a specific area.C champion(1) In quality control, sponsor of a six sigma
implementation project. (2) In general, sponsor of an
certificationDocumentation of competency by a sup- improvement effort.C
plier or by an organization, such as ISO 9000 certifica-
tion. See: supplier certification, ISO 9000.C chance variationVariation in process results occurring
because of numerous small factors such as workers,
certification auditsAudits occurring within registration equipment, raw material, work methods, and environ-
processes (e.g., for ISO 9000:2000).C mental differences.C
Certified Fellow in Production and Inventory
change agentA person who facilitates change within
Management (CFPIM)The APICS designation that is a
an organization. This person may or may not be within
recognition of superior knowledge and performance in
the organization and may or may not be the initiator of
contributing to the profession.C
the change.C
certified fixturesThe inspection models that conform
change controlThe process of determining, approving,
to known specifications.C
or rejecting changes to a plan baseline.C
Certified in Integrated Resource Management (CIRM)
change managementThe business process that coor-
The APICS designation that is a recognition of a high
dinates and monitors all changes to the business
level of professional knowledge in enterprise-wide
processes and applications operated by the business as
processes and activities.C
well as to their internal equipment, resources, operating
Certified in Production and Inventory Management systems, and procedures. The change management
(CPIM)The APICS designation that is a recognition of a discipline is carried out in a way that minimizes the risk

APICS Dictionary, 14th edition 25

change order clean technology

of problems that will affect the operating environment ing production to meet demand. Companies may com-
and service delivery to the users.C bine chase and level production schedule methods.
Syn: chase strategy, chase-demand strategy.C
change orderA formal notification that a purchase or-
der or shop order must be modified in some way. This chase strategySyn: chase production method.C
change can result from modifications such as a revised
check digitA digit added to each number in a coding
quantity, date, or customer specification; an engineer-
system that allows for detection of errors in the record-

C ing change; or a change in inventory requirement date.C

changeoverSyn: setup.C
ing of the code numbers. Through the use of the check
digit and a predetermined mathematical formula, re-
cording errors such as digit reversal or omission can be
changeover costsSyn: setup costs.C
changeover flexibilitySyn: setup flexibility.C
checkingVerifying and documenting the order selec-
change requestAn application to change scopes of tion in terms of both product number and quantity.C
work, budgets, and/or schedules.C
checklistA tool used to ensure that important steps or
channel1) In queuing theory, a line for waiting. 2) In actions in an operation have been taken. Checklists
distribution, a route from raw materials through con- contain items that are important or relevant to an issue
sumption. See: distribution channel, marketing or situation.C
check sheetA simple data-recording device. The check
channel conflictTwo or more agencies of one business sheet is designed by the user to facilitate the users in-
competing for the same customer. For example, retail, terpretation of the results. The check sheet is one of the
catalog, or web sales.C seven tools of quality. Check sheets are often confused
channel equityImportant affiliations between suppliers with data sheets and checklistsC
and purchasers that improve value for everyone.C
churnThe process of customers changing their buying
channel integrationStrengthening relationships up and preferences because they find better and/or cheaper
down the supply chain from suppliers suppliers to cus- products and services elsewhere. The internet makes it
tomers customers.C easy for customers to shop electronically in search of a
better deal.C
channel partnersSuppliers, manufacturers, distribu-
tors, and retailers who form a supply chain to make and churn reductionNot losing as many customers to the
distribute a set of products.C competition.C
channels of distributionAny series of firms or individu- CIFAbbreviation for cost, insurance, freight.C
als that participates in the flow of goods and services
CIMAcronym for computer-integrated manufacturing.C
from the raw material supplier and producer to the final
user or consumer. See: distribution channel.C CIRMAcronym for Certified in Integrated Resource
chargeThe initial loading of ingredients or raw mate-
rials into a processor, such as a reactor, to begin the CISGAbbreviation for contracts for the international
manufacturing process.C sale of goods.C

chargeback provisionsContractual terms specifying city driverA delivery person who drives a local route, as
how a company may charge a supplier for failure to opposed to long-haul route.C
perform.C claimA charge made against a company because of
charge ticketA document used for receiving goods and loss or damage.C
charging those goods to an operating cost center.C classificationThe designation of the job function that
chart of accountsIn accounting, a list of general ledger an employee is assigned to and is proficient infor ex-
accounts used to track costs, revenues, assets, liabili- ample, assembler, machinist, or welder.C
ties, and so on by category.C classification of defectsThe delineation of possible
chase-demand strategySyn: chase production defects on a unit, classified by seriousness: critical (A),
method.C major (B), minor (C), or incidental (D).C
chase production methodA production planning me- clean technologyA technical measure taken to reduce
thod that maintains a stable inventory level while vary- or eliminate at the source the production of any nuis-

26 APICS Dictionary, 14th edition

cleanup collaborative planning

ance, pollution, or waste and to help save raw mate- that feedback is provided by the execution processes so
rials, natural resources, and energy.C that the planning can be kept valid at all times.C

cleanupThe neutralizing of the effects of production closed periodThe accounting time period for which the
just completed. It may involve cleaning residues, sanita- adjusting and closing entries have been posted. Ant:
tion, equipment refixturing, and so on.C open period.C
closely heldA description of an organization owned by

clearinghouseAn entity restricted to providing services
such as settling accounts.C a small number of people.C

clerical/administrationSeveral related activities closeness ratingsIn layout analysis, to begin yielding.

necessary for the organizations operation, generally In layout analysis, measures of how beneficial it would
including but not limited to the following: updating be for one department to be located near another.C
records and files based on receipts, shipments, and cloud computingAn emerging way of computing where
adjustments; maintaining labor and equipment records; data is stored in massive data centers which can be ac-
and performing locating, order consolidation, cessed from any connected computers over the
correspondence preparation, and similar activities.C internet.C

clicks and mortarRefers to a brick and mortar compa- CMIAbbreviation for co-managed inventory.C
ny that also has succeeded in making online sales. Ant: CNCAbbreviation for computer numerical control.C
bricks and mortar.C
co-designSyn: participative design/engineering.C
clickstreamThe way a customer moves through a
co-destinyThe evolution of a supply chain from intra-
organizational management to interorganizational
clientIn information systems, a software program that management.C
is used to contact and obtain data from a server pro-
coefficient of correlationA value used to express the
gram on another computer. Each client program is de-
relationship between two variables, whether there is a
signed to work with one or more specific kinds of server
strong or weak correlation. The coefficient of correlation
programs, and each server requires a specific kind of
varies from 0 to 1 with values close to 0 indicating no
client. A browser is one type of client.C
relationship, or a weak relationship, and values close to
client/server systemA distributed computing system in 1 indicating a strong relationship. The existence of a
which work is assigned to the computer best able to relationship does not prove causality.C
perform it from among a network of computers.C coefficient of determinationUsed to measure the ex-
CLINAbbreviation for contract line items number.C pected accuracy of a forecast; measures the variation in
one variable due to a different variable.C
clock cardSyn: time card.C
coefficient of variationIn statistics, the ratio of the
closed-loop feedback systemA planning and control standard deviation to the mean for a particular
system that monitors system progress toward the plan process.C
and has an internal control and replanning capability.C
COFCAbbreviation for container on a railroad flatcar.C
closed-loop MRPA system built around material re-
cold chainA term referring to the storage, transfer, and
quirements planning that includes the additional plan-
supply chain of temperature-controlled products.
ning processes of production planning (sales and
Industries in the cold chain include food and agricul-
operations planning), master production scheduling,
ture, pharmaceuticals, and chemicals.C
and capacity requirements planning. Once this planning
phase is complete and the plans have been accepted collaborationJoint work among people to achieve
as realistic and attainable, the execution processes common business objectives.C
come into play. These processes include the manufac- collaborative forecastingThe process for collecting and
turing control processes of input-output (capacity) mea- reconciling information from within and outside the or-
surement, detailed scheduling and dispatching, as well ganization to come up with a single projection of
as anticipated delay reports from both the plant and demand.C
suppliers, supplier scheduling, and so on. The term
collaborative planningSyn: collaborative planning, fo-
closed loop implies not only that each of these
recasting, and replenishment.C
processes is included in the overall system, but also

APICS Dictionary, 14th edition 27

collaborative planning, forecasting, and replenishment (CPFR) communication management plan

collaborative planning, forecasting, and replenishment commodity buyingGrouping like parts or materials un-
(CPFR)1) A collaboration process whereby supply der one buyers control for the procurement of all re-
chain trading partners can jointly plan key supply chain quirements to support production.C
activities from production and delivery of raw materials
commodity procurement strategyThe purchasing plan
to production and delivery of final products to end cus-
for a family of items. This would include the plan to
tomers. Collaboration encompasses business planning,
manage the supplier base and solve problems.C
sales forecasting, and all operations required to reple-

C nish raw materials and finished goods. 2) A process phi-

losophy for facilitating collaborative communications.
commonalityA condition where given raw materials or
ingredients are used in multiple parents.C
CPFR is considered a standard, endorsed by the common carrierTransportation available to the public
Voluntary Interindustry Commerce Standards. Syn: col- that does not provide special treatment to any one party
laborative planning.C and is regulated as to the rates charged, the liability as-
collaborative supply relationshipSyn: supplier sumed, and the service provided. A common carrier
partnership.C must obtain a certificate of public convenience and ne-
cessity from the Federal Trade Commission for inter-
collaborative transportation managementA method of state traffic. Ant: private carrier.C
sharing information among suppliers, buyers, and
transporters to add value to the service.C common carrier dutiesThe requirements of common
carriers to offer reasonable services and rates and to
collective bargainingA highly regulated system estab- avoid discrimination.C
lished to control conflict between labor and manage-
common causesCauses of variation that are inherent
ment. It defines and specifies the rules and procedures
in a process over time. They affect every outcome of the
of initiating, negotiating, maintaining, changing, and
process and everyone working in the process. Syn: ran-
terminating the labor-management relationship.C
dom cause. See: assignable cause, assignable varia-
co-locationPlacing project team members in physical tion, common cause variability.C
proximity to facilitate communication and working rela-
common cause variabilityThe variability in product
quality that results from numerous uncontrollable eve-
co-managed inventory (CMI)Continuous replenishment ryday factors, such as temperature, humidity, and tool
where the manufacture is responsible for managing the wear. Syn: common variation. See: common causes.C
inventory of standard merchandise and the retailer common costA cost that is incurred by the business as
manages promotional items.C a whole.C
combined lead timeSyn: cumulative lead time.C common lawLaw flowing from judicial decisions over
the years rather than from legislative action.C
commercial invoiceAn official document indicating the
names of the seller and buyer, the product being common materialReadily available items used in in-
shipped, and its value. The document is provided by the dustry that require no special handling.C
common parts billSyn: common parts bill of material.C
commercial-off-the-shelf (COTS)A term describing
common parts bill of materialA type of planning bill
computer software made available for sale by commer-
that groups common components for a product or fami-
cial developers.C ly of products into one bill of material, structured to a
commercial speechCommunication that is primarily pseudoparent item number. Syn: common parts bill.C
for a business purpose. Such speech is protected under common-size income statementIn accounting, an in-
the First Amendment to the U.S. Constitution but less so come statement having values expressed as a percen-
than is noncommercial speech.C tage of sales rather than dollar values.C
committed capabilityThe portion of the production ca- common variationSyn: common cause variability.C
pability that is currently in use or is scheduled for use.C
communication management planA document that
commodityAn item that is traded in commerce. The describes the communications needs and expectations
term usually implies an undifferentiated product com- within a project, including format, dates, locations, and
peting primarily on price and availability.C responsibilities.C

28 APICS Dictionary, 14th edition

company culture computer-assisted software engineering (CASE)

company cultureA system of values, beliefs, and be- composite partA part that represents operations
haviors inherent in a company. To optimize business common to a family or group of parts controlled by
performance, top management must define and create group technology. Tools, jigs, and dies are used for the
the necessary culture.C composite part; therefore, any parts of that family can
be processed with the same operations and tooling. The
compensationThe pay and benefits given for services
goal here is to reduce setup costs.C
rendered to an organization.C

compensation lawsLaws designed to pay employees

for injuries sustained on the job.C
composite yieldA condition where loss occurs along
several operations resulting in a decreased yield for the
end item. Syn: cumulative yield.C
competitive advantageThe advantage a company has compositionThe makeup of an item, typically express-
over its rivals in attracting customers and defending ing chemical properties rather than physical
against competitors. Sources of the advantage include properties.C
characteristics that a competitor cannot duplicate with-
out substantial cost and risk, such as a manufacturing compound interest1) The type of interest that is pe-
technique, brand name, or human skill set. Syn: com- riodically added to the amount of investment (or loan)
petitive edge.C so that subsequent interest is based on the cumulative
amount. 2) The interest charges under the condition
competitive analysisAn analysis of a competitor that that interest is charged on any previous interest earned
includes its strategies, capabilities, prices, and costs.C in any time period, as well as on the principal.C
competitive benchmarkingBenchmarking a product or compound yieldThe cumulative effect of yield loss at
service against competitors. Syn: performance ben- multiple operations within the manufacturing cycle.C
chmarking. See: benchmarking.C
comptrollerSyn: controller.C
competitive bidA price offering by one company that a
computer-aided design (CAD)The use of computers in
buyer will consider along with price offerings from other
interactive engineering drawing and storage of designs.
Programs complete the layout, geometric transforma-
competitive differentiatorA characteristic that makes a tions, projections, rotations, magnifications, and interval
company or product unique within a marketplace.C (cross-section) views of a part and its relationship with
other parts.C
competitive edgeSyn: competitive advantage.C
computer-aided engineering (CAE)The process of ge-
competitive intelligenceThe information required to nerating and testing engineering specifications on a
conduct a competitive analysis about external events computer workstation.C
and trends that can affect a companys plans.C
computer-aided inspection and test (CAIT)The use of
complete and on-time delivery (COTD)A metric defining computer technology in the inspection and testing of
customer service. To be considered as complete and on manufactured products.C
time, all items in the orderin the correct quantity and
with the correct line itemsmust arrive on time.C computer-aided manufacturing (CAM)The use of com-
puters to program, direct, and control production
componentThe raw material, part, or subassembly equipment in the fabrication of manufactured items.C
that goes into a higher level assembly, compound, or
computer-aided process planning (CAPP)A method of
other item. This term may also include packaging mate-
process planning in which a computer system assists in
rials for finished items. See: ingredient, intermediate
the development of manufacturing process plans (defin-
ing operation sequences, machine and tooling require-
component availabilityThe availability of component ments, cut parameters, part tolerances, inspection
inventory for the manufacture of a specific parent order criteria, and other items). Artificial intelligence and clas-
or group of orders or schedules.C sification and coding systems may be used in the gen-
eration of the process plan.C
component lead-time offsetSyn: lead-time offset.C
computer-assisted software engineering (CASE)The
composite lead timeSyn: cumulative lead time.C
use of computerized tools to assist in the process of
composite manufacturing lead timeSyn: cumulative designing, developing, and maintaining software prod-
manufacturing lead time.C ucts and systems.C

APICS Dictionary, 14th edition 29

computer-integrated manufacturing (CIM) consignment inventory

computer-integrated manufacturing (CIM)The neering changes have been incorporated and

integration of the total manufacturing organization documented.C
through the use of computer systems and managerial
configuration management systemFormal procedures
philosophies that improve the organizations
to identify and document the physical characteristics of
effectiveness; the application of a computer to bridge
a product or project, control changes, and support an
various computerized systems and connect them into a
audit to verify conformance.C
coherent, integrated whole. For example, budgets,

C CAD/CAM, process controls, group technology systems,

MRP II, and financial reporting systems are linked and
configuration systemSyn: customer order servicing
interfaced.C configuratorSoftware system that creates, uses, and
computer numerical control (CNC)A technique in which maintains product models that allow complete defini-
a machine tool controller uses a computer or micropro- tion of all possible product options and variations with a
cessor to store and execute numerical instructions.C minimum of data entries.C

concentrationThe percentage of an active ingredient confirming orderA purchase order issued to a supplier,
within the whole. For example, a 40 percent solution of listing the goods or services and terms of an order
hydrochloric acid.C placed orally or otherwise before the usual purchase
concept phaseIn project management, the first phase
in which a project is defined and the scope is planned.C confiscationThe taking of property without adequate
compensation for it.C
concurrencySyn: resource contention.C
conflict of interestAny business activity, personal or
concurrent designSyn: participative design/ company-related, that interferes with a companys goals
engineering.C or that entails unethical or illegal actions.C
concurrent engineeringSyn: participative design/ en- conformanceAn affirmative indication or judgment
gineering.C that a product or service has met the requirements of a
relevant specification, contract, or regulation.C
conference room pilotSimulation of all business
processes from end-to-end within the new information conformance perspectiveA measure of how closely a
system in a controlled environment.C product or service performs to its intended quality.C

confidence intervalThe range on either side of an es- connectivityThe ability to communicate effectively with
timated value from a sample that is likely to contain the supply chain partners to facilitate interorganization syn-
true value for the whole population.C chronization.C

confidence levelThe probability that a particular value considerationIn contract law, an obligation that is to
lies between an upper and a lower boundthe confi- the detriment of one party (promisee) or to the benefit
dence limits.C of the other party (promisor).C

confidence limitThe bounds of an interval. A probabili- consigned stocksInventories, generally of finished

ty can be given for the likelihood that the true value will goods, that are in the possession of customers, dealers,
lie between the confidence limits.C agents, and so on, but remain the property of the manu-
facturer by agreement with those in possession. Syn:
configurationThe arrangement of components as spe- consignment inventory, vendor-owned inventory. See:
cified to produce an assembly.C consignment.C
configuration auditA review of the product against the consigneeThe receiver of a shipment of freight.C
engineering specifications to determine whether the
engineering documentation is accurate, up-to-date, and consignment1) A shipment that is handled by a com-
representative of the components, subsystems, or sys- mon carrier. 2) The process of a supplier placing goods
tems being produced.C at a customer location without receiving payment until
after the goods are used or sold. See: consigned
configuration controlThe function of ensuring that the stocks.C
product being built and shipped corresponds to the
consignment inventorySyn: consigned stocks. See:
product that was designed and ordered. This means
that the correct features, customer options, and engi-

30 APICS Dictionary, 14th edition

consignor containerization

consignorThe originator of a shipment of freight.C hausted in the production or sale of a good or service.
Syn: consumable tooling, supplies; expendables.C
consolidationPackages and lots that move from sup-
pliers to a carrier terminal and are sorted and then consumable tooling, suppliesSyn: consumables.C
combined with similar shipments from another suppli-
consumerA person who purchases a good or service
ers container load or truckload for travel to a final des-
for his or her own use (not for resale). See: customer.C
tination. See: milk run.C

consumer durable goodsA division of durable goods
consolidation warehousesCollection points that re- for items intended for consumer use, such as refrigera-
ceive less-than-truckload (LTL) shipments from regional tors, as opposed to industrial goods, such as fork lifts.
sources and then ships in cargo load or truckload quan- See: durable goods.C
tities to a manufacturing facility.C
consumer marketA market composed of individuals
consolidatorA company that groups together various and families who buy products and services for con-
shipments or orders to facilitate movement.C sumption. See: government market, industrial market,
consortia trade exchanges (CTX)An online market- institutional market.C
place, usually owned by a third party, that allows mem- consumer price indexA measure of the overall level of
bers to trade with each other. This site lowers members prices. It attempts to relate the cost of buying a specific
search costs and enables lower prices for the buyer.C set of goods and services with the cost of buying the
consortiumA group of companies that work together to same set of goods and services during an earlier time
jointly produce a product, service, or project.C period.C

constantA quantity that has a fixed value. Ant: consumers risk ()For a given sampling plan, the
variable.C probability of acceptance of a lot, the quality of which
has designated numerical value representing a level
constrained optimizationAchieving the best possible
that is worse than some threshold value. See: type II
solution to a problem in terms of a specified objective
function and a given set of constraints.C
consumer surplusThe difference between the highest
constraint1) Any element or factor that prevents a sys- price a consumer is willing to pay for a good or service
tem from achieving a higher level of performance with and the price actually paid.C
respect to its goal. Constraints can be physical, such as
a machine center or lack of material, but they can also consuming the forecastThe process of reducing the
be managerial, such as a policy or procedure. 2) One of forecast by customer orders or other types of actual
a set of equations that cannot be violated in an optimi- demands as they are received. The adjustments yield
zation procedure.C the value of the remaining forecast for each period. Syn:
forecast consumption.C
constraint accountingSyn: theory of constraints
accounting.C consumptionThe amount of each bill-of-material com-
ponent used in the production process to make the
constraint-oriented finite loadingA finite loading tech- parent.C
nique that plans orders around bottleneck work centers.
The objective is to maximize total production through- contact efficiencyA measure of how well an organiza-
put. Orders in small lot sizes aggregate into large lot tion transforms website hits into visits.C
sizes at the constraint and then load forward. Prior op- contactlessUsing radio frequency identification or sim-
erations are then backward-scheduled, and down- ilar technologies to record data about an item electroni-
stream operations are forward-scheduled. See: drum- cally without physical contact with the item.C
buffer-rope, order-oriented finite loading.C
containerA large box in which commodities to be
constraints managementThe practice of managing re- shipped are placed.C
sources and organizations in accordance with the
container designThe characteristics of the product
theory of constraints (TOC) principles. See: theory of
that make it transportable with ease of handling and
stowability. Container concepts include packaging,
constraint theorySyn: theory of constraints.C monetary density, and physical density.C
consumablesSupplies or materials (such as paint, containerizationA shipment method in which commod-
cleaning materials, or fuel) that are consumed or ex- ities are placed in containers, and after initial loading,

APICS Dictionary, 14th edition 31

container on a flatcar (COFC) contract carrier

the commodities per se are not rehandled in shipment continuous process improvement (CPI)A never-ending
until they are unloaded at the destination.C effort to expose and eliminate root causes of problems:
small-step improvement as opposed to big-step im-
container on a flatcar (COFC)A specialized form of con-
provement. Syn: continuous improvement. See:
tainerization in which rail, motor, and sea transport
content management applicationsSupports the evolu- continuous productionA production system in which

C tionary life cycle of digital-based information and makes

information dynamically updatable online; includes the
the productive equipment is organized and sequenced
according to the steps involved to produce the product.
This term denotes that material flow is continuous dur-
ability to publish content to a repository and support
access to digital-based content.C ing the production process. The routing of the jobs is
fixed and setups are seldom changed. Syn: continuous
contestable marketA market having low entry costs.C flow (production), continuous process, continuous man-
contingency planningA process for creating a docu- ufacturing. See: mass production, project
ment that specifies alternative plans to facilitate project manufacturing.C
success if certain risk events occur.C continuous replenishmentA process by which a sup-
contingency reserveA budget of money or time allowed plier is notified daily of actual sales or warehouse ship-
over an initial estimate to reduce the likelihood of ments and commits to replenishing these sales (by size,
overruns.C color, and so on) without stockouts and without receiv-
ing replenishment orders. The result is a lowering of as-
contingent projectA project that can be accepted only
sociated costs and an improvement in inventory
if one or more other projects are accepted first. See:
turnover. See: rapid replenishment, vendor-managed
independent project, mutually exclusive project.C
continuous flow distributionA pull system diverting
continuous review systemThe inventory level on-hand
products in response to customer requirements while
and on-order for this system is checked whenever a
keeping distribution costs low.C
change in inventory level occurs and when the reorder
continuous flow (production)Syn: continuous point is reached a restocking order is released. See:
production.C fixed reorder cycle inventory model.C
continuous improvementThe act of making incremen- continuous variableA variable, such as height, tem-
tal, regular improvements and upgrades to a process or perature, or weight, that can be measured along a con-
product in the search for excellence.C tinuous scale. See: discrete variable.C
continuous manufacturingA type of manufacturing contractAn agreement between two or more compe-
process that is dedicated to the production of a very tent persons or companies to perform or not to perform
narrow range of standard products. The rate of product specific acts or services or to deliver merchandise. A
change and new product information is very low. contract may be oral or written. A purchase order, when
Significant investment in highly specialized equipment accepted by a supplier, becomes a contract.
allows for a high volume of production at the lowest Acceptance may be in writing or by performance, unless
manufacturing cost. Thus, unit sales volumes are very the purchase order requires acceptance in writing.C
large, and price is almost always a key order-winning
criterion. Examples of items produced by a continuous contract accountingThe function of collecting costs
process include gasoline, steel, fertilizer, glass, and pa- incurred on a given job or contract, usually in a progress
per. Syn: continuous production.C payment situation. Certain U.S. government contracting
procedures require contract accounting.C
continuous processSyn: continuous production.C
contract administrationManaging all aspects of a con-
continuous process controlThe use of transducers
tract to guarantee that the contractor fulfills his
(sensors) to monitor a process and make automatic
changes in operations through the design of appropri-
ate feedback control loops. Although such devices have contract carrierA carrier that does not serve the gen-
historically been mechanical or electromechanical, eral public, but provides transportation for hire for one
there is now widespread use of microcomputers and or a limited number of shippers under a specific
centralized control.C contract.C

32 APICS Dictionary, 14th edition

contract date control system

contract dateThe date when a contract is accepted by control chartA graphic comparison of process perfor-
all parties.C mance data with predetermined computed control lim-
its. The process performance data usually consist of
contract laborSelf-employed individuals or firms con-
groups of measurements selected in regular sequence
tracted by an organization to perform specific services
of production that preserve the order. The primary use
on an intermittent or short-term basis.C
of control charts is to detect assignable causes of varia-
contract line items number (CLIN)Specific items that tion in the process as opposed to random variations.
are priced separately on a contract.C

contract manufacturingA situation in which a third par-

The control chart is one of the seven tools of quality.
Syn: process control chart.C
ty makes products that are packaged under another control decisionA decision about the planning or con-
companys label.C trolling of daily operations.C
contract peggingSyn: full pegging.C controllable costA cost that is under the direct control
contract reportingReporting of and the accumulation of a given level of management.C
of finished production against commitments to a controlled accessFenced or walled areas within a
customer.C warehouse or yard usually monitored by security cam-
contracts for the international sale of goods (CISG) eras. These areas are used to store high-value items.C
Govern the sale of goods in the international environ- controlled issueSyn: planned issue.C
ment. They enable exporters to avoid choice-of-law
issues.C controllerThe person responsible for financial and
managerial accounting within a company. Syn:
contract target costThe estimated cost negotiated in a
control limitA statistically determined line on a control
contributionThe difference between sales price and
chart (upper control limit or lower control limit). If a val-
variable costs. Contribution is used to cover fixed costs
ue occurs outside of this limit, the process is deemed to
and profits.C
be out of control.C
contribution marginAn amount equal to the difference
control numberTypically, the manufacturing order or
between sales revenue and variable costs.C
schedule number used to identify a specific instance or
contribution margin pricingA method of setting prices period of production.C
based on the contribution margin. It provides a ceiling
and a floor between which the price setter operates. control phaseOne of the six sigma phases of quality.
The ceiling is the target selling pricewhat the seller Process performance is observed, often with control
would like to getand the floor is the total variable charts, for steady results.C
costs of the product using traditional accounting.C control pointsIn the theory of constraints, strategic lo-
contribution relativitiesAn investment by one stake- cations in the logical product structure for a product or
holder may benefit others in the supply chain.C family that simplify the planning, scheduling, and con-
trol functions. Control points include gating operations,
contributory negligenceA rule under which a defen- convergent points, divergent points, constraints, and
dant may escape liability if it can be shown that the shipping points. Detailed scheduling instructions are
plaintiff was negligent to some extent.C planned, implemented, and monitored at these loca-
controlComparing actual to planned performance and tions. Other work centers are instructed to work if they
taking corrective action, as needed, to align perfor- have work; otherwise, be prepared for work. In this
mance with plan.C manner, materials flow rapidly through the facility with-
out detailed work center scheduling and control.C
control boardA visual means of showing machine load-
ing or project planning, usually a variation of the basic control systemA system that has as its primary func-
Gantt chart. Syn: dispatch(ing) board, planning board, tion the collection and analysis of feedback from a giv-
schedule board. See: schedule chart.C en set of functions for the purpose of controlling the
functions. Control may be implemented by monitoring or
control centerIn a centralized dispatching operation,
systematically modifying parameters or policies used in
the place at which the dispatching is done.C
those functions, or by preparing control reports that in-

APICS Dictionary, 14th edition 33

convergent point cost-budgeting

itiate useful action with respect to significant deviations corporate cultureThe set of important assumptions
and exceptions.C that members of the company share. It is a system of
shared values about what is important and beliefs
convergent pointAn operation in a production process
about how the company works. These common assump-
where multiple materials/parts/components are
tions influence the ways the company operates.C
combined into a single component. An assembly
operation is an example of a convergent point.C corporate purchasing cardsSyn: procurement credit

C conversion efficiencyIn e-commerce, a measure of

how well an organization transforms visits to its website
into customer orders. See: attractability efficiency.C

corrective actionThe implementation of solutions re-

sulting in the reduction or elimination of an identified
convertible securityAn asset (stock or bond) that may problem.C
be changed for another asset at the owners request.C
corrective maintenanceThe maintenance required to
conveyorA device following a fixed route that has the restore an item to a satisfactory condition.C
capability of moving material between points in a facili-
correlated demandsDemands that consistently vary in
ty. This device commonly is used when there is a high
the same direction because of the relationship between
volume of flow along the route.C
the items demanded.C
cooperative trainingAn educational process in which
students alternate formal studies with actual on-the-job correlationThe relationship between two sets of data
experience. Successful completion of the off-campus such that when one changes, the other is likely to make
experience may be a prerequisite for graduation from a corresponding change. If the changes are in the same
the program of study.C direction, there is positive correlation. When changes
tend to occur in opposite directions, there is negative
co-productA product that is usually manufactured to- correlation. When there is little correspondence or ran-
gether or sequentially because of product or process dom changes, there is no correlation.C
similarities. See: by-product.C
correlation coefficientA measure of the degree of cor-
core competenciesBundles of skills or knowledge sets
relation between two values, which has a range from -1
that enable a firm to provide the greatest level of value
to 1.C
to its customers in a way that is difficult for competitors
to emulate and that provides for future growth. Core cost accountingThe branch of accounting that is con-
competencies are embodied in the skills of the workers cerned with recording and reporting business operating
and in the organization. They are developed through costs. It includes the reporting of costs by departments,
collective learning, communication, and commitment to activities, and products.C
work across levels and functions in the organization and
cost allocationThe assignment of costs that cannot be
with the customers and suppliers. For example, a core
directly related to production activities via more mea-
competency could be the capability of a firm to coordi-
surable means (e.g., assigning corporate expenses to
nate and harmonize diverse production skills and mul-
different products via direct labor costs or hours).C
tiple technologies. To illustrate, advanced casting
processes for making steel require the integration of cost analysisA review and an evaluation of actual or
machine design with sophisticated sensors to track anticipated cost data.C
temperature and speed, and the sensors require ma-
cost-based contractA type of purchasing contract
thematical modeling of heat transfer. For rapid and ef-
where the price of goods or services is tied to the cost
fective development of such a process, materials
of key inputs or other economic factors, such as interest
scientists must work closely with machine designers,
software engineers, process specialists, and operating
personnel. Core competencies are not directly related to cost-benefit ratioA ratio of total measurable benefits
the product or market.C to the initial capital cost. This might be used in deciding
core processThat unique capability that is central to a which projects to pursue in a continuous improvement
companys competitive strategy.C effort.C

core teamA cross-functional team of specialists cost-budgetingIn project management, accumulating

formed to manage new product introduction. See: cross- the estimated costs of individual activities to arrive at a
functional team.C cost baseline.C

34 APICS Dictionary, 14th edition

cost center cost-plus-incentive-fee contract

cost centerThe smallest segment of an organization cost objectIn activity-based cost accounting, anything
for which costs are collected and formally reported, typ- for which a separate cost measurement is desirable.
ically a department. The criteria in defining cost centers This may include a product, a customer, a project, or
are that the cost be significant and that the area of re- other work unit.C
sponsibility be clearly defined. A cost center is not nec-
cost object driverIn activity-based cost accounting, a
essarily identical to a work center; normally, a cost
numerical measure of the demand placed on one cost
center encompasses more than one work center, but
this may not always be the case.C

cost controlApplying procedures that monitor the

object by other cost objects.C

cost of capitalThe cost of maintaining a dollar of capi- C

tal invested for a certain period, normally one year. This
progress of operations against authorized budgets, and
cost is normally expressed as a percentage and may be
taking action to achieve minimal costs.C
based on factors such as the average expected return
cost driverSyn: driver (first definition).C on alternative investments and current bank interest
rate for borrowing.C
cost driver analysisIn activity-based cost accounting,
the examination of the impact of cost drivers. The re- cost of goods soldAn accounting classification useful
sults of this analysis are useful in the continuous im- for determining the amount of direct materials, direct
provement of cost, quality, and delivery times.C labor, and allocated overhead associated with the
products sold during a given period of time. See: cost of
costed bill of materialA form of bill of material that ex- sales.C
tends the quantity per of every component in the bill by
the cost of the components.C cost of lost salesProfit that is foregone because of a
stock-out situation.C
cost elementIn activity-based cost accounting, the
lowest subdivision of a resource, activity, or cost cost of poor qualityThe cost associated with providing
object.C poor quality products or services. There are four catego-
ries of costs: (1) internal failure costs (costs associated
cost engineerAn engineer whose judgment and expe- with defects found before the customer receives the
rience are used in the application of scientific principles product or service); (2) external failure costs (costs as-
and techniques to problems of cost estimation and cost sociated with defects found after the customer receives
control in business planning, profitability analysis, the product or service); (3) appraisal costs (costs in-
project management and production planning, schedul- curred to determine the degree of conformance to qual-
ing, and control.C ity requirements); and (4) prevention costs (costs
cost estimation(1) Specification of the relationship incurred to keep failure and appraisal costs to a mini-
between cost and the underlying cost drivers. (2) In mum). Syn: cost of quality.C
project management, creating an approximation of the cost of qualitySyn: cost of poor quality.C
resources and associated costs needed to complete a
project.C cost of salesThe total cost attached (allocated) to
units of finished product delivered to customers during
cost equalization point (CEP)A point or quantity at the period. See: cost of goods sold.C
which the cost curves of two manufacturing methods
cost performance index (CPI)A measure of project effi-
have an equal value.C
ciency. Earned value over actual costs.C
cost, insurance, freight (CIF)A freight term indicating
cost-plus contractA pricing method where the buyer
that the seller is responsible for cost, the marine insur-
agrees to pay the seller all the acceptable costs of the
ance, and the freight charges on an ocean shipment of
product or service up to a maximum cost plus a fixed
fee. Syn: cost-type contract.C
cost managementControl of activities to eliminate
cost-plus-fixed-fee contractA contract in which the sel-
waste, improve cost drivers, and plan operations. This
ler is paid for costs specified as allowable in the con-
process should affect the organizations setting of
tract plus a stipulated fixed fee.C
strategy. Factors such as product pricing, introduction
of new products, and distribution of existing products cost-plus-incentive-fee contractA contract in which the
are examples of strategic decisions that are affected by seller is paid for costs specified as allowable in the con-
cost management.C tract plus a profit provided certain provisions are met.C

APICS Dictionary, 14th edition 35

cost pool crew size

cost poolIn activity-based cost accounting, an aggre- value items, although properties other than value can
gation of resources assigned to activities or activities influence the frequency.C
assigned to cost objects. Items may be aggregated or
count-per-unit chartSyn: U chart.C
disaggregated depending on how the data are to be
used.C count pointA point in a flow of material or sequence of
operations at which parts, subassemblies, or assem-
cost-ratio planA variation of the weighted-point plan of
blies are counted as being complete. Count points may

C supplier evaluation and selection. The cost ratio is

obtained by dividing the bid price by the weighted
scores determined by the weighted-point plan. This
be designated at the ends of lines or upon removal from
a work center, but most often they are designated as
the points at which material transfers from one depart-
procedure determines the true costs by taking into
ment to another. Syn: pay point.C
account compensating factors. Suppliers are selected
and/or evaluated based on the lowest cost ratio.C couponA promotional device offering special savings
when a product is purchased.C
cost reductionThe act of lowering the cost of goods or
services by securing a lower price, reducing labor costs, CpA widely used process capability index. It is calcu-
and so forth. In cost reduction, the item usually is not lated by dividing the difference between the upper spe-
changed, but the circumstances around which the item cification limit (USL) and the lower specification limit
is secured are changedas opposed to value analysis, (LSL) by 6 times the standard deviation (s) or
in which the item itself is actually changed to produce a C

lower cost.C
CPFRAbbreviation for collaborative planning, forecast-
cost tradeoffConsidering the advantages and disad- ing, and replenishment.C
vantages of one method to another, such as different
CPI1) Abbreviation for continuous process improve-
avenues of distribution or providing customer service.C
ment. 2) Abbreviation for cost performance index.C
cost-type contractSyn: cost-plus contract.C
CPIMAbbreviation for Certified in Production and
cost varianceIn cost accounting, the difference be- Inventory Management.C
tween what has been budgeted for an activity and what
CpkAn index method of the variability of a process. A
it actually costs.C
widely used process capability index. It is expressed as:
cost-volume-profit analysisThe study of how profits
change with various levels of output and selling price.C
where m is the mean and s is the standard deviation.C
COTDAbbreviation for complete and on-time delivery.C
CPMAbbreviation for critical path method.C
COTSAbbreviation for commercial-off-the-shelf.C
C.P.M.Abbreviation for Certified Purchasing Manager.C
Council of Supply Chain Management Professionals
(CSCMP)A not-for-profit worldwide organization of lo- CPOFAbbreviation for capacity planning using overall
gistics and supply chain managers. It provides educa- factors.C
tional opportunities through a variety of activities.C CPUAbbreviation for central processing unit.C
counselingThe providing of basic, technical, and cranes and hoistsEquipment capable of moving items
sometimes professional human assistance to em- up and down or side to side.C
ployees to help them with personal and work-related
crashingIn project management, adding resources to
critical path or near-critical path activities on a project
count chartSyn: c chart.C to shorten project duration after analyzing the project to
counterpurchaseWhen an exporter buys unrelated identify the most cost-effective course of action.C
goods or services from an importer.C credit periodThe time allowed a customer to pay an
countertradeAny transaction in which partial or full invoice in full.C
payment is made with goods instead of money. This of- crew sizeThe number of people required to perform an
ten applies in international trade.C operation. The associated standard time should
count frequencyThe number of times an item in inven- represent the total time for all crew members to per-
tory is counted during a period of time. Generally, high- form the operation, not the net start to finish time for
value inventories are counted more frequently than low- the crew.C

36 APICS Dictionary, 14th edition

crew-size standard cross-functional organization

crew-size standardA labor estimate of the number of eration, or at an operation where key components are
workers necessary to complete the required output for a consumed.C
given shift.C
critical processesProcesses that have large potential
critical activityAny activity on the critical path of a for losseither money, property, or human life.C
project; an activity with no slack time (i.e., any delay in critical process parametersA variable or a set of va-
the activity will delay project completion). See: critical riables that dominates the other variables. Focusing on
path, critical path method.C

critical chainThe longest sequence of dependent

these variables will yield the greatest return in invest-
ment in quality control and improvement.C C
events through a project network, considering both critical ratioA dispatching rule that calculates a priority
technical and resource dependencies in completing the index number by dividing the time to due date remain-
project. The critical chain is the constraint of a project.C ing by the expected elapsed time to finish the job. For
critical chain methodIn the theory of constraints, a example,
network planning technique for the analysis of a timeremaining 30
criticalratio .75
projects completion time, used for planning and con- workremaining 40
trolling project activities. The critical chain, which de- A ratio less than 1.0 indicates the job is behind sche-
termines project duration, is based on technological dule, a ratio greater than 1.0 indicates the job is ahead
and resource constraints. Strategic buffering of paths of schedule, and a ratio of 1.0 indicates the job is on
and resources is used to increase project completion schedule.C
success. See: critical chain, critical path method.C
critical success factorOne of a few organizational ob-
critical characteristicsThe attributes of a product that jectives whose achievement should be sufficient for or-
must function properly to avoid the failure of the prod- ganizational success.C
uct. Syn: functional requirements.C
critical-to-quality characteristics (CTQs)Critical-to-
critical failureThe malfunction of those parts that are quality characteristics (CTQs) are the important and
essential for continual operation or the safety of the measurable traits of a product or process whose per-
user.C formance targets must be met to satisfy the customer.
They adjust improvement efforts to meet consumer re-
critical massIndividuals who add value to the product
quirements. CTQs represent customer expectations for
or service. These individuals include personnel working
a product.C
directly on the product, personnel providing a service to
the customer, and personnel who provide support for critical value analysisA modified ABC analysis where a
the product or service (e.g., after-sale service).C subjective metric of the criticality of an item is assigned
to each item.C
critical pathThe longest sequence of activities through
a network. The critical path defines the planned project CRMAbbreviation for customer relationship manage-
duration. See: critical activity, critical path method.C ment and customer relations management.C

critical path activityIn project management, any activi- cross-dockingThe concept of packing products on the
ty on a networks critical path as determined by the crit- incoming shipments so they can be easily sorted at in-
ical path method.C termediate warehouses or for outgoing shipments
based on final destination. The items are carried from
critical path lead timeSyn: cumulative lead time.C the incoming vehicle docking point to the outgoing ve-
critical path method (CPM)A network planning tech- hicle docking point without being stored in inventory at
nique for the analysis of a projects completion time the warehouse. Cross-docking reduces inventory in-
used for planning and controlling the activities in a vestment and storage space requirements. Syn: direct
project. By showing each of these activities and their loading.C
associated times, the critical path, which identifies cross-functional integrationThread that weaves the
those elements that actually constrain the total time for entire organization and manufacturing process into one
the project, can be determined. See: critical chain me- fabric in which each of the different parts serves and
thod, network analysis, critical activity, critical path.C supports the whole. See: integrated enterprise.C
critical point backflushBackflush performed at a spe- cross-functional organizationOrganization where
cific point in the manufacturing process, at a critical op- groups of directors, executives, and managers with a

APICS Dictionary, 14th edition 37

cross-functional team cumulative sum control chart

diversity of skills and backgrounds work on problems work ethics, education, religion, and consumer and eco-
outside the bounds of their functional responsibilities. logical factors.C
See: integrated enterprise.C
cumulative available-to-promiseA calculation based on
cross-functional teamA set of individuals from various the available-to-promise (ATP) figure in the master
departments assigned a specific task such as imple- schedule. Two methods of computing the cumulative
menting new computer software. See: core team.C available-to-promise are used, with and without look-

C cross plotSyn: scatter chart.C

cross-sellingOccurs when customers buy additional
ahead calculation. The cumulative with look-ahead ATP
equals the ATP from the previous period plus the MPS
of the period minus the backlog of the period minus the
products or services after the initial purchase.C sum of the differences between the backlogs and MPSs
cross-shipmentMaterial flow activity where materials of all future periods until, but not to include, the period
are shipped to customers from a secondary shipping where point production exceeds the backlogs. The cu-
point rather than from a preferred shipping point.C mulative without look-ahead procedure equals the ATP
in the previous period plus the MPS, minus the backlog
cross-sourcingA method of sourcing that uses one in the period being considered. See: available-to-
supplier in one area of business for a product or service promise.C
and uses a different supplier in a different area of busi-
ness for similar products or services. The suppliers can cumulative lead timeThe longest planned length of
then compete for future business.C time to accomplish the activity in question. It is found by
reviewing the lead time for each bill of material path
cross-subsidyIn activity-based cost accounting, the
below the item; whichever path adds up to the greatest
situation of assigning too much or too little cost to a
number defines cumulative lead time. Syn: aggregate
cost object. This may lead to poor decision making rela-
lead time, combined lead time, composite lead time,
tive to the economic goals of the organization.C
critical path lead time, stacked lead time. See: planning
cross-trainingProviding training or experience in sev- horizon, planning time fence.C
eral different areas (e.g., training an employee on sev-
cumulative manufacturing lead timeThe cumulative
eral machines). Cross-training provides backup workers
planned lead time when all purchased items are as-
in case the primary operator is unavailable.C
sumed to be in stock. Syn: composite manufacturing
CRPAbbreviation for capacity requirements planning.C lead time.C
CRTAbbreviation for current reality tree.C cumulative MRPThe planning of parts and subassem-
blies by exploding a master schedule, as in MRP, except
CSCMPAbbreviation for Council of Supply Chain
that the master-scheduled items and therefore the ex-
Management Professionals.C
ploded requirements are time phased in cumulative
CSCPAbbreviation for Certified Supply Chain form. Usually these cumulative figures cover a planning
Professional.C year.C
CSRAbbreviation for customer service cumulative receiptsA cumulative number, or running
representative.C total, as a count of parts received in a series or se-
CTPAbbreviation for capable-to-promise.C quence of shipments. The cumulative receipts provide a
number that can be compared with the cumulative fig-
CTQsAbbreviation for critical-to-quality characteristicsC
ures from a plan developed by cumulative MRP.C
cubageCubic volume of space being used or available
cumulative sumThe accumulated total of all forecast
for shipping or storage.C
errors, both positive and negative. This sum will ap-
cube utilizationIn warehousing, a measurement of the proach zero if the forecast is unbiased. Syn: sum of
utilization of the total storage capacity of a vehicle or deviations.C
cumulative sum control chartA control chart on which
cubic spaceIn warehousing, a measurement of space the plotted value is the cumulative sum of deviations of
available or required in transportation and successive samples from a target value. The ordinate of
warehousing.C each plotted point represents the algebraic sum of the
previous ordinate and the most recent deviations from
cultural environmentThe sociocultural factors of the
the target.C
organizations external environment. It includes values,

38 APICS Dictionary, 14th edition

cumulative system customer order servicing system

cumulative systemA method for planning and control- customer-as-participantA service system that contains
ling production that makes use of cumulative MRP, cu- a high level of customer involvement in part of the ser-
mulative requirements, and cumulative counts.C vice delivery.C

cumulative trauma disorderAn occupational injury be- customer-as-productA service system designed to ac-
lieved to be caused by repetitive motions such as typing tually perform the service on the customer, such as in
or twisting.C health care or hair salons.C

cumulative yieldSyn: cascading yield loss, composite

customer contact centersCenters that combine phone
centers and web contact services to enable customers
to contact the center 24 hours a day via phone, web, or
current assetsAn accounting/financial term (balance email.C
sheet classification of accounts) representing the short-
term resources owned by a company, including cash, customer convergenceAn internet-based marketing
accounts receivable, and inventories. See: assets, concept in which organizations must provide descrip-
balance sheet.C tions of the goods and services they offer so that poten-
tial customers locate or converge on the appropriate
current cost1) The current or replacement cost of la- websites.C
bor, material, or overhead. Its computation is based on
customer coproductionThe customer is part of the
current performance or measurements, and it is used to
service delivery process. For example, in grocery stores
address todays costs before production as a revision of
customers often have the option to use the self check-
annual standard costs. 2) An assets value based on the
cost of an identical asset purchased today.C
customer defection analysisAnalyzing the customers
current finish timeIn project management, the present
who have stopped buying to determine why.C
estimate of an activitys finish time.C
customer-defined attributesThe characteristics of a
current liabilitiesThe debts owed by a company and
good or service that are viewed as being important in
expected to be paid within 12 months. See: liabilities,
addressing the needs of the customer. See: house of
balance sheet.C
current priceThe price currently being paid as opposed customer drivenA companys consideration of cus-
to standard cost.C tomer wants and desires in deciding what is produced
current ratioCurrent assets divided by current and its quality.C
liabilities.C customer facingA hardware or software product, tech-
current reality tree (CRT)A logic-based tool for using nology, or any thing or person that a businesss cus-
cause-and-effect relationships to determine root prob- tomer deals with directly.C
lems that cause the observed undesirable effects of the customer orderAn order from a customer for a particu-
system. See: root cause analysis.C lar product or a number of products. It is often referred
current start dateIn project management, the present to as an actual demand to distinguish it from a fore-
estimate of an activitys start date.C casted demand. See: booked orders.C
customer/order fulfillment processA series of
curve fittingAn approach to forecasting based on a
customers interactions with an organization through
straight line, polynomial, or other curve that describes
the order filling process, including product/service
some historical time series data.C
design, production and delivery, and order status
customer1) A person or organization receiving a good, reporting.C
service, or information. See: external customer, internal
customer order promisingSyn: order promising.C
customer. 2) In project management, every project has
a customer who may be internal or external to the or- customer order servicing systemAn automated system
ganization and who is responsible for the final project for order entry, where orders are keyed into a local ter-
acceptance.C minal and a bill-of-material translator converts the cata-
log ordering numbers into required manufacturing part
customer acquisitionIn marketing, the rate at which
numbers and due dates for the MRP system. Advanced
new customers are switching to an organizations
systems contain customer information, sales history,
forecasting information, and product option compatibili-

APICS Dictionary, 14th edition 39

customer partner cybermarketing

ty checks to facilitate order processing, cleaning up total that were supposed to be shipped in that time pe-
orders before placing a demand on the manufacturing riod. Syn: customer service level, fill rate, order-fill ratio,
system. Syn: configuration system, sales order - percent of fill. Ant: stockout percentage. 2) In a make-
configuration.C to-order company, it is usually some comparison of the
number of jobs or dollars shipped in a given time period
customer partnerA customer organization with which a
(e.g., a week) compared with the number of jobs or dol-
company has formed a customer-supplier partnership.
lars that were supposed to be shipped in that time

C See: outpartnering.C
customer partnershipSyn: customer-supplier
customer service representative (CSR)Personnel as-
signed to customer relations who answer customer
customer profitabilityEstimating the profit retained on questions and who provide technical support.C
business with a specific customer.C
customer shareIn marketing, a measurement (usually
customer relationship management (CRM)A marketing a percentage) of how many potential customers are at-
philosophy based on putting the customer first. The col- tracted to a brand. It is a measurement of the recogni-
lection and analysis of information designed for sales tion of the brand in the marketplace and the
and marketing decision support (as contrasted to en- predisposition of the customer to buy the brand when
terprise resources planning information) to understand presented with a choice of competing brands.C
and support existing and potential customer needs. It
customer-supplier partnershipA long-term relationship
includes account management, catalog and order entry,
between a buyer and a supplier characterized by team-
payment processing, credits and adjustments, and oth-
work and mutual confidence. The supplier is considered
er functions. Syn: customer relations management.C
an extension of the buyers organization. The partner-
customer relations management (CRM)Syn: customer ship is based on several commitments. The buyer pro-
relationship management.C vides long-term contracts and uses fewer suppliers. The
customer satisfactionThe results of delivering a good supplier implements quality assurance processes so
or service that meets customer requirements.C that incoming inspection can be minimized. The suppli-
er also helps the buyer reduce costs and improve prod-
customer segmentationThe practice of dividing a cus-
uct and process designs. Syn: customer partnership.
tomer base into groups of individuals that are similar in
See: outpartnering.C
specific ways relevant to marketing. Traditional segmen-
tation focuses on identifying customer groups based on customer surveysDevices such as interviews or ques-
demographics and attributes such as attitude and psy- tionnaires that aim to collect user data and preferences
chological profiles.C about product or service characteristics.C

customer service1) The ability of a company to ad- customer tolerance timeSyn: demand lead time.C
dress the needs, inquiries, and requests from custom- custom productA product that is made to meet the
ers. 2) A measure of the delivery of a product to the requirements of specific customers.C
customer at the time the customer specified.C
customs brokerA person who manages the paperwork
customer service levelSyn: customer service ratio.C required for international shipping and tracks and
customer service life cycleIn information systems, a moves the shipments through the proper channels.C
model that describes the relationship with a customer custom serviceA service that is created to meet the
as having four phases: requirements, acquisition, own- requirements of specific customers.C
ership, and retirement.C
cut-off controlA procedure for synchronizing cycle
customer service management processA process that counting and transaction processing.C
enables a business to offer post-purchase service and
cwtAbbreviation for hundredweight.C
information to the customer.C
cybercashThe technology that enables online accep-
customer service ratio1) A measure of delivery per-
tance of credit cards, approving customers for payment
formance of finished goods, usually expressed as a per-
before delivery is made.C
centage. In a make-to-stock company, this percentage
usually represents the number of items or dollars (on cybermarketingAny type of internet-based promotion.
one or more customer orders) that were shipped on Many marketing managers use the term to refer to any
schedule for a specific time period, compared with the type of computer-based marketing.C

40 APICS Dictionary, 14th edition

cybernetics data date

cyberneticsThe study of control processes in mechani- when material enters a production facility until it exits.
cal, biological, electrical, and information systems.C Syn: throughput time.C

cybernetic systemThe information flow or information cyclical componentA component of demand, usually
system (electronic, mechanical, logical) that controls an describing the impact of the business cycle on demand.
industrial process.C See: decomposition, time series analysis.C
cyclical demandDemand influenced by the increases

cyberspaceA common name encompassing both the
internet and other forms of electronic communication.C and decreases in the economy over time.C

cycle1) The interval of time during which a system or

process, such as seasonal demand or a manufacturing
operation, periodically returns to similar initial condi-
tions. 2) The interval of time during which an event or dampenersUser-input parameters to suppress the re-
set of events is completed.C porting of insignificant or unimportant action
cycle counterAn individual who is assigned to do cycle
counting.C dark factoryA completely automated production facility
with no labor. Syn: lightless plant.D
cycle countingAn inventory accuracy audit technique
dashboardAn easy-to-read management tool similar to
where inventory is counted on a cyclic schedule rather
an automobiles dashboard designed to address a wide
than once a year. A cycle inventory count is usually tak-
range of business objectives by combining business in-
en on a regular, defined basis (often more frequently for
telligence and data integration infrastructure. See: ex-
high-value or fast-moving items and less frequently for
ecutive dashboard.D
low-value or slow-moving items). Most effective cycle
counting systems require the counting of a certain dataAny representations, such as alphabetic or nu-
number of items every workday with each item counted meric characters, to which meaning can be assigned.D
at a prescribed frequency. The key purpose of cycle data acquisitionObtaining data from a source, such as
counting is to identify items in error, thus triggering re- a database, and communicating that data to another
search, identification, and elimination of the cause of database or a data warehouse.D
the errors.C
databaseA data processing file-management ap-
cycle inventorySyn: cycle stock.C proach designed to establish the independence of
computer programs from data files. Redundancy is mi-
cycle reduction stockStock held to reduce delivery
nimized, and data elements can be added to, or deleted
from, the file structure without necessitating changes to
cycle service levelThe probability of not having a existing computer programs.D
stockout in any one ordering cycle, which begins at the
database management system (DBMS)The software
time an order is placed and ends when the goods are
designed for organizing data and providing the mechan-
placed in stock. Syn: measure of service, service level.C
ism for storing, maintaining, and retrieving that data on
cycle stockOne of the two main conceptual compo- a physical medium (i.e., a database). A DBMS separates
nents of any item inventory, the cycle stock is the most data from the application programs and people who use
active component; the cycle stock depletes gradually as the data and permits many different views of the data.D
customer orders are received and is replenished cycli- data cleansingSifting through a database to find and
cally when supplier orders are received. The other con- fix mistakes such as misspelling, missing information,
ceptual component of the item inventory is the safety and false data.D
stock, which is a cushion of protection against uncer-
tainty in the demand or in the replenishment lead time. data collectionThe act of compiling data for recording,
Syn: cycle inventory.C analysis, or distribution.D
data communicationsTransmission of data in
cycle time1) In industrial engineering, the time be-
computer-readable form using various transmission ve-
tween completion of two discrete units of production.
hicles and paths.D
For example, the cycle time of motors assembled at a
rate of 120 per hour would be 30 seconds. 2) In mate- data dateThe date through which a report has pro-
rials management, it refers to the length of time from vided actual accomplishment. Syn: time-now date.D

APICS Dictionary, 14th edition 41

data dictionary decision matrix

data dictionary1) A catalog of requirements and speci- DBMSAbbreviation for database management
fications for an information system. 2) A file that stores system.D
facts about the files and databases for all systems that
DBRAbbreviation for drum-buffer-rope.D
are currently being used or for the software involved.D
D chartA control chart for evaluating a process in
data elementA group of characters that defines an
terms of a demerit (or quality score); for example, a
item at a basic level. Syn: data field.D
weighted sum of counts of various classified noncon-

D data fileA collection of related data records organized

in a specific manner (e.g., one record for each inventory
formities. Syn: demerit chart.D

DDPAbbreviation for distributed data processing.D

item showing product code, unit of measure, production
costs, transactions, selling price, and production lead deadheadThe return of an empty transportation con-
time).D tainer to its point of origin. See: backhauling.D

data integrityAssurance that data accurately reflects debentureA bond that is backed by the general credit
the environment it is representing.D of the issuing firm.D

data miningThe process of studying data to search for deblendThe further processing of a product to adjust
previously unknown relationships. This knowledge is specific physical and chemical properties to within spe-
then applied to achieving specific business goals.D cification ranges.D

data normalizationA database maintenance term used debtAn amount owed to creditors. It is generally equal
in the context of relational databases, which helps to to the total assets in a company less the equity. See:
minimize the duplication of information or safeguard liabilities.D
the database against certain types of logical or struc-
debt-to-equity ratioThe amount of bonds and preferred
tural data anomalies. It is often used when merging da-
stocks relative to the owners equity position. The debt
ta from one or more databases.D
to equity ratio is a measurement of the use of borrowed
data transferThe movement by electronic means of funds to leverage owners equity.D
data from one location to another. The data can take
decentralized authorityThe process of dispersing
the form of voice, text, image, or others. The movement
decision-making governance to staff people below the
is accomplished by communication links between
executive level of an organization.D
computers and a variety of input/output devices.D
decentralized computer networkA network where
data warehouseA repository of data that has been
there is no central computer or computers linked to all
specially prepared to support decision-making applica-
other computers in the group.D
tions. Syn: decision-support data. See: information data
warehouse.D decentralized dispatchingThe organization of the dis-
patching function into individual departmental
date codeA label on products with the date of produc-
tion. In food industries, it is often an integral part of the
lot number.D decentralized inventory controlInventory decision mak-
ing exercised at each stocking location for SKUs at that
date effectivityA technique used to identify the effec-
tive date of a configuration change. A component
change is controlled by effective date within the bill of decentralized purchasingWhen purchasing decisions
material for the unchanged parent part number.D are made locally and not at a central location.D

days of supplyInventory-on-hand metric converted decision matrixA matrix used by teams to evaluate
from units to how long the units will last. For example, if problems or possible solutions. After a matrix is drawn
there are 2,000 units on hand and the company is us- to evaluate possible solutions, for example, the team
ing 200 per day, than there are 10 days of supply.D lists the solutions in the far left vertical column. Next,
the team selects criteria to rate the possible solutions,
days outstandingA term used to imply the amount of
writing them across the top row. Third, each possible
an asset or liability measured in days of sales. For ex-
solution is rated on a scale of 1 to 5 for each criterion
ample, accounts payable days are the typical number of
and the rating recorded in the corresponding grid.
days that a firm delays payments of invoices to its
Finally, the ratings of all the criteria for each possible
solution are added to determine its total score. The total

42 APICS Dictionary, 14th edition

decision theory defect

score is then used to help decide which solution de- production rate of the supplying operation do not con-
serves the most attention.D strain production or use rates of the next operation.D
decision theoryA systematic approach to making deci- decoupling inventoryAn amount of inventory kept be-
sions, particularly when uncertainty is present.D tween entities in a manufacturing or distribution net-
decisions under certaintySimple decisions that as- work to create independence between processes or
sume complete information and no uncertainty con- entities. The objective of decoupling inventory is to dis-
nected with the analysis of decisions.D
decisions under riskDecision problems in which the
connect the rate of use from the rate of supply of the
item. See: buffer.D D
analyst elects to consider several possible futures, the decoupling pointsThe locations in the product struc-
probabilities of which can be estimated.D ture or distribution network where inventory is placed to
create independence between processes or entities.
decisions under uncertaintyDecisions for which the
Selection of decoupling points is a strategic decision
analyst elects to consider several possible futures, the
that determines customer lead times and inventory in-
probabilities of which cannot be estimated.D
vestment. See: control points.D
decision-support dataSyn: data warehouse.D
decryptionTransformation of encrypted text into a
decision support system (DSS)A computer system de- readable format.D
signed to assist managers in selecting and evaluating
courses of action by providing a logical, usually quantit- dedicated capacityA work center that is designated to
ative, analysis of the relevant factors.D produce a single item or a limited number of similar
items. Equipment that is dedicated may be special
decision tableA means of displaying logical conditions equipment or may be grouped general-purpose equip-
in an array that graphically illustrates actions asso- ment committed to a composite part.D
ciated with stated conditions.D
dedicated contract carrierA third-party hauler that
decision treeA method of analysis that evaluates
works exclusively for a single customer.D
alternative decisions in a tree-like structure to estimate
values and/or probabilities. Decision trees take into dedicated equipmentEquipment whose use is re-
account the time value of future earnings by using a stricted to specific operations on a limited set of
rollback concept. Calculations are started at the far components.D
right-hand side, then traced back through the branches
dedicated lineA production line permanently confi-
to identify the appropriate decision.D
gured to run well-defined parts, one piece at a time,
decision variablesThe variables that will be changed to from station to station.D
find the optimal solution in an optimization problem.D
de-expediteThe reprioritizing of jobs to a lower level of
declared valueThe value of goods declared on a bill of activity. All extraordinary actions involving these jobs
lading, used to determine a freight rate or limit the car- stop.D
riers liability.D
defamationInjury to anothers reputation by a public
decompositionA method of forecasting where time se-
utterance: print (libel) or oral (slander).D
ries data are separated into up to three components:
trend, seasonal, and cyclical; where trend includes the defaultThe action that will be taken by a computer
general horizontal upward or downward movement over program when the user does not specify a variable
time; seasonal includes a recurring demand pattern parameter.D
such as day of the week, weekly, monthly, or quarterly;
defectA goods or services nonfulfillment of an in-
and cyclical includes any repeating, nonseasonal pat-
tended requirement or reasonable expectation for use,
tern. A fourth component is random, that is, data with
including safety considerations. There are four classes
no pattern. The new forecast is made by projecting the
of defects: Class 1, Very Serious, leads directly to se-
patterns individually determined and then combining
vere injury or catastrophic economic loss; Class 2,
them. See: cyclical component, random component,
Serious, leads directly to significant injury or significant
seasonal component, trend component.D
economic loss; Class 3, Major, is related to major prob-
decouplingCreating independence between supply lems with respect to intended normal or reasonably fo-
and use of material. Commonly denotes providing in- reseeable use; and Class 4, Minor, is related to minor
ventory between operations so that fluctuations in the problems with respect to intended normal or reasonably

APICS Dictionary, 14th edition 43

defects per million opportunities demand chain management

foreseeable use. See: blemish, imperfection, delivery lead timeThe time from the receipt of a cus-
nonconformity.D tomer order to the delivery of the product. Syn: delivery
defects per million opportunitiesThe quantity of de-
fects per one million defect opportunitiesa potential delivery policyThe companys goal for the time to ship
problem that is important to the customer.D the product after the receipt of a customers order. The
policy is sometimes stated as our quoted delivery

defects per unitThe average number of blemishes on time.D
a particular product (e.g., a television cabinet).D
delivery reliabilityA performance criterion that meas-
deficiencyFailure to meet quality standards.D ures how consistently goods and services are delivered
on, or before, the promised time.D
define-measure-analyze-design-verifyA six sigma
process that outlines the steps needed to create a delivery scheduleThe required or agreed time or rate
completely new business process or product at six sig- of delivery of goods or services purchased for a future
ma quality levels.D period.D

define-measure-analyze-improve-control (DMAIC)The delivery speedA performance criterion that measures

sequence of steps for improvement projects within six- how quickly a product or service can be delivered once
sigma quality control.D the demand is identified.D
delivery windowA time frame for when goods or ser-
define, measure, analyze, improve, control (DMAIC)
vices should be delivered.D
processA six sigma improvement process comprised
of five stages: (1) Determine the nature of the problem, Delphi methodA qualitative forecasting technique
(2) Measure existing performance and commence re- where the opinions of experts are combined in a series
cording data and facts that offer information about the of iterations. The results of each iteration are used to
underlying causes of the problem, (3) Study the infor- develop the next, so that convergence of the experts
mation to determine the root causes of the problem, (4) opinions is obtained. See: management estimation,
Improve the process by effecting solutions to the prob- panel consensus.D
lem, and (5) Monitor the process until the solutions be-
demandA need for a particular product or component.
come ingrained.D
The demand could come from any number of sources
define phaseA step in the six sigma DMAIC process in (e.g., a customer order or forecast, an interplant re-
which project goals and customer deliverables are iden- quirement, a branch warehouse request for a service
tified. See: design-measure-analyze-improve-control part or the manufacturing of another product). At the
process.D finished goods level, demand data are usually different
from sales data because demand does not necessarily
degrees of freedomA statistical term indicating the result in sales (i.e., if there is no stock, there will be no
number of variables or data points used for testing a sale). There are generally up to four components of de-
relationship. The greater the degrees of freedom, the mand: cyclical component, random component, sea-
greater the confidence that can be placed on the statis- sonal component, and trend component. See: booked
tical significance of the results.D orders.D
delay reportSyn: anticipated delay report.D demand-based order quantityAn order system using
forecast or derived demand for one or more future pe-
delay reportingReporting against an operation status
riods (rather than a fixed quantity as in economic order
of a manufacturing order on an exception basis, when
delays are anticipated.D
demand chain1) A demand chain is composed of the
delinquent orderSyn: past due order.D enterprises that sell a businesss goods or services. 2)
deliverableAny unique and verifiable product or result Supply chain as seen from the viewpoint of the custom-
that is needed to complete a process or project.D er, the entity who chooses among competing products
and services and thus controls the demand.D
delivery appointmentThe time for goods to arrive at a
demand chain managementA supply chain inventory
selected location.D
management approach that concentrates on demand
delivery cycleSyn: delivery lead time.D pull rather than supplier push inventory models.D

44 APICS Dictionary, 14th edition

demand curve demand time fence (DTF)

demand curveA graphic description of the relationship forecasts and reconciles volume and mix variations in
between price and quantity demanded in a market, as- the forecast.D
suming that all other factors stay the same. Quantity
demand planningThe process of combining statistical
demanded of a product is measured on the horizontal
forecasting techniques and judgment to construct de-
axis for an array of different prices measured on the
mand estimates for products or services (both high and
vertical axis.D
low volume; lumpy and continuous) across the supply
demand depositsDeposits that can be withdrawn on
demand or paid to a third party by check.D
chain from the suppliers' raw materials to the consum-
er's needs. Items can be aggregated by product family,
geographical location, product life cycle, and so forth, to
demand-driven supply networkA situation where a determine an estimate of consumer demand for fi-
customer purchase initiates real-time information flows nished products, service parts, and services. Numerous
through the supply chain which then causes movement forecasting models are tested and combined with
of product through the network.D judgment from marketing, sales, distributors, warehous-
demand during lead timeThe quantity of a product ex- ing, service parts, and other functions. Actual sales are
pected to be withdrawn from stock or to be consumed compared with forecasts provided by various models
during its replenishment lead time when usage is at the and judgments to determine the best integration of
forecasted rate. See: expected demand.D techniques and judgment to minimize forecast error.
See: demand management.D
demand filterA standard that is set to monitor sales
data for individual items in forecasting models. It is demand pullThe triggering of material movement to a
usually set to be tripped when the demand for a period work center only when that work center is ready to be-
differs from the forecast by more than some number of gin the next job. In effect, it shortens or eliminates the
mean absolute deviations.D queue from in front of a work center, but it can cause a
queue at the end of a previous work center. Demand
demand forecastingForecasting the demand for a par- pull also can occur within a supply chain, in which case
ticular good, component, or service.D it often is called a demand chain.D
demand forecast updatingRecomputing a forecast af- demand rateA statement of requirements in terms of
ter deleting the oldest data and adding data that oc- quantity per unit of time (hour, day, week, month,
curred since the last forecast revision.D etc.).D

demand lead timeThe amount of time potential cus- demand riskThe risk that declining economic activity
tomers are willing to wait for the delivery of a good or a substantially reduces the demand for a firms products
service. Syn: customer tolerance time.D or services.D

demand management1) The function of recognizing demand segmentationCategorizing demand types into
all demands for goods and services to support the mar- groups that share similar characteristics (e.g., govern-
ketplace. It involves prioritizing demand when supply is ment, large customers, seasonal products). Similar
lacking. Proper demand management facilitates the segments can be treated alike in business or capacity
planning and use of resources for profitable business planning.D
results. 2) In marketing, the process of planning, ex- demand shapingThe practice of using the four Ps
ecuting, controlling, and monitoring the design, pricing, (product, pricing, placement, and promotion) and other
promotion, and distribution of products and services to market variables to influence the demand of a product
bring about transactions that meet organizational and or service so that the demand better matches the avail-
individual needs. Syn: marketing management. See: able supply. See: four Ps.D
demand planning.D
demand-side analysisTechniques such as market
demand management processA process that weighs research, surveys, focus groups, and performance/cost
both customer demand and a firms output capabilities, modeling used to identify emerging technologies.D
and tries to balance the two. Demand management is
demand time fence (DTF)1) That point in time inside
made up of planning demand, communicating demand,
of which the forecast is no longer included in total de-
influencing demand, and prioritizing demand.D
mand and projected available inventory calculations;
demand managerPerson who assists sales and mar- inside this point, only customer orders are considered.
keting in the development and maintenance of sales Beyond this point, total demand is a combination of ac-

APICS Dictionary, 14th edition 45

demand uncertainty derived demand

tual orders and forecasts, depending on the forecast fied loading or unloading time. See: detention,
consumption technique chosen. 2) In some contexts, express.D
the demand time fence may correspond to that point in
denied party listA list of organizations that are unau-
the future inside which changes to the master schedule
thorized to submit a bid for an activity.D
must be approved by an authority higher than the mas-
ter scheduler. Note, however, that customer orders may densityA measure of the weight of an item compared
still be promised inside the demand time fence without to its volume. Because density can influence the num-

D higher authority approval if there are quantities

available-to-promise (ATP). Beyond the demand time
ber of units that can be carried by a particular truck,
this is a factor in defining transportation charges.D
fence, the master scheduler may change the MPS with- departmental stocksAn informal system of holding
in the limits of established rescheduling rules, without some stock in a production department. This action is
the approval of higher authority. See: option overplan- taken as a protection from stockouts in the stockroom
ning, planning time fence, time fence.D or for convenience; however, it results in increased in-
demand uncertaintyThe uncertainty or variability in ventory investment and possible degradation of the ac-
demand as measured by the standard deviation, mean curacy of the inventory records.D
absolute deviation (MAD), or variance of forecast department overhead rateThe overhead rate applied
errors.D to jobs passing through a department.D

demerit chartSyn: D chart.D dependent demandDemand that is directly related to

or derived from the bill of material structure for other
Deming circleThe concept of a continuously rotating
items or end products. Such demands are therefore
wheel of plan-do-check-action (PDCA) used to show the
calculated and need not and should not be forecast. A
need for interaction among market research, design,
given inventory item may have both dependent and in-
production, and sales to improve quality. See: plan-do-
dependent demand at any given time. For example, a
part may simultaneously be the component of an as-
Deming PrizeAn award given annually to organizations sembly and sold as a service part. See: independent
that, according to the award guidelines, have success- demand.D
fully applied companywide quality control based on sta- depletionThe reduction in the value of a capital asset
tistical quality control and will keep up with it in the (usually a natural resource) in the balance sheet and
future. Although the award is named in honor of W. charging this amount as an expense against income for
Edwards Deming, its criteria are not specifically related the period. See: capital recovery.D
to Demings teachings. There are three separate divi-
sions for the award: the Deming Application Prize, the deployment planning and schedulingPlanning how to
Deming Prize for Individuals, and the Deming Prize for use existing inventory to meet demand requirements.D
Overseas Companies. The award process is overseen by depositionThe sworn questioning, outside of court, of
the Deming Prize Committee of the Union of Japanese a potential witness by the other sides attorney.D
Scientists and Engineers in Tokyo.D
depreciationAn allocation of the original value of an
Demings 14 PointsSyn: 14 Points.D asset against current income to represent the declining
value of the asset as a cost of that time period.
demographicsThe characteristics of a specific popula-
Depreciation does not involve a cash payment. It acts
tion, such as a set of potential customers.D
as a tax shield and thereby reduces the tax payment.
demographic segmentationIn marketing, dividing po- See: capital recovery, depletion, double-declining-
tential markets by characteristics of potential custom- balance depreciation, straight line depreciation, units-
ers, such as age, sex, income, and education.D of-production depreciation.D

demonstrated capacityProven capacity calculated depreciation of a currencyA decrease in the buying

from actual performance data, usually expressed as the power of a countrys currency in terms of other coun-
average number of items produced multiplied by the tries goods and services.D
standard hours per item. See: maximum demonstrated derived demandDemand for component products that
capacity.D arises from the demand for final design products. For
example, the demand for steel is derived from the de-
demurrageThe carrier charges and fees applied when
mand for automobiles.D
rail freight cars and ships are retained beyond a speci-

46 APICS Dictionary, 14th edition

description by brand detailed scheduling

description by brandA method to identify a product or products. This process is associated with green manu-
service required; requesting by brand usually means the facturing.D
product or service provides some advantage over other
design for serviceSimplification of parts and
processes to improve the after-sale service of a product.
description by market grade/industry standardA Syn: design for maintainability.D
method to identify a product or service required when design for six sigmaAn approach to designing products
there is a high level of understanding between user and
and processes that attempts to ensure the firm can
provide products or services that meet six sigma quality
levels. These quality levels correspond to approximately
description by performance characteristicsA method
to identify a product or service by specifying the perfor- 3.4 defects per million opportunities.D
mance required.D design for the environment (DFE)Considering health,
description by specificationA method to identify a safety, and environmental aspects of a product during
product or service required by communicating its cha- the design and development phase of product
racteristics in detail.D development.D

deseasonalized dataData from which seasonality has design for the supply chainEnhancement of a firms
been removed using annual moving averages.D product design in consideration of the issues that will
arise in the supply chain, from raw materials to the final
deshiA Japanese word meaning student.D stage of the products life cycle.D
designThe conversion of a need or innovation into a designing in quality vs. inspecting in qualitySyn: pre-
product, process, or service that meets both the enter- vention vs. detection.D
prise and customer expectations. The design process
design of experiments (DOE)1) A process for structur-
consists of translating a set of functional requirements
ing statistically valid studies in any science. 2) A quality
into an operational product, process, or service.D
management technique used to evaluate the effect of
design changeover flexibilityThe capability of the exist- carefully planned and controlled changes to input
ing production system to accommodate and introduce a process variables on the output variable. The objective
large variety of major design changes quickly.D is to improve production processes.D
design cycleThe interval of time between the start of design phaseOne of the six sigma phases of quality. It
the design process of one model and the completion of involves improvement project identification and selec-
the design process for the model.D tion. See: design-measure-analyze-improve-control
design engineeringThe discipline consisting of process
engineering and product engineering.D design reviewA technique for evaluating a proposed
design to ensure that the design (1) is supported by
design for maintainabilitySyn: design for service.D
adequate materials and materials that are available on
design for manufacturabilitySimplification of parts, a timely basis, (2) will perform successfully during use,
products, and processes to improve quality and reduce (3) can be manufactured at low cost, and (4) is suitable
manufacturing costs.D for prompt field maintenance.D
design for manufacture and assembly (DFMA)A prod- design simplificationA process of reducing the number
uct development approach that involves the manufac- of pieces in a product or machine, eliminating features
turing function in the initial stages of product design to that are seldom needed, and eliminating steps in the
ensure ease of manufacturing and assembly. See: early production process.D
manufacturing involvement.D design-to-orderSyn: engineer-to-order.D
design for qualityA product design approach that uses destructive testingInspection that renders the in-
quality measures to capture the extent to which the de- spected part inoperable.D
sign meets the needs of the target market (customer
attributes), as well as its actual performance, aesthet- detailed planning and controlThe planning of a project
ics, and cost. See: total quality engineering.D in the short term, covering the present time up until a
few weeks out.D
design for remanufactureProducts developed in a
detailed schedulingSyn: operations scheduling.D
manner that allows components to be used in other

APICS Dictionary, 14th edition 47

detail file direct loading

detail fileA file that contains manufacturing, routing, or petitionfocusing on making a product or service
specification details. See: master file.D unique.D
detentionCarrier charges and fees applied when truck digital cash or moneyAn electronic currency equivalent
trailers are retained beyond a specified loading or un- of currency or coins.D
loading time. See: demurrage, express.D
dimensions of qualityAn aspect of quality that is speci-
deteriorationProduct spoilage, damage to the pack- fied to enhance the ability to define quality. The most

D age, and so forth. This is one of the considerations in

inventory carrying cost.D
commonly used list for products was created by David
Garvin. His dimensions are aesthetics, conformance,
durability, features, perceived quality, performance, re-
deterministic modelsModels where no uncertainty is
liability, and serviceability. The most commonly used list
included (e.g., inventory models without safety stock
for service quality was created by Parasuraman,
Zeithamel, and Berry. This list is assurance, availability,
deviationThe difference, usually the absolute differ- completeness, empathy, pleasantness, professionalism,
ence, between a number and the mean of a set of responsiveness, service reliability, tangibles, and
numbers, or between a forecast value and the actual timeliness.D
direct costingSyn: variable costing.D
Deweys reflective thinkingA problem solving tech-
direct costs1) In traditional cost accounting, variable
nique with a formal sequence of (1) problem definition,
costs that can be directly attributed to a particular job
(2) problem analysis, (3) brainstorming solutions, (4)
or operation. Direct material and direct labor are tradi-
development of proposed solutions, and (5) solution
tionally considered direct costs. 2) In activity-based cost
testing and validation.D
(ABC) accounting, a cost that can specifically be traced
DFMAAbbreviation for design for manufacture and and is economically feasible to track to a particular cost
assembly.D object (e.g., the units produced, a production line, a de-
diagnostic journey and remedial journeyA two-phase partment, a manufacturing plant). In contrast, if the cost
investigation used by teams to solve chronic quality must be allocated across various cost objects, it is an
problems. In the first phasethe diagnostic journeythe indirect cost. Based on the cost object under considera-
team journeys from the symptom of a chronic problem tion, the classification of direct and indirect can change.
to its cause. In the second phasethe remedial jour- ABC accounting assumes that more costs traditionally
neythe team journeys from the cause to its remedy.D viewed as fixed costs are variable and can be traced to
cost objects.D
diagnostic studyA brief investigation or cursory me-
thods study of an operation, process, group, or individ- direct-deduct inventory transaction processingA me-
ual to discover causes of operational difficulties or thod of inventory bookkeeping that decreases the book
problems for which more detailed remedial studies may (computer) inventory of an item as material is issued
be feasible. An appropriate work measurement tech- from stock, and increases the book inventory as trans-
nique may be used to evaluate alternatives or to locate actions processed for each item. The key concept here
major areas requiring improvement.D is that the book record is updated coincidentally with
the movement of material out of or into stock. As a re-
dieA special form used in general-purpose equipment
sult, the book record is a representation of what is phys-
to make specific parts.D
ically in stock. Syn: discrete issue.D
differentiated marketingMarketing to different market
direct deliveryThe consignment of goods directly from
segments with a different marketing strategy for each
the supplier to the buyer, frequently used where a third
party acts as intermediary between supplier and
differentiated oligopolyA market in which a few com- buyer.D
panies produce partially differentiated products or ser-
direct laborLabor that is specifically applied to the
vices that are marketed within a given geographical
good being manufactured or used in the performance of
area. Differentiation may be based on quality, features,
the service. Syn: touch labor.D
styling, or services offered along with the product. See:
industry structure types.D direct labor costThe compensation of workers who are
involved in converting material into a finished product.D
differentiation strategyA business strategy that focus-
es on setting a product or service apart from the com- direct loadingSyn: cross-docking.D

48 APICS Dictionary, 14th edition

direct marketing discrete order quantity

direct marketingCommunicating directly with consum- discountAn allowance or deduction granted by the sel-
ers in an effort to elicit a response or a transaction.D ler to the buyer, usually when the buyer meets certain
stipulated conditions that reduce the price of the prod-
direct materialMaterial that becomes a part of the fi-
ucts purchased. A quantity discount is an allowance de-
nal product in measurable quantities.D
termined by the quantity or value of the purchase. A
direct materials costThe acquisition cost of all mate- cash discount is an allowance extended to encourage
rials used directly in the finished product.D payment of an invoice on or before a stated date. A
direct materials purchasingPurchasing from suppliers
on a contractual basis for a fixed period of time or
trade discount is a deduction from an established price
for goods or services made by the seller to those en-
amount of product. For job shops, the purchasing con- gaged in certain businesses. See: price break.D
tract can be only for one job. For repetitive manufactur- discounted cash flowA method of investment analysis
ing, the materials are usually purchased on contracts in which future cash flows are converted, or discounted,
that last for a model run or at least a year.D to their value at the present time. The net present value
direct numerical control (DNC)A system in which sets of an item is estimated to be the sum of all discounted
of numerical control machines are connected to a com- future cash flows.D
puter, allowing direct control of machines by the com- discount periodThe time allowed a customer to re-
puter without use of external storage media.D ceive a cash discount for timely payment of an invoice.D
direct offsetSimilar to bartering, trading goods or ser- discount rateThe rate of interest charged to commer-
vices for related goods or services or agreeing on co-
cial banks by a central banking authority.D
discrete available-to-promiseA calculation based on
direct salesSales from the manufacturer to the ulti-
the available-to-promise figure in the master schedule.
mate consumer without going through a distributor or
For the first period, the ATP is the sum of the beginning
inventory plus the MPS quantity minus backlog for all
direct store delivery (DSD)A shipment that bypasses periods until the item is master scheduled again. For all
the customers warehouse and goes directly from the other periods, if a quantity has been scheduled for that
manufacturers plant to the retail store.D time period then the ATP is this quantity minus all cus-
tomer commitments for this and other periods until
direct truck shipmentShipment made without any ad-
another quantity are scheduled in the MPS. For those
ditional stops, such as for loading or changing trucks.D
periods where the quantity scheduled is zero, the ATP is
disabilityA limitation of capability that limits function- zero (even if deliveries have been promised). The prom-
ing within a plant or a company.D ised customer commitments are accumulated and
disassembly bill of materialIn remanufacturing, a bill shown in the period where the item was most recently
of material used as a guide for the inspection in the scheduled. Syn: incremental available-to-promise. See:
teardown and inspection process. On the basis of in- available-to-promise.D
spection, this bill is modified to a bill of repair defining discrete issueSyn: direct-deduct inventory transaction
the actual repair materials and work required. Syn: processing.D
teardown bill of material. See: repair bill of material.D
discrete manufacturingThe production of distinct
disbursementThe physical issuance and reporting of items such as automobiles, appliances, or computers.D
the movement of raw material, components, or other
items from a stores room or warehouse. Taking a part discrete order pickingA method of picking orders in
out of inventory. See: issue.D which the items on one order are picked before the next
order is picked. See: batch picking, order picking, zone
disbursement listSyn: picking list.D picking.D
disciplinary actionAn action taken to enforce com-
discrete order quantityAn order quantity that
pliance with organizational rules and policies.D
represents an integer number of periods of demand.
discontinuous demandA demand pattern that is cha- Most MRP systems employ discrete order quantities.
racterized by large demands interrupted by periods with See: fixed-period requirements, least total cost, least
no demand, as opposed to a continuous or steady (e.g., unit cost, lot-for-lot, part period balancing, period order
daily) demand. Syn: lumpy demand.D quantity, Wagner-Whitin algorithm.D

APICS Dictionary, 14th edition 49

discrete variable distribution cost

discrete variableA variable, such as number of de- distressed goodsProducts that are damaged or close
fects, that can take on only certain values (such as in- to their expiration date and cannot be sold at full
tegers). See: continuous variable.D price.D
discussion listA group of people who have all signed distributed inventoryMaintaining inventory in a variety
up on a listserver to participate via email in the discus- of locations to provide better customer service.D
sion of a given topic.D

distributed numerical controlAn approach to auto-
diseconomies of scaleOccurs when more outputs are
mated machining in which each machine tool has its
required than the efficient quantity that the facility is
own dedicated microcomputer or computer numerical
designed to produce; this causes an increase in unit
control (CNC). Each machine tools CNC is connected
via a network with a minicomputer that handles distri-
disintermediationThe process of eliminating an inter- buted processing between the host mainframe comput-
mediate stage or echelon in a supply chain. Total supply er and the CNC. This minicomputer handles part
chain operating expense is reduced, total supply chain program transfers and machine status data collection.
inventory is reduced, total cycle time is reduced, and This approach is considered more advanced than direct
profits increase among the remaining echelons. See: numerical control, in which several machine tools are
echelon.D tied directly to a central computer.D
dispatch(ing) boardSyn: control board.D distributed systemsComputer systems in multiple lo-
dispatcher1) A production control person whose pri- cations throughout an organization, working in a coop-
mary function is dispatching. 2) A transportation worker erative fashion, with the system at each location
who sends out and tracks cars, buses, trucks, railcars, primarily serving the needs of that location but also able
and other vehicles.D to receive and supply information from other systems
within a network.D
dispatchingThe selecting and sequencing of available
jobs to be run at individual workstations and the as- distribution1) The activities associated with the
signment of those jobs to workers.D movement of material, usually finished goods or service
parts, from the manufacturer to the customer. These
dispatching ruleThe logic used to assign priorities to
activities encompass the functions of transportation,
jobs at a work center.D
warehousing, inventory control, material handling, order
dispatch listA listing of manufacturing orders in priority administration, site and location analysis, industrial
sequence. The dispatch list, which is usually communi- packaging, data processing, and the communications
cated to the manufacturing floor via paper or electronic network necessary for effective management. It in-
media, contains detailed information on priority, loca- cludes all activities related to physical distribution, as
tion, quantity, and the capacity requirements of the well as the return of goods to the manufacturer. In
manufacturing order by operation. Dispatch lists are many cases, this movement is made through one or
normally generated daily and oriented by work center. more levels of field warehouses. Syn: physical distribu-
Syn: work center schedule, priority report.D tion. 2) The systematic division of a whole into discrete
dispersionThe scattering of the observations of a fre- parts having distinctive characteristics.D
quency distribution around its average.D
distribution by valueSyn: ABC classification.D
dispute resolutionThe process of arbitration or media-
distribution centerA location used to store inventory.
tion to settle arguments without going to court.D
Decisions driving warehouse management include site
distinctive competencyA sustainable advantage that a selection, number of facilities in the system, layout, and
company has over its competitors. distributed data methods of receiving, storing, and retrieving goods.D
processing (DDP)A data processing organizational
concept under which computer resources of a company distribution channelThe distribution route, from raw
are installed at more than one location with appropriate materials through consumption, along which products
communication links. Processing is performed at the travel. See: channels of distribution, marketing
users location generally on a smaller computer and channel.D
under the users control and scheduling, as opposed to
distribution costThose items of cost related to the ac-
processing for all users being done on a large, centra-
tivities associated with the movement and storage of
lized computer system.D
finished products. Distribution costs can include inven-

50 APICS Dictionary, 14th edition

distribution curve dock-to-stock inventory

tory costs, transportation costs, and order processing (warehouse space, workforce, money, trucks, freight
costs.D cars, etc).D

distribution curveA graphic display of numerous data distribution systemA group of interrelated facilities
points showing the mean and frequency of occurrences manufacturing and one or more levels of warehousing
of observations on a chart. See: normal distribution linking the production, storage, and consumption activi-
curve.D ties for spare parts and finished goods inventory. See:

distribution inventoryInventory, usually spare parts

and finished goods, located in the distribution system
pipeline stock.D
distribution warehouseA facility where goods are re- D
(e.g., in warehouses, in-transit between warehouses ceived in large-volume uniform lots, stored briefly, and
and the consumer).D then broken down into smaller orders of different items
required by the customer. Emphasis is on expeditious
distribution network structureThe planned channels of movement and handling.D
inventory disbursement from one or more sources to
distributorA business that does not manufacture its
field warehouses and ultimately to the customer. There
own products, but purchases and resells these prod-
may be one or more levels in the disbursement system.
ucts. Such a business usually maintains a finished
Syn: bill of distribution.D
goods inventory. Syn: wholesaler.D
distribution of forecast errorsTabulation of the fore-
divergent pointAn operation in a production process in
cast errors according to the frequency of occurrence of
which a single material/component enters and, after
each error value. The errors in forecasting are, in many
processing, can then be routed to a number of different
cases, normally distributed even when the observed da-
downstream operations.D
ta do not come from a normal distribution.D
diversification strategyAn expansion of the scope of
distribution plannerA person who plans inventories the product line to exploit new markets. A key objective
and schedules replenishment shipments for the distri- of a diversification strategy is to spread the companys
bution centers.D risk over several product lines in case there should be a
distribution planningThe planning activities associated downturn in any one products market.D
with transportation, warehousing, inventory levels, ma- dividendA payment to stockholders either in cash or
terials handling, order administration, site and location stock.D
planning, industrial packaging, data processing, and
dividend yieldThe ratio of dividends per share over
communications networks to support distribution.D
stock price.D
distribution requirements planning (DRP)1) The func-
DMAICAcronym for define-measure-analyze-improve-
tion of determining the need to replenish inventory at
branch warehouses. A time-phased order point ap-
proach is used where the planned orders at the branch DMAIC processAcronym for define, measure, analyze,
warehouse level are exploded via MRP logic to be- improve, and control process.D
come gross requirements on the supplying source. In DNCAbbreviation for direct numerical control.D
the case of multilevel distribution networks, this explo-
sion process can continue down through the various dock receiptA receipt recorded for a shipment re-
levels of regional warehouses (master warehouse, fac- ceived or delivered at a pier or dock.D
tory warehouse, etc.) and become input to the master dock-to-stockA program by which specific quality and
production schedule. Demand on the supplying sources packaging requirements are met before the product is
is recognized as dependent, and standard MRP logic released. Prequalified product is shipped directly into
applies. 2) More generally, replenishment inventory cal- the customers inventory. Dock-to-stock eliminates the
culations, which may be based on other planning ap- costly handling of components, specifically in receiving
proaches such as period order quantities or replace and inspection and enables product to move directly
exactly what was used, rather than being limited to the into production.D
time-phased order point approach.D
dock-to-stock inventoryA supplier-customer relation-
distribution resource planning (DRP II)The extension of ship where specified quality and packaging require-
distribution requirements planning into the planning of ments are met before the product is released. The
the key resources contained in a distribution system product is then received directly into the customers in-

APICS Dictionary, 14th edition 51

dock-to-stock time dumping

ventories. See: point-of-use inventory, stockless driver1) In activity-based cost accounting, an opera-
purchasing.D tion that influences the quantity of work required and
cost of an activity. Syn: cost driver. 2) In the theory of
dock-to-stock timeSyn: put-away time.D
constraints, an underlying cause that is responsible for
Dodge-Romig tablesInformation about the correct several observed effects.D
sample size and maximum defective quantity in a sam-
drop-dead dateThe last possible date to apply influ-
ple to satisfy lot acceptance; a quality control

D measurement.D
DOEAbbreviation for design of experiments.D
ence to a future activity.D
drop shipTo take the title of the product but not ac-
tually handle, stock, or deliver it (i.e., to have one sup-
dogA slang term used to refer to a low-growth, low- plier ship directly to another or to have a supplier ship
market-share product. See: growth-share matrix.D directly to the buyers customer).D

dojoA Japanese word meaning hall.D DRPAbbreviation for distribution requirements

domestic corporationA company incorporated in a par-
ticular state or country.D DRP IIAbbreviation for distribution resource planning.D

double-declining-balance depreciationA type of accele- drumIn the theory of constraints, the constraint is
rated depreciation. See: depreciation.D viewed as a drum, and nonconstraints are like soldiers
in an army who march in unison to the drumbeat; the
double order point systemA distribution inventory resources in a plant should perform in unison with the
management system that has two order points. The drumbeat set by the constraint.D
smallest equals the original order point, which covers
demand during replenishment lead time. The second drum-buffer-rope (DBR)The theory of constraints me-
order point is the sum of the first order point plus nor- thod for scheduling and managing operations that have
mal usage during manufacturing lead time. It enables an internal constraint or capacity-constrained
warehouses to forewarn manufacturing of future reple- resource.D
nishment orders.D drum scheduleThe detailed production schedule for a
double-sampling planA way to control quality by taking resource that sets the pace for the entire system. The
one sample and making an accept or reject decision, drum schedule must reconcile the customer require-
and, if the decision cannot be made, taking a second ments with the systems constraint(s).D
sample and making the accept or reject decision by DSDAbbreviation for direct store delivery.D
combining the results of both samples.D
DSSAbbreviation for decision support system.D
double smoothingSyn: second-order smoothing.D
DTFAbbreviation for demand time fence.D
downgradeThe substitution of a product of lower quali- dual-card kanban systemSyn: two-card kanban
ty, value, or status for another either in planning or in system.D
dual sourcingA method for sourcing requirements by
downloadThe process of transferring data or programs using a few suppliers for the same products or services.
from one computer to another (and usually saving to a See: multisourcing, multiple sourcing, single sourcing.D
due dateThe date when purchased material or produc-
downstreamUsed as a relative reference within a firm tion material is due to be available for use. Syn: ex-
or supply chain to indicate moving in the direction of the pected receipt date. See: arrival date.D
end customer.D
due date ruleA dispatching rule that directs the se-
downstream operationThe tasks subsequent to the quencing of jobs by the earliest due date.D
task currently being planned or executed.D
dummy activityIn activity-on-arrow diagramming, an
downtimeTime when a resource is scheduled for op- activity with zero duration used to express a precedence
eration but is not producing for reasons such as main- relationship that cant otherwise be diagrammed. It is
tenance, repair, or setup.D shown graphically with a dashed arrow.D
drawbackA refund of customs duties paid on material dumpingSelling goods below costs in selected
imported and later exported.D markets.D

52 APICS Dictionary, 14th edition

dunnage earned value method

dunnageThe packing material used to protect a prod- earliest start dateThe earliest date an operation or or-
uct from damage during transport.D der can start. It may be restricted by the current date,
material availability, or management-specified maxi-
durability1) A measurement of time or amount of use
mum advance.E
before a product needs repair or replacement. 2) One of
the eight dimensions of quality that refers to the length earlinessIf a job is finished before its due date, the
of a products economic life.D difference between its completion date and the due
durable goodsGenerally, any goods whose continuous
serviceability is likely to exceed three years (e.g., trucks,
date. See: lateness, tardiness.E

early finish date (EF)In the critical path method of E

furniture). See: consumer durable goods.D project management, the earliest time at which a given
activity is estimated to be completed. This date can
durationIn project management, the length of time an
change as the project is executed.E
activity is estimated to require.D
dutyA tax levied by a government on the importation, early manufacturing involvementThe process of
exportation, or use and consumption of goods.D involving manufacturing personnel early in the product
design activity and drawing on their expertise, insights,
duty-free zoneAn area where merchandise is brought and knowledge to generate better designs in less time
into the country for further work to be done. Duty is paid and to generate designs that are easier to manufacture.
only on the items brought in, normally at a lower rate Early involvement of manufacturing, field service,
than finished goods, and paid only at the time of sale.D suppliers, customers, and so on means drawing on their
dynamic congruenceIn simulation, the situation where expertise, knowledge, and insight to improve the design.
a physical system and a simulation model mimic one Benefits include increased functionality, increased
another closely.D quality, ease of manufacture and assembly, ease of
testing, better testing procedures, ease of service,
dynamic kanbanAn electronic signal using kanban to decreased cost, and improved aesthetics. See: design
create an automatic purchase order to a supplier or a for manufacture and assembly, participative
manufacturing order to a shop. Dynamic kanban is one design/engineering.E
of the elements of a manufacturing execution system
that enables just-in-time deliveries to production. See: early start date (ES)In the critical path method of
kanban.D project management, the earliest time at which a given
activity is estimated to begin. This date can change as
dynamic lot sizingAny lot-sizing technique that creates
the project is executed.E
an order quantity subject to continuous recomputation.
See: least total cost, least unit cost, part period balanc- early supplier involvement (ESI)The process of
ing, period order quantity, Wagner-Whitin algorithm.D involving suppliers early in the product design activity
and drawing on their expertise, insights, and knowledge
dynamic programmingA method of sequential decision
to generate better designs in less time and designs that
making in which the result of the decision at each stage
are easier to manufacture with high quality. See:
affords the best possible means to exploit the expected
participative design/engineering.E
range of likely (yet unpredictable) outcomes in the fol-
lowing decision-making stages.D earmarked materialThe reserved material on hand
that is physically identified, rather than merely reserved

in a balance-of-stores record.E

earned hoursA statement reflecting the standard hour

assigned for actual production reported during the pe-
EACAbbreviation for estimate at completion.E
riod. Syn: earned volume.E
EAPAbbreviation for employee assistance program.E
earned valueIn project management, the total value,
earliest due date (EDD)A priority rule that sequences including overhead, of approved estimates for com-
the jobs in a queue according to their (operation or job) pleted activities or portions thereof.E
due dates. See: earliest operation due date.E
earned value methodIn project management, a com-
earliest operation due date (ODD)A dispatching rule parison of planned activity time and cost to actual activ-
that selects the job having the earliest due date for the ity time and cost to see if a project is on schedule by
impending operation. See: earliest due date.E time and by budget.E

APICS Dictionary, 14th edition 53

earned volume efficiency

earned volumeSyn: earned hours.E cimal, and C = unit cost. Syn: economic lot size, mini-
mum cost order quantity. See: total cost curve.E
earnings before interest and taxes (EBIT)Syn: net op-
erating income.E economic value addedIn managerial accounting, the
net operating profit earned above the cost of capital for
earnings before taxes (EBT)Earnings before interest
a profit center.E
and taxes minus interest charges.E
economy of scaleA phenomenon whereby larger vo-

EBITAcronym for earnings before interest and taxesE
lumes of production reduce unit cost by distributing
eBPPAbbreviation for electronic bill presentment and fixed costs over a larger quantity. See: economy of
payment.E scope.E
EBTAbbreviation for earnings before taxes.E economy of scopeUsing one versatile plant to produce
e-cashAn electronic system that provides for deposits many different products at a lower cost than making
and withdrawals of digital money. It permits a payer us- each product in different plants at a higher cost. See:
ing it to remain anonymous.E economy of scale.E

echelonA level of supply chain nodes. For example, a ECRAbbreviation for efficient consumer response.E
supply chain with two independent factory warehouses EDDAbbreviation for earliest due date.E
and nine wholesale warehouses delivering product to
350 retail stores is a supply chain with three echelons EDIAbbreviation for electronic data interchange.E
between the factory and the end customer. One echelon EDIFACTAbbreviation for EDI for administration, com-
consists of the two independent factory warehouses, merce, and transport.E
one echelon consists of the nine wholesale ware-
EDI for administration, commerce, and transport
houses, and one echelon consists of the 350 retail
(EDIFACT)A set of United Nations rules for electronic
stores. Each echelon adds operating expense, holds in-
data interchange. These are international guidelines
ventory, adds to the cycle time, and expects to make a
and standards for the electronic exchange of data re-
profit. See: disintermediation.E
garding trade.E
e-commerceAbbreviation for electronic commerce.E
EDTAn abbreviation for electronic data transfer.E
econometric modelA set of equations intended to be
edutainmentMixing entertainment and education
used simultaneously to capture the way in which de-
elements to make learning more fun.E
pendent and independent variables are interrelated.E
EEOAbbreviation for equal employment opportunity.E
econometric modelingThe process of developing eco-
nometric models. See: econometric model.E EEOCAbbreviation for Equal Employment Opportunity
economic indicatorAn index of total business activities
at the regional, national, and global levels.E EFAbbreviation for early finish date.E
economic infrastructureA nations networks for sup- effective capacitySyn: rated capacity.E
porting commerce, including transportation, communi- effective dateThe date on which a component or an
cations, and finance.E operation is to be added or removed from a bill of ma-
economic lifeThe time until a product is scrappednot terial or an assembly process. The effective dates are
because it is unusable but because repairs are becom- used in the explosion process to create demands for
ing too expensive to justify further use.E the correct items. Normally, bills of material and routing
systems provide for an effectivity start date and stop
economic lot sizeSyn: economic order quantity.E
date, signifying the start or stop of a particular relation-
economic order quantity (EOQ)A type of fixed order ship. Effectivity control also may be by serial number
quantity model that determines the amount of an item rather than date. Syn: effectivity, effectivity date.E
to be purchased or manufactured at one time. The in-
effective interest rateSyn: annual percentage rate.E
tent is to minimize the combined costs of acquiring and
carrying inventory. The basic formula is: effectivitySyn: effective date.E
quantity effectivity dateSyn: effective date.E
where A = annual usage in units, S = ordering costs in efficiencyA measurement (usually expressed as a
dollars, i = annual inventory carrying cost rate as a de- percentage) of the actual output to the standard output

54 APICS Dictionary, 14th edition

efficiency variance employee assistance program (EAP)

expected. Efficiency measures how well something is electronic commerce applicationA computer interface
performing relative to existing standards; in contrast, between two organizations that is used to carry out
productivity measures output relative to a specific input business transactions electronically.E
(e.g., tons/labor hour). Efficiency is the ratio of (1)
electronic communitiesCommunities of people who
actual units produced to the standard rate of production
communicate exclusively electronically.E
expected in a time period or (2) standard hours
produced to actual hours worked (taking longer means electronic data interchange (EDI)The paperless (elec-
less efficiency) or (3) actual dollar volume of output to a
standard dollar volume in a time period. Illustrations of
tronic) exchange of trading documents, such as pur-
chase orders, shipment authorizations, advanced E
these calculations follow. (1) There is a standard of 100 shipment notices, and invoices, using standardized
pieces per hour and 780 units are produced in one document formats.E
eight-hour shift; the efficiency is 780/800 converted to
electronic documentThe electronic representation of a
a percentage, or 97.5 percent. (2) The work is
document that can be printed.E
measured in hours and took 8.21 hours to produce 8
standard hours; the efficiency is 8/8.21 converted to a electronic formAn electronic version of a paper form.
percentage or 97.5 percent. (3) The work is measured These forms eliminate the cost of printing, storing, and
in dollars and produces $780 with a standard of $800; distributing paper forms.E
the efficiency is $780/$800 converted to a percentage,
electronic funds transfer (EFT)A computerized system
or 97.5 percent.E
that processes financial transactions and information
efficiency varianceIn cost accounting, the difference about these transactions or performs the exchange of
between the actual volume of a resource used and the value between two parties.E
budgeted volume, multiplied by the budgeted or stan-
electronic invoice presentment and payment (EIPP)
dard price.E
Accepting and sending invoices and payments over the
efficient consumer response (ECR)Replenishment internet.E
through a distribution network based on point-of-sale
electronic mail (email)A technology for handling mail
e-formAbbreviation for electronic form.E
electronic marketAn internet-based market where
EFTAbbreviation for electronic funds transfer.E most sales occur electronically.E
EIAbbreviation for employee involvement.E electronic product codes (EPCs)Codes that are used
80-20A term referring to the Pareto principle. The with RFID tags to carry information on the product that
principle suggests that most effects come from relative- will support warranty programs.E
ly few causes; that is, 80 percent of the effects (or sales
electronic publishingRepresentation of text and mul-
or costs) come from 20 percent of the possible causes
timedia documents electronically.E
(or items). See: ABC classification.8
electronic signatureAn authentication that validates a
EIPPAbbreviation for electronic invoice presentment
transaction by means of an authorization code to identi-
and payment.E
fy an individual or group.E
elasticity of demand (supply)The ratio of the percen-
tage change in quantity demanded (supplied) to the emailAcronym for electronic mail.E
percentage change in price.E embezzlementThe fraudulent taking of anothers
e-learningTraining or schooling done online.E property while acting in a fiduciary capacity.E

electronic bill presentment and payment (eBPP)A sys- empathyA dimension of service quality referring to car-
tem that connects the bill issuer, bill payer, and the ing, individualized attention from a service firm.E
payers bank to facilitate electronic payment. Payment empiricalPertaining to a statement or formula based
is usually by credit card.E upon experience or observation rather than on deduc-
electronic commerce (e-commerce)The use of com- tion or theory.E
puter and telecommunication technologies to conduct
employee assistance program (EAP)Employer-provided
business via electronic transfer of data and
service aimed at helping employees and their families
with personal and work-related problems. Examples in-

APICS Dictionary, 14th edition 55

employee empowerment enterprise performance management (EPM)

clude financial counseling and chemical-dependency endogenous variableA variable whose value is deter-
rehabilitation programs.E mined by relationships included within the model.E

employee empowermentThe practice of giving non- end productSyn: end item.E

managerial employees the responsibility and the power
end user1) The final consumer of a product. 2) The
to make decisions regarding their jobs or tasks. It is as-
recipient of an output from a computer system.E
sociated with the practice of transfer of managerial re-

E sponsibility to the employee. Empowerment allows the end-user computingUse of computer resources by
employee to take on responsibility for tasks normally non-information-system personnel to enter, retrieve,
associated with staff specialists. Examples include al- manipulate, or print data.E
lowing the employee to make scheduling, quality, enforced problem solvingThe methodology of inten-
process design, or purchasing decisions.E tionally restricting a resource (e.g., inventory, storage
employee involvement (EI)The concept of using the space, number of workers) to expose a problem that
experience, creative energy, and intelligence of all em- must then be resolved.E
ployees by treating them with respect, keeping them engineering changeA revision to a drawing or design
informed, and including them and their ideas in released by engineering to modify or correct a part. The
decision-making processes appropriate to their areas of request for the change can be from a customer or from
expertise. Employee involvement focuses on quality and production, quality control, another department, or a
productivity improvements. Syn: people involvement.E supplier. Syn: engineering change notice, engineering
employee stock ownership plan (ESOP)In the United change order.E
States, a program that encourages workers to purchase engineering change noticeSyn: engineering change.E
company stockgenerally tied into the compensation/
benefits package. The intention is to give workers a feel- engineering change orderSyn: engineering change.E
ing of participation in the management and direction of engineering characteristicsThe technical features de-
the company.E signed into a product.E
empowermentA condition whereby employees have engineering drawingsA visual representation of the
the authority to make decisions and take action in their dimensional characteristics of a part or assembly at
work areas without prior approval. For example, an op- some stage of manufacture.E
erator can stop a production process if a problem is de-
engineering orderSyn: experimental order.E
tected, or a customer service representative can send
out a replacement product if a customer calls with a engineering standardDesign or test guidelines in-
problem.E tended to promote the design, production, and test of a
part, component, or product in a manner that promotes
encryptionChanging readable words into another form,
standardization, ease of maintenance, consistency,
called a cipher, which hides the texts meaning.E
adequacy of test procedures, versatility of design, ease
ending inventoryA statement of on-hand quantities or of production and field service, and minimization of the
the dollar value of a SKU at the end of a period, often number of different tools and special tools required.E
determined by a physical inventory.E
engineer-to-orderProducts whose customer specifica-
end itemA product sold as a completed item or repair tions require unique engineering design, significant cus-
part; any item subject to a customer order or sales fore- tomization, or new purchased materials. Each customer
cast. Syn: end product, finished good, finished product. order results in a unique set of part numbers, bills of
See: good.E material, and routings. Syn: design-to-order.E

end-of-life-inventoryInventory kept on hand to satisfy en routeA term describing goods in transit.E

demand for products that are no longer being
enterpriseAny undertaking, venture, initiative, or busi-
ness organization with a defined mission.E
end-of-life managementPlanning for the phase-out of
enterprise performance management (EPM)The
one product and the phase-in of a new product to avoid
process of monitoring performance across the enter-
both the excessive inventory of and an out-of-stock sit-
prise with the goal of improving business performance.
uation with the old product before the replacement
An EPM system integrates and analyzes data from many
product is available.E
sources, including e-commerce systems, front- and

56 APICS Dictionary, 14th edition

enterprise resources management equivalent unit cost

back-office applications, data warehouses, and external EOQ = 1Reducing setup time and inventory to the
data sources. Advanced EPM systems can support point where it is economically sound to produce in
many performance methodologies, such as the ba- batches with a size of one. Often EOQ = 1 is an ideal to
lanced scorecard.E strive for, like zero defects.E
enterprise resources managementThe planning, ex- EOQ tablesTables listing several ranges of monthly
ecution, control, and measurement functions required usages in dollars and the appropriate order size in dol-
to effectively operate an enterprise.E
enterprise resources planning (ERP)Framework for
organizing, defining, and standardizing the business
lars or monthly usage for each usage range.E

EPAAbbreviation for Environmental Protection

processes necessary to effectively plan and control an
organization so the organization can use its internal EPCAbbreviation for electronic product code.E
knowledge to seek external advantage.E EPMAbbreviation for enterprise performance
enterprise resources portalA means for a company to management.E
share, exchange, or transact information with an exter-
equal employment opportunity (EEO)In the United
nal business partner using internet-based technologies.
States, the laws prohibiting discrimination in employ-
An enterprise resources portal is often associated with
ment because of race or color, sex, age, handicap sta-
an enterprise resources planning system, which can be
tus, religion, and national origin.E
configured to share or present such information via an
internet portal or hyperlink. An enterprise resources por- Equal Employment Opportunity Commission (EEOC)An
tal can also be one means of implementing a private administrative agency in the United States that over-
trading exchange.E sees Title VII of the Civil Rights Act, which prohibits em-
ployment discrimination based on race, color, religion,
entrepreneurOne who organizes resources productive-
sex, or national origin.E
ly and bears the risk of the venture.E
environmentally responsible businessA firm that oper- equal protection clauseA part of the Fourteenth
ates in such a way as to minimize deleterious impacts Amendment to the U.S. Constitution requiring similar
to society. See: green manufacturing, green supply treatment of citizens in similar circumstances.E
chain.E equal runout methodSyn: equal runout quantities.E
environmentally responsible manufacturingA collec- equal runout quantitiesOrder quantities for items in a
tion of manufacturing activities that includes design of group that result in a supply that covers an equal time
the product, facility, manufacturing processes, logistics, for all items. Syn: equal runout method. See: fair-share
and supplier relationships that reduce or eliminate envi- quantity logic.E
ronmental waste through innovation and
improvements.E equilibrium pointThe point in a market where the de-
mand for a product and the supply of that product are
environmentally responsible purchasingSyn: responsi-
exactly equal. If supply were greater, the price would
ble procurement.E
fall. If demand were greater, the price would rise. Free
environmentally sensitive engineeringDesigning with markets tend to move toward their equilibrium point.E
consideration of how a product or its packaging will ul-
equipment classA means to describe a group of
timately be disposed.E
equipment with similar characteristics for purposes of
Environmental Protection Agency (EPA)A U.S. agency planning and scheduling.E
with regulatory authority over matters affecting the envi-
ronment, including waste generation and habitat equityThe part of a companys total assets not pro-
destruction.E vided by creditors; owner-invested funds.E

environmental scanningProcess used to expose an equivalent daysThe standard hour requirements of a

organizations potential strengths, weaknesses, oppor- job converted to days for scheduling purposes.E
tunities, and threats. Many experts emphasize oppor-
equivalent unit costA method of costing that uses the
tunities and threats because the tool is primarily
total cost incurred for all like units for a period of time
divided by the equivalent units completed during the
EOQAbbreviation for economic order quantity.E same time period.E

APICS Dictionary, 14th edition 57

equivalent units executive information system

equivalent unitsA translation of inventories into equiv- actions to break an assumption and hence solve (eva-
alent finished goods units or of inventories exploded porate) the problem can be determined.E
back to raw materials for period end valuation of inven-
eventAn event is an identifiable point in time among a
tories. An equivalent unit can be the sum of several par-
set of related activities. Graphically, an event can be
tially completed units. Two units 50 percent completed
represented by two approaches: (1) in activity-on-node
are equivalent to one unit 100 percent completed.E
networks, it is represented by a node; (2) in activity-on-

E ergonomicsApproach to job design that focuses on the

interactions between the human operator and such tra-
ditional environmental elements as atmospheric con-
arrow networks, the event is represented by the arrow.E
event-based marketingPromoting goods or services
through specific events.E
taminants, heat, light, sound, and all tools and
equipment.E event-on-arrow networkSyn: activity-on-arrow
ERPAbbreviation for enterprise resources planning.E
event-on-node networkSyn: activity-on-node network.E
ESAbbreviation for early start date.E
everyday low prices (EDLP)A retail strategy of keeping
escalationAn amount or percentage by which a con- prices low across all products or services as opposed to
tract price may be adjusted if specified contingencies having sales at certain times.E
occur, such as changes in the suppliers raw material or
exception messageSyn: action message.E
labor costs.E
exception reportA report that lists or flags only those
ESIAbbreviation for early supplier involvement.E
items that deviate from the plan.E
ESOPAcronym for employee stock ownership plan.E
excess capacityCapacity that is not used to either pro-
estimate at completion (EAC)Estimated cost of an ac- duce or protect the creation of throughput.E
tivity or project when the defined scope of work will be
excess inventoryAny inventory in the system that ex-
finished. It is the actual cost-to-date plus estimate-to-
ceeds the minimum amount necessary to achieve the
complete for uncompleted activities.E desired throughput rate at the constraint or that ex-
estimate of errorIn statistics, a measure of dispersion. ceeds the minimum amount necessary to achieve the
See: standard deviation, standard error, variance.E desired due date performance. Total inventory = pro-
ductive inventory + protective inventory + excess
estimate to complete (ETC)Expected cost to complete
all remaining work for an activity or project.E
excess issueThe removal from stock and assignment
ETCAbbreviation for estimate to complete.E
to a schedule of a quantity higher than the schedule
ethical standardsA set of guidelines for proper con- quantity. Syn: overissue.E
duct by business professionals. For example, the ISM exchange rateThe rate at which one currency converts
(formerly NAPM) provides a set of principles and stan- to another.E
dards for the proper conduct of purchasing activities.E
exchange unitThe number of units to be produced be-
euroOfficial currency of the Eurozone, which forms a fore changing the bit, tool, or die. See: process batch.E
large part of the European Union.E
exclusive useCarrier vehicles assigned for the exclu-
eurobondAn internationally marketed bond.E sive use of a particular shipper.E
eurocurrencyMoney that is deposited outside of the executing processesThe processes performed to com-
country that issued it (outside of the issuing countrys plete a project plan to accomplish the objectives set
control).E forth in the project scope.E
eurodollarA U.S. dollar held in a foreign bank.E executive dashboardA set of cross-functional metrics
European Union (EU)An economic and political union for measuring company performance that indicates the
of European countries, created to strengthen econo- health of the company. It usually includes the compa-
mies and lower trade barriers.E nys key performance indicators. See: dashboard.E
executive information systemA software application
evaporating cloudIn the theory of constraints, a logic-
used by top managers, without assistance, to access
based tool for surfacing assumptions related to a con-
information on the current organizational status.E
flict or problem. Once the assumptions are surfaced,

58 APICS Dictionary, 14th edition

executive sales and operations planning explode-to-deduct

executive sales and operations planningThe portion of expected demand during lead timeSyn: demand dur-
sales and operations planning that defines executive ing lead time.E
decision-making processes to balance supply and de-
expected lifeThe average length of time a product re-
mand at the volume level in families, fully integrates
mains in service or in a serviceable condition.E
financial planning and operational planning, and that
provides a forum for establishing and linking high-level expected receipt dateSyn: due date.E
strategic plans with day-to-day operations. See: sales

expected valueThe average value that would be ob-
and operations planning.E served in taking an action an infinite number of times.
exemplarA particularly strong practice that should be The expected value of an action is calculated by multip-
imitated.E lying the outcome of the action by the probability of
achieving the outcome.E
exemptGenerally, a classification of employees/jobs
for which compensation is not determined by extending expediteTo rush or chase production or purchase or-
the recorded hours worked by an hourly rate (e.g., pay is ders that are needed in less than the normal lead time;
specified at an annual or monthly rate). Exempt to take extraordinary action because of an increase in
employees include most professionals, administrative relative priority. Syn: stockchase.E
and management personnel, and sales representatives. expeditorA production control person whose primary
Specifically, the term refers to and is fully defined by the duty is expediting.E
U.S. Department of Labor Fair Labor Standards Act,
expendablesSyn: consumables.E
which regulates minimum wages and overtime for
nonexempt employees. See: exempt positions, expenseExpenditures of short-term value, including
nonexempt positions.E depreciation, as opposed to land and other fixed capi-
tal. See: overhead.E
exempt carrierA for-hire carrier that is free from eco-
nomic regulation.E expensed stocksSyn: floor stocks.E

exempt employeeA person filling an exempt position. experience curveSyn: learning curve.E
See: exempt positions.E experience curve pricingThe average cost pricing me-
exempt positionsPositions that do not require the thod, but using an estimate of future average costs,
payment of overtime because they meet the tests of based on an experience (learning) curve.E
executive, supervisory, or administrative activity, as de- experimental designA formal plan that details the spe-
fined under the Fair Labor Standards Act.E cifics for conducting an experiment, such as which sta-
exit interviewAn interview given to an employee who is tistical techniques and responses, factors, levels,
leaving the company. The purpose is to find out why a blocks, and treatments, are to be used.E
person is leaving, what was liked and disliked about the experimental orderAn order generated by the laborato-
job and the company, and what changes would make ry, research and development, or engineering group
the department and the company a better place to that must be run through regular production facilities
work.E with potential future product or market development as
exogenous variableA variable whose values are de- a project or team goal. Syn: engineering order, laborato-
termined by considerations outside the model in ry order, pilot order, R&D order.E
question.E experimental researchA form of research (sometimes
expansionAny increase in the capacity of a plant, facil- used in marketing research) where matched sets of
ity, or unit, usually by added investment. The scope of people are controlled for certain variables (such as in-
this increase extends from the elimination of problem come, age, and so on) while other variables (such as
areas to the complete replacement of an existing facility products offered) are varied to test research questions.
with a larger one.E See: marketing research.E

expected completion quantityThe planned quantity of expert systemA type of artificial intelligence computer
a manufacturing order after expected scrap.E system that mimics human experts by using rules and
heuristics rather than deterministic algorithms.E
expected demandThe quantity expected to be con-
explodeTo perform a bill-of-material explosion.E
sumed during a given time period when usage is at the
forecast rate. See: demand during lead time.E explode-to-deductSyn: backflush.E

APICS Dictionary, 14th edition 59

explosion extrinsic forecasting method

explosionSyn: requirements explosion. Ant: pose of goods, that induces the buyer to buy and on
implosion.E which the seller intends the buyer to depend.E

explosion levelSyn: low-level code.E extended enterpriseThe notion that supply chain part-
ners form a larger entity. See: supply chain community.E
exponential distributionA continuous probability distri-
bution where the probability of occurrence either steadi- extensible markup language (XML)This language facili-

ly increases or decreases. The steady increase case tates direct communication among computers on the
(positive exponential distribution) is used to model phe- internet. Unlike the older hypertext markup language
nomena such as customer service level versus cost. (HTML), which provides HTML tags giving instructions to
The steady decrease case (negative exponential distri- a web browser about how to display information, XML
bution) is used to model phenomena such as the weight tags give instructions to a web browser about the cate-
given to any one time period of demand in exponential gory of information.E
external customerA person or organization that rece-
exponential smoothing forecastA type of weighted ives a good, a service, or information but is not part of
moving average forecasting technique in which past ob- the organization supplying it. See: customer, internal
servations are geometrically discounted according to customer.E
their age. The heaviest weight is assigned to the most
external environmentAll the factors that exist outside
recent data. The smoothing is termed exponential be-
the boundary of the organization that have the possibili-
cause data points are weighted in accordance with an
ty of affecting any part of the organization. See: internal
exponential function of their age. The technique makes
environment, organizational environment.E
use of a smoothing constant to apply to the difference
between the most recent forecast and the critical sales external factoryA situation where suppliers are viewed
data, thus avoiding the necessity of carrying historical as an extension of the firms manufacturing capabilities
sales data. The approach can be used for data that ex- and capacities. The same practices and concerns that
hibit no trend or seasonal patterns. Higher order expo- are commonly applied to the management of the firms
nential smoothing models can be used for data with manufacturing system should also be applied to the
either (or both) trend and seasonality.E management of the external factory.E
export brokerA party that introduces the buyer to the external failure costsThe costs related to problems
seller and eventually withdraws, getting a fee for servic- found after the product reaches the customer. This
es rendered.E usually includes such costs as warranty and returns.E
export complianceCooperating with export rules re- externalityThe costs or benefits of a firms activities
garding packaging and documentation.E borne or received by others.E
export licenseA document received from a governmen- external setup timeThe time associated with elements
tal agency authorizing a certain quantity of an export to of a setup procedure performed while the process or
be sent to a given country.E machine is running. Ant: internal setup time.E
exportsProducts produced in one country and sold in extranetA network connection to a partners network
another.E using secure information processing and internet proto-
cols to do business.E
exposuresThe number of times per year that the sys-
tem risks a stockout. The number of exposures is ar- extrapolationEstimation of the future value of some
rived at by dividing the lot size into the annual usage.E data series based on past observations. Statistical fore-
casting is a common example. Syn: projection.E
express1) Carrier payment to its customers when
ships, rail cars, or trailers are unloaded or loaded in less extrinsic forecasting methodA forecast method on a
than the time allowed by contract and returned to the correlated leading indicator, such as estimating furni-
carrier for use. See: demurrage, detention. 2) The use of ture sales based on housing starts. Extrinsic forecasts
priority package delivery to achieve overnight or second- tend to be more useful for large aggregations, such as
day delivery.E total company sales, than for individual product sales.
Ant: intrinsic forecast method. See: quantitative fore-
express warrantyA positive representation, made by a
casting technique.E
seller, concerning the nature, character, use, and pur-

60 APICS Dictionary, 14th edition

fabrication FAQs

failure analysisThe collection, examination, review,

F and classification of failures to determine trends and to

identify poorly performing parts or components.F

fabricationManufacturing operations for making com- failure costsA term used within the cost of poor quality
ponents, as opposed to assembly operations.F model to include both internal and external failure
costs. See: cost of poor quality, external failure costs,
fabrication levelThe lowest production level. The only
components at this level are parts (as opposed to as-
semblies or subassemblies). These parts are either pro-
internal failure costs.F

failure mode analysis (FMA)A procedure to determine

cured from outside sources or fabricated within the which malfunction symptoms appear immediately be-
manufacturing organization.F fore or after a failure of a critical parameter in a system.
After all the possible causes are listed for each symp-
fabrication orderA manufacturing order to a tom, the product is designed to eliminate the
component-making department authorizing it to pro- problems.F
duce component parts. See: batch card, manufacturing
failure mode effects analysis (FMEA)A procedure in
which each potential failure mode in every sub-item of
fabricatorA manufacturer that turns the product of a an item is analyzed to determine its effect on other sub-
converter into a larger variety of products. For example, items and on the required function of the item.F
a fabricator may turn steel rods into nuts, bolts, and
failure mode effects and criticality analysis (FMECA)A
twist drills, or may turn paper into bags and boxes.F
procedure that is performed after a failure mode effects
facilitating productsProducts that support the opera- analysis to classify each potential failure effect accord-
tions of a firm but are not sold externally, such as furni- ing to its severity and probability of occurrence.F
ture and computers.F Fair Labor Standards Act (FLSA)Federal law that go-
facilitiesThe physical plant, distribution centers, ser- verns the definitions of management and labor and es-
vice centers, offices, laboratories, and related tablishes wage payment and hours worked and other
equipment.F employment practices.F

fair returnWithin transportation, a profit level accom-

facility layoutDescribes where machines and utilities
plishing a rate of return on investment that regulatory
will be located in a facility, as well as the arrangement
agencies deem acceptable given the level of risk.F
of processes.F
fair-share quantity logicThe process of equitably allo-
facility planningLong range plan of what capacity is
cating available stock among field distribution centers.
needed, when it will be needed, and what facilities will
Fair-share quantity logic is normally used when stock
meet these requirements; also, a plan for the layout of
available from a central inventory location is less than
these facilities.F
the cumulative requirements of the field stocking loca-
factory within a factoryA technique to improve man- tions. The use of fair-share quantity logic involves pro-
agement focus and overall productivity by creating au- cedures that push stock out to the field, instead of
tonomous business units within a larger physical plant. allowing the field to pull in what is needed. The objec-
Syn: plant within a plant.F tive is to maximize customer service from the limited
available inventory. See: equal runout quantities.F
failsafe techniquesSyn: failsafe work methods, poka-
familyA group of end items whose similarity of design
and manufacture facilitates their being planned in ag-
failsafe work methodsMethods of performing opera- gregate, whose sales performance is monitored togeth-
tions so that actions that are incorrect cannot be com- er, and, occasionally, whose cost is aggregated at this
pleted. For example, a part without holes in the proper level.F
place cannot be removed from a jig, or a computer sys-
family contractsA purchase order that groups families
tem will reject invalid numbers or require double entry
of similar parts together to obtain pricing advantages
of transaction quantities outside the normal range.
and a continuous supply of material.F
Called poka-yoke by the Japanese. Syn: failsafe tech-
niques, mistake-proofing, poka-yoke.F FAQsAbbreviation for frequently asked questions.F

APICS Dictionary, 14th edition 61

FAS final assembly department

FAS1) Abbreviation for final assembly schedule. 2) feeThe charge for the use of the contractors organiza-
Abbreviation for free alongside ship.F tion for the period and to the extent specified in the
fast-trackingA project schedule compression tech-
nique that overlaps (or performs in parallel) activities feedbackThe flow of information back into the control
that would ordinarily be performed sequentially.F system so that actual performance can be compared
with planned performance.F
fault isolationA technique used to identify the cause of

F a defect.F

fault toleranceThe ability of a system to avoid or mi-

feedback loopThe part of a closed-loop system that
allows the comparison of response with command.F
nimize the disruptive effects of defects by using some feeder workstationsAn area of manufacture whose
form of redundancy or extra design margins.F products feed a subsequent work area.F
fault tree analysisA logical approach to identify the feedstockThe primary raw material in a chemical or
probabilities and frequencies of events in a system that refining process normally received by pipeline or large-
are most critical to uninterrupted and safe operation. scale bulk shipments. Feedstock availability is frequent-
This analysis may include failure mode effects analysis ly the controlling factor in setting the production sche-
(determining the result of component failure interac- dule and rate for a process.F
tions toward system safety) and techniques for human
FEFOAbbreviation for first expiry first out.F
error prediction.F
FEUAn abbreviation for forty-foot equivalent unit.F
feasibility studyAn analysis designed to establish the
practicality and cost justification of a given project and, fiduciaryOne having the duty to act on anothers be-
if it appears to be advisable to do so, to determine the half in a trustworthy and confidential fashion.F
direction of subsequent project efforts.F
fieldA specified area of a record used for a particular
feasible economic order quantityWhen solving a quan- category of data.F
tity discount problem, the economic order quantity is
field finished goodsFinished goods kept in distribution
feasible if the computed number can be purchased at
centers or warehouses.F
the cost used in the EOQ problem rather than at some
other discount quantity. For example, consider a prod- field serviceThe functions of installing and maintaining
uct that sells for $10 for 1 to 99 units, $9 for 100 to a product for a customer after the sale or during the
499 units, and $8 for 500 for more units. If the quantity lease. Field service may also include training and im-
discount solution calls for purchasing 800 units at the plementation assistance. Syn: after-sale service.F
$8 value, the solution is feasible; however if the quanti-
field service partsService parts kept in distribution
ty discount solution calls for purchasing 250 units at
centers or warehouses.F
this cost the solution is not feasible, because the pur-
chase quantity is not consistent with the purchase price field warehouseSyn: distribution center.F
for that quantity.F
FIFOAcronym for first in, first out.F
featureA distinctive characteristic of a good or service.
fileAn organized collection of records.F
The characteristic is provided by an option, accessory,
or attachment. For example, in ordering a new car, the file structureThe manner in which records are stored
customer must specify an engine type and size (option), within a file (e.g., sequential, random, index-
but need not necessarily select an air conditioner (at- sequential).F
tachment). See: accessory, attachment, option.F
file transfer protocol (FTP)A protocol used to transfer
feature codeAn identifying code assigned to a distinct files over the internet.F
product feature that may contain one or more specific
fill rateSyn: customer service ratio.F
part number configurations.F
final assemblyThe highest level assembled product, as
Federal Trade Commission (FTC)The United States go-
it is shipped to customers.F
vernmental agency charged with protecting businesses
and consumers from unfair business practices. It also final assembly departmentThe name for the manufac-
regulates advertising and promotion at the national turing department where the product is assembled.
level.F See: blending department, pack-out department.F

62 APICS Dictionary, 14th edition

final assembly schedule (FAS) first expiry first out (FEFO)

final assembly schedule (FAS)A schedule of end items finish-to-finishIn project management, a network re-
to finish the product for specific customers orders in a quirement that activity A must be finished before sub-
make-to-order or assemble-to-order environment. It is sequent activity B can finish. See: logical relationship.F
also referred to as the finishing schedule because it
finish-to-orderSyn: assemble-to-order.F
may involve operations other than the final assembly;
also, it may not involve assembly (e.g., final mixing, cut- finish-to-startIn project management, a network re-
ting, packaging). The FAS is prepared after receipt of a quirement that activity A must be finished before activi-
customer order as constrained by the availability of ma-
terial and capacity, and it schedules the operations re-
ty B can start. See: logical relationship.F
finite forward schedulingAn equipment scheduling
quired to complete the product from the level where it is technique that builds a schedule by proceeding sequen-
stocked (or master scheduled) to the end-item level.F tially from the initial period to the final period while ob-
financial accountingThe use of generally accepted ac- serving capacity limits. A Gantt chart may be used with
counting principles to prepare reports to external agen- this technique. See: finite loading.F
cies, such as investors and governmental agencies.F finite loadingAssigning no more work to a work center
financial benchmarkingComparing one companys fi- than the work center can be expected to execute in a
nancial results with that of another company. This type given time period. The specific term usually refers to a
of benchmarking need not involve direct contact be- computer technique that involves calculating shop prior-
tween the initiator company and the target company, as ity revisions in order to level load operation by opera-
many financial records are publicly available. See: ben- tion. Syn: finite scheduling. See: drum-buffer-rope.F
chmarking.F finite schedulingSyn: finite loading.F
financial forecastingEstimating a firms future finan- firewallA device used to control access to a companys
cial statements.F data from the internet or other outside sources.F
financial leverage management ratiosA set of mea- firm fixed-price contractA contract in which the seller
surements of the degree to which a firm is financing as- is paid a set price without regard to costs. Syn: fixed-
sets with fixed-charge instruments such as debt or price contract.F
preferred stock.F
firm master production scheduleA part of the master
financial managementThe function concerned with production schedule in which changes can occur only
ensuring the availability of funds for research and de- rarely.F
velopment, operations, and marketing.F
firm offerA written offer to buy or sell goods that will
finish dateThe time of completion of a project or activi- be held open for a stipulated period.F
ty. It may be planned, actual, early, late, baseline, or
target.F firm planned order (FPO)A planned order that can be
frozen in quantity and time. The computer is not allowed
finished goodSyn: end item.F to change it automatically; this is the responsibility of
finished goods inventoryThose items on which all the planner in charge of the item that is being planned.
manufacturing operations, including final test, have This technique can aid planners working with MRP sys-
been completed. These products are available for tems to respond to material and capacity problems by
shipment to the customer as either end items or repair firming up selected planned orders. In addition, firm
parts. Syn: finished products inventory. See: goods.F planned orders are the normal method of stating the
master production schedule. See: planning time fence.F
finished good waiversApprovals for deviation from
normal product specifications.F first-article inspectionA quality check on the first com-
ponent run after a new setup has been completed. Syn:
finished productSyn: end item.F
first-piece inspection.F
finished products inventorySyn: finished goods
first-come-first-served ruleA dispatching rule under
which the jobs are sequenced by their arrival times.
finishing lead time1) The time that is necessary to See: first-in, first-out.F
finish manufacturing a good after receipt of a customer
first expiry first out (FEFO)A picking methodology as-
order. 2) The time allowed for completing the good
suring that the usage shelf life of items is optimized.
based on the final assembly schedule.F
Years ago, first in, first out (FIFO) was satisfactory as the

APICS Dictionary, 14th edition 63

first in, first out (FIFO) fixed-interval review system

shelf-life days for items often didnt vary and FIFO often five-forces model of competitionA methodology for
coincided with the expiry dates. However, re-testing is analyzing competitive pressures in a market and as-
frequently done to extend shelf-life dates on some lots sessing the strength and importance of each of those
or batches, while other lots may have typical shelf-life pressures.F
dates shortened because of quality or processes. Thus,
five MsThe branches of a cause and effect (fishbone)
FEFO was introduced by software vendors to provide
diagram: manpower, methods, materials, machines,
this picking methodology for use with shelf-life con-

F trolled items.F
first in, first out (FIFO)A method of inventory valuation
and measurements.F

five SsFive terms beginning with S used to create a

for accounting purposes. The accounting assumption is workplace suitable for lean production. Sort means to
that the oldest inventory (first in) is the first to be used separate needed items from unneeded ones and re-
(first out), but there is no necessary relationship with move the latter. Simplify means to neatly arrange items
the actual physical movement of specific items. See: for use. Scrub means clean up the work area.
Standardize means to sort, simplify, and scrub daily.
first-come-first-served rule, average cost system.F
Sustain means to always follow the first four Ss. Some-
first-mover advantageThe phenomenon of market lea- times referred to by the Japanese equivalents: seiri, sei-
dership being gained through market innovation.F ton, seiso, seiketsu, and shitsuke.F
first-order smoothingA single exponential smoothing; a
five whysThe common practice in total quality man-
weighted moving average approach that is applied to
agement is to ask why five times when confronted
forecasting problems where the data do not exhibit sig-
with a problem. By the time the answer to the fifth
nificant trend or seasonal patterns. Syn: single expo-
why is found, the ultimate cause of the problem is
nential smoothing, single smoothing.F
identified. Syn: five Ws. See: root cause analysis.F
first pass yieldThe ratio of products that conform to
five WsSyn: five whys.F
specifications without rework or modification to total
input.F fixed assetsAssets acquired for use within a company
having an estimated useful life of one year or more.F
first-piece inspectionSyn: first-article inspection.F
first-tier supplierOne that supplies goods or services fixed-asset turnoverSales divided by net fixed assets.
directly to a business.F Fixed assets reflect asset acquisition price less
fishbone analysisA technique to organize the elements
of a problem or situation to aid in the determination of fixed budgetA budget of expected costs based on a
the causes of the problem or situation. The analysis re- specific level of production or other activity.F
lates the effect of the environment to the several possi-
fixed costAn expenditure that does not vary with the
ble sources of the problem.F
production volume; for example, rent, property tax, and
fishbone chartSyn: cause-and-effect diagram.F salaries of certain personnel.F
fishbone diagramSyn: cause-and-effect diagram.F fixed-cost contribution per unitAn allocation process
fitness for useA term used to indicate that a good or where total fixed cost for a period is divided by total
service fits the customers defined purpose for that units produced in that given time period.F
good or service.F fixed-interval order systemSyn: fixed reorder cycle in-
five focusing stepsIn the theory of constraints, a ventory model.F
process to continuously improve organizational profit by
fixed-interval review systemA hybrid inventory system
evaluating the production system and market mix to de-
in which the inventory analyst reviews the inventory po-
termine how to make the most profit using the system
sition at fixed time periods. If the inventory level is
constraint. The steps consist of (1) identifying the con-
found to be above a preset reorder point, no action is
straint to the system, (2) deciding how to exploit the
taken. If the inventory level is at or below the reorder
constraint to the system, (3) subordinating all noncon-
point, the analyst orders a variable quantity equal to M
straints to the constraint, (4) elevating the constraint to
x where M is a maximum stock level and x is the cur-
the system, (5) returning to step 1 if the constraint is
rent quantity on hand and on order (if any). This hybrid
broken in any previous step, while not allowing inertia to
system does not reorder every review interval. It there-
set in.F
fore differs from the fixed-interval order system, which

64 APICS Dictionary, 14th edition

fixed-location storage fixture

automatically places an order whenever inventory is where the costs of frequent movement of the product
reviewed.F are very high.F

fixed-location storageA method of storage in which a fixed-price contractSyn: firm fixed-price contract.F
relatively permanent location is assigned for the storage
of each item in a storeroom or warehouse. Although fixed-price-incentive-fee contractA contract in which
more space is needed to store parts than in a random- the seller is paid a set price and can earn an additional
location storage system, fixed locations become famili-
ar, and therefore a locator file may not be needed. See:
random-location storage.F
profit if certain stipulations are met.F

fixed propertyProperty attached to, and not easily re-

moved from, the location.F
fixed order period systemA method of inventory plan-
ning that measures actual inventory levels at regular
fixed reorder cycle inventory modelA form of indepen-
intervals of time; either an order is placed every time or
dent demand management model in which an order is
a check of inventory levels is made and an order placed
placed every n time units. The order quantity is variable
if needed. Often the quantity ordered varies from period
and essentially replaces the items consumed during the
to period as inventory is restored to a predetermined
current time period. Let M be the maximum inventory
level. See: fixed order quantity system.F
desired at any time, and let x be the quantity on hand at
fixed order quantityA lot-sizing technique in MRP or the time the order is placed. Then, in the simplest mod-
inventory management that will always cause planned el, the order quantity will be M x. The quantity M must
or actual orders to be generated for a predetermined be large enough to cover the maximum expected de-
fixed quantity, or multiples thereof, if net requirements mand during the lead time plus a review interval. The
for the period exceed the fixed order quantity.F order quantity model becomes more complicated
whenever the replenishment lead time exceeds the re-
fixed order quantity systemAn inventory system, such
view interval, because outstanding orders then have to
as economic order quantity, in which the same order
be factored into the equation. These reorder systems
quantity is used from order to order. The time between
are sometimes called fixed-interval order systems, order
orders (order period) then varies from order to order.
level systems, or periodic review systems. Syn: fixed-
Syn: fixed reorder quantity inventory model. See: fixed
interval order system, fixed order quantity system, order
order period system.F
level system, periodic review system, time-based order
fixed overheadTraditionally, all manufacturing costs system. See: fixed reorder quantity inventory model, hy-
other than direct labor and direct materialsthat con- brid inventory system, independent demand item man-
tinue even if products are not produced. Although fixed agement models, optional replenishment model.F
overhead is necessary to produce the product, it cannot
be directly traced to the final product.F fixed reorder quantity inventory modelA form of inde-
pendent demand item management model in expected
fixed-period quantityAn MRP lot-sizing technique that demand during the replenishment lead time. Fixed
sets the lot size equal to the net requirements for a giv- reorder quantity models assume the existence of some
en number of periods.F form of a perpetual inventory record or some form of
fixed-period requirementsA lot-sizing technique that physical tracking (e.g., a two-bin system that is able to
sets the order quantity to the demand for a given num- determine when the reorder point is reached). These
ber of periods. See: discrete order quantity.F reorder systems are sometimes called fixed order quan-
tity systems, lot-size systems, or order point-order quan-
fixed-position layoutA factory layout that plans for the tity systems. Syn: fixed order quantity system, lot-size
product to be in a set place; the people, machines, and system, order point-order quantity system, quantity-
tools are brought to and from the product.F based order system. See: fixed reorder cycle inventory
fixed-position manufacturingSimilar to project manu- model, hybrid inventory system, independent demand
facturing, this type of manufacturing is mostly used for item management models, optional replenishment
large, complex projects, where the product remains in model, order point, order point system, statistical inven-
one locations for its full assembly period or may move tory control, time-phased order point.F
from location to location after considerable work and
fixtureA device to hold and locate a work piece during
time are spent on it. Examples of fixed position manu-
inspection or production operations. See: jig.F
facturing include shipbuilding or aircraft assembly,

APICS Dictionary, 14th edition 65

flag of convenience floor-ready merchandise

flag of convenienceA ship registered in a nation with flexible machine center (FMC)An automated system,
low taxes and lax safety regulations. Liberia and which usually consists of computer numerical control
Panama are two favorite flags of convenience.F machines with robots loading and unloading the parts
conveyed into, and through, the system. Its purpose is
flatbedA type of truck trailer that has a floor but no
to provide quicker throughput, changeovers, setups,
enclosure. Sideboards or tie-downs are used to prevent
and so forth to enable the manufacturing of multiple
cargo from falling off.F

F flatcarA railroad car without sides used for hauling

machinery.F flexible manufacturing system (FMS)A group of numer-
ically controlled machine tools interconnected by a cen-
flexibility1) The ability of the manufacturing system to
tral control system. The various machining cells are
respond quickly, in terms of range and time, to external
interconnected via loading and unloading stations by an
or internal changes. Six different categories of flexibility
automated transport system. Operational flexibility is
can be considered: mix flexibility, design changeover
enhanced by the ability to execute all manufacturing
flexibility, modification flexibility, volume flexibility, re-
tasks on numerous product designs in small quantities
routing flexibility, and material flexibility (see each term
and with faster delivery.F
for a more detailed discussion). In addition, flexibility
involves concerns of product flexibility. Flexibility can be flexible path equipmentMaterials handling equipment
useful in coping with various types of uncertainty (re- such as forklifts that do not have to follow fixed paths.F
garding mix, volume, and so on). 2) The ability of a
flexible specializationA strategy based on multi-use
supply chain to mitigate, or neutralize, the risks of de-
equipment, skilled workers, and innovative senior man-
mand forecast variability, supply continuity variability,
agers to accommodate the continuous change that oc-
cycle time plus lead-time uncertainty, and transit time
curs in the marketplace.F
plus customs-clearance time uncertainty during periods
of increasing or diminishing volume.F flexible workforceA workforce whose members are
cross-trained and whose work rules permit assignment
flexibility responsivenessThe ability of the firm and its
of individual workers to different tasks.F
management to change rapidly in response to changes
taking place in the marketplace.F flextimeAn arrangement in which employees are al-
flexible automationAutomation that provides short se- lowed to choose work hours as long as the standard
tup times and the ability to switch quickly from one number of work hours is worked.F
product to another.F float1) The amount of work-in-process inventory be-
flexible benefits/cafeteria plansPlans designed to give tween two manufacturing operations, especially in repe-
employees a core of minimum basic coverage with the titive manufacturing. 2) In supply chains, the time
option to choose additional coverage or, sometimes, necessary for items such as documents and checks to
cash. Employees can customize their benefits packages go from one supply chain partner to another. 3) In the
to suit their personal needs.F critical path method of project management, the
amount of time that an activitys early start or early
flexible budgetA budget showing the costs and reve-
finish time can be delayed without delaying the comple-
nues expected to be incurred or realized over a period
tion time of the entire project. There are three types:
of time at different levels of activity, measured in terms
total float, free float, and independent float. Syn: path
of some activity base such as direct labor hours, direct
float, slack.F
labor costs, or machine hours. A flexible manufacturing
overhead budget gives the product costs of various floating inventory location systemSyn: random-location
manufacturing overhead items at different levels of ac- storage.F
tivity. See: step budget.F
floating order pointAn order point that is responsive to
flexible capabilityMachinerys ability to be readily changes in demand or to changes in lead time.F
adapted to processing different components on an on-
floating storage locationSyn: random-location
going basis.F
flexible capacityThe ability to operate manufacturing
equipment at different production rates by varying staff- floor-ready merchandiseProducts shipped by a suppli-
ing levels and operating hours or starting and stopping er having all needed tags, prices, security devices, and
at will.F so on already in place.F

66 APICS Dictionary, 14th edition

floor stocks FMEA

floor stocksStocks of inexpensive production parts symbols)

held in the factory, from which production workers can Syn: process flowchart, process flow diagram. See:
draw without requisitions. Syn: bench stocks, expensed flowchart, process flow.F
flow processingIn process systems development, work
flowchartThe output of a flowcharting process, a chart flows from one workstation to another at a nearly con-
that shows the operations, transportation, storages, de- stant rate and with no delays. When producing discrete
lays, inspections, and so on related to a process.
Flowcharts are drawn to better understand processes.
The flowchart is one of the seven tools of quality. Syn:
(geometric) units, the process is called repetitive manu-
facturing; when producing non-geometric units over
time, the process is called continuous manufacturing. A
flow diagram. See: block diagram, flow process chart.F physical-chemical reaction takes place in the conti-
nuous flow process.F
flowchartingA systems analysis tool that graphically
presents a procedure. Symbols are used to represent flow rackA storage rack using metal shelves equipped
operations, transportations, inspections, storages, de- with wheels or rollers allowing product to flow from the
lays, and equipment.F back to the front of the rack to make the product more
accessible for order picking.F
flow controlA specific production control system that is
based primarily on setting production rates and feeding flow rateRunning rate; the inverse of cycle time; for
work into production to meet these planned rates, then example, 360 units per shift (or 0.75 units per
monitoring and controlling production. See: shop floor minute).F
flow shopA form of manufacturing organization in
flow diagramSyn: flowchart.F which machines and operators handle a standard,
usually uninterrupted, material flow. The operators gen-
flow lineSyn: flow shop.F
erally perform the same operations for each production
flow manufacturingSyn: flow shop.F run. A flow shop is often referred to as a mass produc-
flow orderAn order filled, not by moving material tion shop or is said to have a continuous manufacturing
through production as an integral lot, but by production layout. The plant layout (arrangement of machines,
made over time and checked by a cumulative count un- benches, assembly lines, etc.) is designed to facilitate a
til the flow order quantity is complete.F product flow. Some process industries (chemicals, oil,
paint, etc.) are extreme examples of flow shops. Each
flow plantSyn: flow shop.F
product, though variable in material specifications, uses
flow process chartA graphic, symbolic representation the same flow pattern through the shop. Production is
of the work performed, or to be performed, on a product set at a given rate, and the products are generally man-
as it passes through some or all of the stages of a ufactured in bulk. Syn: flow line, flow manufacturing,
process. Typically, the information included in the chart flow plant.F
is quantity, distance moved, type of work done (by sym-
flow timeThe time between the release of a job to a
bol with explanation), and equipment used. Work times
work center or shop until the job is finished.F
may also be included. The flow process chart symbols
(ASME Standard Symbols) generally used are as follows: flow time efficiencyThe ratio of theoretical flow time to
O operation: A subdivision of a process that changes the actual flow time through a process.F
or modifies a part, material, or product and is done es- FLSAAbbreviation for Fair Labor Standards Act.F
sentially at one workplace location
fluctuation inventoryInventory that is carried as a cu-
transportation (move): Change in location of a per-
shion to protect against forecast error. Syn: fluctuation
son, part, material, or product from one workplace to
stock. See: inventory buffer.F
inspection: Comparison of observed quality or quan- fluctuation stockSyn: fluctuation inventory.F
tity of a product with a quality or quantity standard
FMAAbbreviation for failure mode analysis.F
storage: Keeping a product, material, or part pro-
tected against unauthorized removal FMAPEAbbreviation for forecast mean absolute per-
D delay: An event that occurs when an object or per- centage of error.F
son waits for the next planned action FMCAbbreviation for flexible machine center.F
O combined activity: Adjustment during testing (e.g.,
FMEAAbbreviation for failure mode effects analysis.F
combination of the separate operation and inspection

APICS Dictionary, 14th edition 67

FMECA foreign trade zone (FTZ)

FMECAAbbreviation for failure mode effects and criti- al, random, seasonal, and trend. Syn: sales forecast.
cality analysis.F See: Box-Jenkins model, exponential smoothing fore-
cast, extrinsic forecasting method, intrinsic forecasting
FMSAbbreviation for flexible manufacturing system.F
method, moving average forecast, qualitative forecast-
FOBAbbreviation for free on board.F ing method, quantitative forecasting method.F
FOB destinationThe supplier pays for transportation to forecast accuracyA measurement of forecast useful-

the buyers location, where the buyer takes possession ness, often defined as the average difference between
of the goods.F the forecast value to the actual value. Syn: sales fore-
FOB originationThe buyer takes possession of the cast. See: forecast error.F
goods at the suppliers location, and the buyer must forecast biasTendency of a forecast to systematically
provide transportation.F miss the actual demand (consistently either high or
focused factoryA plant established to focus the entire low).F
manufacturing system on a limited, concise, managea-
forecast consumptionSyn: consuming the forecast.F
ble set of products, technologies, volumes, and markets
precisely defined by the companys competitive strate- forecast errorThe difference between actual demand
gy, technology, and economics. See: cellular and forecast demand, stated as an absolute value or as
manufacturing.F a percentage. See: average forecast error, forecast ac-
curacy, mean absolute deviation, tracking signal.F
focused low-cost strategyTargeting a market with a
low-cost product line in order to lower the cost of sales forecast horizonThe period of time into the future for
and increase gross margin.F which a forecast is prepared.F
focus forecastingA system that allows the user to si- forecastingThe business function that attempts to
mulate the effectiveness of numerous forecasting tech- predict sales and use of products so they can be pur-
niques, enabling selection of the most effective one.F chased or manufactured in appropriate quantities in
focus groupA set of people who are interviewed to- advance.F
gether for the purpose of collecting marketing data.F forecast intervalThe time unit for which forecasts are
focus-group researchA form of research (frequently prepared, such as week, month, or quarter. Syn: fore-
used in marketing research) where data are gathered by cast period.F
interviewing consumers in groups of 6 to 10 at a time forecast managementThe process of making, check-
(the focus group). See: marketing research.F ing, correcting, and using forecasts. It also includes de-
focus strategyTargeting a narrow market with specia- termination of the forecast horizon.F
lized goods or services.F forecast mean absolute percentage of error (FMAPE)
follow-upMonitoring of job progress to see that opera- The absolute error divided by actual demand for n pe-
tions are performed on schedule or that purchased ma- riods. Where absolute error is the variation between the
terial or products will be received on schedule.F actual demand and the forecast for the period ex-
pressed as a positive value (without regard for sign).F
force field analysisA technique for analyzing the forces
that will aid or hinder an organization in reaching an ob- forecast periodSyn: forecast interval.F
jective. An arrow pointing to an objective is drawn down
foreign freight forwarderAn entity that picks up goods
the middle of a piece of paper. The factors that will aid
at the production site and coordinates transport to the
the objectives achievement (called the driving forces)
foreign customers location.F
are listed on the left side of the arrow; the factors that
will hinder its achievement (called the restraining foreign trade zone (FTZ)Areas supervised by U.S.
forces) are listed on the right side of the arrow.F Customs and Border Protection that are considered to
be outside U.S. territory. Material in the zone is not sub-
forecastAn estimate of future demand. A forecast can
ject to duty taxes, which are payable when the material
be constructed using quantitative methods, qualitative
is moved outside the zone for consumption. There is no
methods, or a combination of methods, and it can be
limit on the time material may remain in the zone.
based on extrinsic (external) or intrinsic (internal) fac-
Internationally, similar areas are called free trade
tors. Various forecasting techniques attempt to predict
one or more of the four components of demand: cyclic-

68 APICS Dictionary, 14th edition

forensic procurement free alongside ship (FAS)

forensic procurementAnalyzing root cause-and-effect for operations. See: forward pass. Ant: back
troubleshooting.F scheduling.F

formal cultureThe visible segment of the organization- Fourier seriesA form of analysis useful for forecasting.
al culture, such as policies and procedures, mission The model is based on fitting sine waves with increasing
statement, and dress codes. See: informal culture.F frequencies and phase angles to a time series.F

formatThe predetermined arrangement of the charac-

4PLAbbreviation for fourth-party logistics.F
ters of data for computer input, storage, or output.F
four PsA set of marketing tools to direct the business
form-fit-functionA term used to describe the process of offering to the customer. The four Ps are product, price,
designing a part or product to meet or exceed the per- place, and promotion.F
formance requirements expected by customers.F
14 PointsW. Edwards Demings 14 management prac-
formulaA statement of ingredient requirements. A tices to help companies increase their quality and prod-
formula may also include processing instructions and uctivity: (1) create constancy of purpose for improving
ingredient sequencing directions. Syn: formulation, products and services; (2) adopt the new philosophy; (3)
recipe.F cease dependence on inspection to achieve quality; (4)
end the practice of awarding business on price alone;
formulationSyn: formula.F
instead, minimize total cost by working with a single
form utilityThe value created by changing a goods supplier; (5) improve constantly and forever every
form through a production process.F process for planning, production, and service; (6) insti-
tute training on the job; (7) adopt and institute leader-
forty-foot equivalent unitA measure of container ca-
ship; (8) drive out fear; (9) break down barriers between
pacity that is equivalent to two 20-foot equivalency
staff areas; (10) eliminate slogans, exhortations, and
units; that is, a unit equivalent to 40-feet long, 8-feet
targets for the workforce; (11) eliminate numerical quo-
wide, and approximately 8-feet high.F
tas for the workforce and numerical goals for manage-
40/30/30 ruleA rule that identifies the sources of ment; (12) remove barriers that rob people of pride of
scrap, rework, and waste as 40 percent product design, workmanship and eliminate the annual rating or merit
30 percent manufacturing processing, and 30 percent system; (13) institute a vigorous program of education
from suppliers.4 and self-improvement for everyone; and (14) put every-
body in the company to work to accomplish the trans-
forward buyingThe practice of buying materials in a
formation. Syn: Demings 14 Points.F
quantity exceeding current requirements but not beyond
the point that the long-term need exists.F fourth-party logistics (4PL)Fourth-party logistics differs
from third-party logistics in the following ways: (1) the
forward flow schedulingA procedure for building
4PL organization is often a separate entity formed by a
process train schedules that starts with the first stage
joint venture or other long-term contract between a
and proceeds sequentially through the process struc-
client and one or more partners; (2) the 4PL organiza-
ture until the last stage is scheduled.F
tion is an interface between the client and multiple lo-
forward integrationProcess of buying or owning ele- gistics services providers; (3) ideally, all aspects of the
ments of the production cycle and the channel of distri- clients supply chain are managed by the 4PL organiza-
bution forward toward the final customer. See: vertical tion; and, (4) it is possible for a major 3PL organization
integration.F to form a 4PL organization within its existing structure.
See: third-party logistics.F
forward passIn the critical path method of project
management, working from the first node to the last four-wall inventorySyn: wall-to-wall inventory.F
node calculating early start times and early finish times
FPOAbbreviation for firm planned order.F
as well as the projects duration. See: forward schedul-
ing, backward pass, critical path method.F franchise extensionThe placement of a brand name
on products outside the companys present sphere of
forward schedulingA scheduling technique where the
scheduler proceeds from a known start date and com-
putes the completion date for an order, usually proceed- free alongside ship (FAS)A term of sale indicating the
ing from the first operation to the last. Dates generated seller is liable for all changes and risks until the goods
by this technique are generally the earliest start dates sold are delivered to the port on a dock that will be used

APICS Dictionary, 14th edition 69

free float functional organization

by the vessel. Title passes to the buyer when the seller fringe benefitsEmployer-granted compensations that
has secured a clean dock or ships receipt of goods.F are not directly tied to salary.F
free floatIn the critical path method of project man- front roomThe place where the customer comes into
agement, the amount of time that a given activity can contact with the service operation. Many service opera-
be delayed without delaying an immediately subsequent tions contain front room and back room operations.
activitys early start time. See: float, independent float, See: back room.F

F total float.F
free on board (FOB)The terms of sale that identify
where title passes to the buyer.F
frozen master production scheduleThe parts of a mas-
ter production schedule that should not be changed or
should be changed rarely.F
free slackThe amount of time by which the completion frozen zoneIn forecasting, the periods where no
of an activity in a project network can increase without changes can be made to work orders based on changes
delaying the start of the next activity.F in demand. This provides stability to the master produc-
tion schedule.F
free trade zone (FTZ)The international term for what is
known in the United States as a foreign trade zone. See: FRTAbbreviation for future reality tree.F
foreign trade zone.F
FTCAbbreviation for Federal Trade Commission.F
freight billA freight carriers invoice for a shipment.F
FTPAbbreviation for file transfer protocol.F
freight carriersCompanies that move cargo via truck,
FTZAbbreviation for foreign trade zone.F
rail, air, or sea.F
Full-Baldrige approachA quality award program mod-
freight chargeThe rate established for the transporta-
eled after the Malcolm Baldrige National Quality Award
tion of freight.F
and using the same criteria.F
freight collectThe freight and charges to be paid by the
full cost pricingEstablishing price at some markup
over the full cost (absorption costing). Full costing in-
freight consolidationThe grouping of shipments to ob- cludes direct manufacturing as well as applied
tain reduced costs or improved utilization of the trans- overhead.F
portation function. Consolidation can occur by market
full peggingThe ability of a system to automatically
area grouping, grouping according to scheduled delive-
trace requirements for a given component all the way
ries, or using third-party pooling services such as public
up to its ultimate end item, customer, or contract num-
warehouses and freight forwarders.F
ber. Syn: contract pegging.F
freight equalizationThe practice by more distant sup-
fully qualified domain nameThe complete, registered
pliers of absorbing the additional freight charges to
address (URL) of an internet site.F
match the freight charges of a supplier geographically
closer to the customer. This is done to eliminate the functional benchmarkingBenchmarking a single func-
competitive advantage of lower freight charges that the tion within an organization rather than the entire organ-
nearest supplier has.F ization. See: benchmarking.F

freight forwarderThe middle man between the carri- functionalityThe degree to which a product achieves
er and the organization shipping the product. Often its designed purpose.F
combines smaller shipments to take advantage of lower functional layoutA facility configuration in which opera-
bulk costs.F tions of a similar nature or function are grouped togeth-
frequency distributionA table that indicates the fre- er; an organizational structure based on departmental
quency with which data fall into each of any number of specialty (e.g., saw, lathe, mill, heat treat, press). Syn:
subdivisions of the variable. The subdivisions are usual- job shop layout, process layout.F
ly called classes.F functional managerA manager responsible for a spe-
frequency of repairSyn: repair factor.F cialized department, such as accounting or
frequently asked questions (FAQs)A list of commonly
asked questions pertaining to a website (or perhaps functional organizationA hierarchical organization in
software, hardware, and so on) along with the answers which each individual has one clear superior and staff
to these questions.F areas are well defined.F

70 APICS Dictionary, 14th edition

functional organizational structure gap analysis

functional organizational structureAn organizational (1) develop, expand, and complete the solution and (2)
structure based on functional specialization, such as identify and solve or prevent new problems created by
sales, engineering, manufacturing, finance, and implementing the solution.F
futuresContracts for the sale and delivery of commodi-
functional requirementsSyn: critical characteristics.F ties at a future time, made with the intention that no
commodity be delivered or received immediately.F
functional siloA view of an organization where each
department is operated independently of the others.
Each group is referred to as a silo. See: silo effect.F
future valueA present payments value at some point
in the future valued at a given interest rate.F G
functional silo syndromeSuboptimization of an organi- future worth1) The equivalent monetary value at a
zations goals due to members of specific functions de- designated future date based on the time value of
veloping more loyalty to the functions group goals than money. 2) The monetary sum, at a given future time,
to the organizations goals.F that is equivalent to one or more sums at given earlier
times when interest is compounded at a given rate.
functional strategyA strategy that is built from the
See: time value of money.F
business strategy for the various business functions,
such as finance, marketing, and production. See: stra- fuzzy logicA field of logic based on fuzzy sets, that is,
tegic planning.F sets in which membership is probabilistic rather than
functional systems designThe development and defi-
nition of the business functions to be accomplished by
a computer system (i.e., preparing a statement of the
proposed computer systems data input, data manipula-
tion, and information output in common business terms GAAPAcronym for generally accepted accounting
that can be reviewed, understood, and approved by a principles.G
user organization). This statement, after approval, pro-
vides the basis for the computer systems design.F gain sharingA method of incentive compensation
where employees share collectively in savings from
functional testMeasure of a production components productivity improvements. Syn: gain sharing plans.G
ability to work as designed to meet a level of
performance.F gain sharing plansSyn: gain sharing.G

funds flow managementThe planning, execution, and GAMPAcronym for generally accepted manufacturing
control of cash receipts and disbursements with the ob- practices.G
jective of maintaining the cash balance at a preset posi- G&AAbbreviation for general and administrative
tive value. Syn: cash flow management.F expenses.G
funds flow statementA financial statement showing Gantt chartThe earliest and best-known type of plan-
the flow of cash and its timing into and out of an organi- ning and control chart, especially designed to show
zation or project. Syn: cash flow statement, statement graphically the relationship between planned perfor-
of cash flows.F mance and actual performance over time. Named after
funnel experimentAn experiment that demonstrates its originator, Henry L. Gantt, the chart is used for (1)
the effects of tampering. Marbles are dropped through machine loading, in which one horizontal line is used to
a funnel in an attempt to hit a flat-surfaced target be- represent capacity and another to represent load
low. The experiment shows that adjusting a stable against that capacity; or (2) monitoring job progress, in
process to compensate for an undesirable result or an which one horizontal line represents the production
extraordinarily good result will produce output that is schedule and another parallel line represents the actual
worse than if the process had been left alone. See: progress of the job against the schedule in time. Syn:
tampering.F job progress chart, milestone chart.G

future orderAn order entered for shipment at some gapWhen the actual performance level is not equal to
future date.F the expected performance level.G
gap analysisA tool designed to assess the distance
future reality tree (FRT)In the theory of constraints, a
that exists between a service that is offered and cus-
logic-based tool for constructing and testing potential
tomer expectations.G
solutions before implementation. The objectives are to

APICS Dictionary, 14th edition 71

gapped schedule Global Reporting Initiative (GRI) Reporting Framework

gapped scheduleA schedule in which every piece in a nication between marketing and manufacturing, top
lot is finished at one work center before any piece in the management control of the production planning process
lot can be processed at the succeeding work center; the (sales and operations planning process), systems capa-
movement of material in complete lots, causing time ble of validly translating high-level plans into detailed
gaps between the end of one operation and the begin- schedules, and so on. Today GAMP includes such para-
ning of the next. It is a result of using a batched sche- digms as just-in-time, theory of constraints, total quality
dule at each operation (work center), where process management, business process reengineering, and

G batch and transfer batch are assumed to be the same

or equal. Syn: gap phasing, straight-line schedule. Ant:
supply chain management.G
general merchandise warehouseA warehouse for the
overlapped schedule.G
storage of goods that require no special handling.G
gap phasingSyn: gapped schedule.G
general-purpose machineryManufacturing resources
gatekeepingA group technique applied by a team that can perform several kinds of operations.G
leader to effectively manage a situation, discussion, or
general storesSyn: supplies.G
meeting. For example, in a situation where a dominant
spokesperson or person of authority monopolizes a dis- general warehouseA location where goods usually are
cussion, the gatekeeper will intervene by requesting stored for long periods of time. The primary purpose is
additional group members input.G to protect goods until they are needed. The general
warehouse is used because the producer or owner ei-
gate reviewThe formal review process between the
ther does not have the necessary warehouse space or
major phases of a new product introduction effort. The
the cost of storage is better off-site. Usually use of a
determination to continue or to stop the project is for-
general warehouse involves minimal handling, move-
mally made at each review point or gate.G
ment, and transportation.G
gatewayThe connection that allows data and other in-
general warrantyAn assurance that the product is fit
formation to flow between two networks.G
for use. See: special warranty, warranty.G
gateway operationSyn: gateway work center.G
generic processingA means of developing routings or
gateway work centerA work center that performs the processes for the manufacture of products through a
first operation of a particular routing sequence.G family relationship, usually accomplished by means of
GATTAcronym for general agreement on tariffs and tabular data to establish interrelationships. It is espe-
trade.G cially prevalent in the manufacture of raw material such
as steel, aluminum, or chemicals.G
gaugeAn instrument for measuring or testing.G
GERTAcronym for graphical evaluation and review
GDSSAbbreviation for group decision support
globalizationThe interdependence of economies glo-
gembaA Japanese word meaning shop floor.G
bally that results from the growing volume and variety of
genchi genbutsuA Japanese phrase meaning visit the international transactions in goods, services, and capi-
shop floor to observe what is occurring.G tal, and also from the spread of new technology.G
general and administrative expenses (G&A)The cate- global marketingThe use of one marketing strategy in
gory of expenses on an income statement that includes all countries in which a company operates, selling a sin-
the costs of general managers, computer systems, re- gle product worldwide.G
search and development, and more.G
global measurementsMeasurements used to judge
generally accepted accounting principles (GAAP) the performance of the system as a whole.G
Accounting practices that conform to conventions, rules,
global positioning system (GPS)A system that uses sa-
and procedures that have general acceptability by the
tellites to locate an objects position.G
accounting profession.G
Global Reporting Initiative (GRI)A network-based or-
generally accepted manufacturing practices (GAMP)A
ganization that pioneered the world's most widely used
group of practices and principles, independent of any
sustainability reporting framework.G
one set of techniques, that define how a manufacturing
company should be managed. Included are such ele- Global Reporting Initiative (GRI) Reporting Framework
ments as the need for data accuracy, frequent commu- The framework that sets out the principles and perfor-

72 APICS Dictionary, 14th edition

global sourcing green supply chain

mance indicators organizations can use to measure and graphical evaluation and review technique (GERT)A
report their human rights, labor, environment, and anti- network analysis technique that allows for probability
corruption practices and outcomes.G distributions of activity durations and also conditions
under which some activities may not be carried out.
global sourcingUsing international sources for
See: critical path method, network analysis, program
evaluation and review technique.G

global strategyA strategy that focuses on improving
graphical forecasting methodsThe use of visual infor-
worldwide performance through the sales and market-
mation to predict sales patterns, it typically involves
ing of common goods and services with minimum prod-
plotting information in a graphical form. It is relatively
uct variation by country. Its competitive advantage
easy to convert a spreadsheet into a graph that conveys
grows through selecting the best locations for opera-
the information visually. Trends and patterns of data
tions in other countries. See: multinational strategy.G
are easier to spot, and extrapolation of previous de-
global supply chainsSupply chains that include inter- mand can be used to predict future demands.G
national partners or markets.G graphical user interface (GUI)A connection between
glocalizationA combination of "globalization" and "loca- the computer and the user employing a mouse and
lization." When used in a supply chain context, glocaliza- icons so that the user makes selections by pointing at
tion is a form of postponement where a product or icons and clicking the mouse.G
service is developed for distribution globally but is mod- gravity modelsAn approach used for locating facilities
ified to meet the needs of a local market. The modifica- at the center of gravity. Gravity is determined by the
tions are made to conform with local laws, customs, product of the masses of two bodies divided by the
cultures or preferences.G square of the distance between them. In gravity models,
GNPAbbreviation for gross national product.G the population of each neighborhood in the region is
used as the mass, and driving time is used as the
going concern valueThe value of the firm as a whole, distance.G
rather than the sum of the values of the separate
gray box designA situation in which the supplier and
client jointly design a product or service. See: black box
go/no-goThe state of a unit or product. Two design.G
parameters are possible: go (conforms to specification)
green beltA manager or team member who has been
and no-go (does not conform to specification).G
trained in six sigma improvement methods and will
goodA tangible product, merchandise, or ware.G have full-time responsibilities for process and quality
goodness of fitThe degree to which a model complies
with observed data.G green fieldThe initiation of a new process where no
similar initiatives have previously existed.G
goodwillAn intangible item that is only recorded on a
companys books as the result of a purchase. Generally, green logisticsA purchasing firm has the responsibility
it is inseparable from the enterprise but makes the to properly dispose of packaging supplies received with
company more valuable, for example, a good items ordered.G
reputation.G green manufacturingA method of producing a good or
government marketA market in which most or all buy- service that minimizes external cost and pollution. It in-
ers consist of agencies of federal, state, or local gov- cludes design for reuse, design for disassembly, and
ernments. See: consumer market, industrial market, design for remanufacture. See: environmentally respon-
institutional market.G sible business.G
green marketingIn advertising, promoting products
GPSAbbreviation for global positioning system.G
because of their environmental sensitivity.G
gradesThe sublabeling of items to identify their partic-
green reverse logisticsThe responsibility of the suppli-
ular makeup and to separate one lot from other produc-
er to dispose of packaging materials or environmentally
tion lots of the same item.G
sensitive materials such as heavy metals.G
grandfather clauseA provision that exempts existing
green supply chainA supply chain that considers envi-
entities from a newly created regulation.G
ronmental impacts on its operations and takes action

APICS Dictionary, 14th edition 73

GRI hard automation

along the supply chain to comply with environmental group layoutA layout in which machine groups are ar-
safety regulations and communicate this to customers ranged to process families of parts with similar charac-
and partners. See: environmentally responsible teristics.G
group replacementReplacing an entire set of compo-
GRIAbbreviation for Global Reporting Initiative.G nents, whether failed or not, all at one time (e.g., replac-
ing all the light bulbs in a ceiling fixture).G
grid techniqueA quantitative model used for locating

H plants and warehouses by finding the least cost point,

given the positions of raw materials and markets.G
group technology (GT)An engineering and manufactur-
ing philosophy that identifies the physical similarity of
parts (common routing) and establishes their effective
grievanceA complaint by an employee concerning al-
production. It provides for rapid retrieval of existing de-
leged contract violations handled formally through con-
signs and facilitates a cellular layout.G
tractually fixed procedures. If unsettled, a grievance
may lead to arbitration.G group technology work cellsA concentrated area for
producing parts based on similar operations and/or
grievance proceduresMethods identified in a collective
characteristics to use equipment and labor more
bargaining agreement to resolve problems that develop
or to determine if a contract has been violated.G
groupthinkA situation in which a team seizes on one
gross inventoryThe standard cost value of inventory
solution to a problem and does not consider other via-
before allowance for excess or obsolete items.G
ble solutions either because members are afraid of con-
gross marginThe difference between total revenue frontation or because they convince themselves that
and the cost of goods sold. Syn: gross profit margin.G other ideas arent worth discussing.G
gross national product (GNP)The market value of all growth-share matrixIn marketing, a division of prod-
goods and services produced in a nation in a given ucts by relative market share and market growth rate.
year.G Products are divided as follows: (1) Cash cowshigh
market share, low growth rate; (2) Starshigh market
gross profitSales minus cost of goods sold.G
share, high growth rate; (3) Dogslow market share, low
gross profit marginSyn: gross margin.G growth rate; and (4) Question markslow market share,
gross profit margin rateSales minus cost of goods sold high growth rate. Sometimes this same set of terms is
then divided by sales.G used to categorize products by market share and profit-
ability. See: cash cow, dog, question mark, star.G
gross requirementThe total of independent and de-
pendent demand for a component before the netting of growth trajectorySyn: ramp rate.G
on-hand inventory and scheduled receipts.G GTAbbreviation for group technology.G
gross salesThe total amount charged to all customers GTSGrasps the situation.G
during the accounting time period.G
guaranteeA contractual obligation by one entity to
gross weightVehicle weight including freight or another that a fact regarding a product is true. See:
passengers.G warranty.G
group classification codeA part of a material classifica- GUIAbbreviation for graphical user interface.G
tion technique that provides for designation of charac-

teristics by successively lower order groups of code.
Classification may denote function, type of material,
size, shape, and so forth.G
handling costThe cost involved in the movement of
group decision support system (GDSS)The software
material. In some cases, the handling cost depends on
designed to support groups in unstructured decision
the size of the inventory.H
making by supporting brainstorming, conflict resolution,
voting, and other techniques.G hanseiA Japanese word meaning reflection.H
groupingMatching like operations and running them hard automationUse of specialized machines to man-
together sequentially, thereby taking advantage of a ufacture and assemble products. Each machine is nor-
common setup.G mally dedicated to one function, such as milling.H

74 APICS Dictionary, 14th edition

hard copy high-level language (HLL)

hard copyA printed report, message, or special riods beyond some time fence such that, if the hedge is
listing.H not needed, it can be rolled forward before major re-
sources must be committed to produce the hedge and
hardware1) In manufacturing, relatively standard
put it in inventory. A product mix hedge is an approach
items such as nuts, bolts, washers, or clips. 2) In data
where several interrelated optional items are over-
processing, the computer and its peripherals.H
planned. Sometimes, using a planning bill, the sum of
harmonic smoothingAn approach to forecasting based the percent mix can exceed 100 percent by a defined
on fitting some set of sine and cosine functions to the
historical pattern of a time series. Syn: seasonal
amount, thus triggering additional hedge planning. 3) In
purchasing, any purchase or sale transaction having as
harmonics.H its purpose the elimination of the negative aspects of
harmonized system classification codesAn interna- price fluctuations. See: market hedge, option overplan-
tionally standardized description of goods that uses a ning, planning bill of material, safety stock, time fence,
system of numbers to provide increasingly detailed two-level master.H
classification and descriptions.H hedge inventoryA form of inventory buildup to buffer
against some event that may not happen. Hedge inven-
hash totalA control process used to ensure that all
tory planning involves speculation related to potential
documents in a group are present or processed. In
labor strikes, price increases, unsettled governments,
practice, the arithmetic sum of data not normally added
and events that could severely impair a companys stra-
together is found, the checking (audit) process adds the
tegic initiatives. Risk and consequences are unusually
same data, and a comparison is made. If the sums do
high, and top management approval is often required.H
not agree, an error exists. Example: the last digit of
every part number in an assembly is added, and the last hedgingThe practice of entering into contracts on a
digit of the sum becomes the last digit of the assembly. commodity exchange to protect against future fluctua-
If the last digit of an assembly is not the same as the tions in the commodity. This practice allows a company
sum of the last digit of the components sum, the as- to isolate profits to the value-added process rather than
sembly must be missing a part or must have the wrong to uncontrolled pricing factors. See: speculative
combination of parts.H buying.H
Hawthorne effectA study at the Hawthorne Western heelIn the process industry, an item used in the manu-
Electric plant from 1927 to 1932 systematically im- facture of itself. For example, in the manufacture of
proved working conditions and productivity improved. plastic, the ingredients will include the parent as well as
Then, when it systematically worsened working condi- the components.H
tions, productivity improved. From this study, it was de- heijunkaIn just-in-time philosophy, an approach to lev-
termined that concern by management generally factors el production throughout the supply chain to match the
into improved productivity.H planned rate of end product sales.H
hazardous wasteWaste, such as chemicals or nuclear helper applicationSoftware that assists the browser
material, that is hazardous to humans or animals and when audio, video, or large images are requested.H
requires special handling.H
heuristicsA form of problem solving in which the re-
hazmatHazardous material defined by environmental sults or rules have been determined by experience or
laws and legal precedents. A product has been defined intuition instead of by optimization. Heuristics can be
as hazardous by regulations that impose stiff fines if the used in such areas as forecasting; lot sizing; or deter-
regulations are ignored.H mining production, staff, or inventory levels.H
hedge1) An action taken in an attempt to shield the hierarchical databaseA method of constructing a da-
company from an uncertain event such as a strike, price tabase that requires that related record types be linked
increase, or currency reevaluation. 2) In master sche- in tree-like structures, where no child record can have
duling, a scheduled quantity to protect against uncer- more than one physical parent record.H
tainty in demand or supply. The hedge is similar to
high-level language (HLL)Relatively sophisticated
safety stock, except that a hedge has the dimension of
computer language that allows users to employ a nota-
timing as well as amount. A volume hedge or market
tion with which they are already familiar. For example:
hedge is carried at the master schedule or production
COBOL (business), ALGOL (mathematical and scientific),
plan level. The master scheduler plans excess quanti-
FORTRAN, BASIC, Java, and Visual Basic.H
ties over and above the demand quantities in given pe-

APICS Dictionary, 14th edition 75

hi-low house of quality (HOQ)

hi-lowA forklift truck with a standing operator.H HOQAbbreviation for house of quality.H
histogramA graph of contiguous vertical bars horizontal dependencyThe relationship between the
representing a frequency distribution in which the components at the same level in the bill of material, in
groups or classes of items are marked on the x axis and which all must be available at the same time and in suf-
the number of items in each class is indicated on the y ficient quantity to manufacture the parent assembly.
axis. The pictorial nature of the histogram lets people See: vertical dependency.H

H see patterns that are difficult to see in a simple table of

numbers. The histogram is one of the seven tools of
horizontally integrated firmAn organization that seeks
to produce or sell a type of product in numerous mar-
kets. The horizontal integration exists when an organi-
historical analogyA judgmental forecasting technique zation produces or sells similar products in various
based on identifying a sales history that is analogous to geographical locations. Horizontal integration in market-
a present situation, such as the sales history of a simi- ing occurs more frequently than horizontal integration in
lar product, and using that past pattern to predict future production. See: vertically integrated firm.H
sales. See: management estimation.H
horizontal marketplaceAn online marketplace used by
historical labor standardDetermined by studying ac- buyers and sellers from multiple industries. This mar-
tual past labor data for the operation of interest.H ketplace lowers prices by lowering transaction costs.H
HLLAbbreviation for high-level language.H horizontal mergerAn alliance of two or more compet-
holding companyIn financial management, a firm that ing firms.H
controls the voting stock of other firms.H hoshinA Japanese word meaning statement of
holding costsSyn: carrying costs.H objectives.H

hold orderA written order directing that certain opera- hoshin kanriSee hoshin planning.H
tions or work be interrupted or terminated pending a
hoshin planningBreakthrough planning. A Japanese
change in design or other disposition of the material.
strategic planning process in which a company develops
Syn: stop work order.H
up to four vision statements that indicate where the
hold pointsStockpoints for semifinished inventory.H company should be in the next five years. Company
goals and work plans are developed based on the vision
holonic network1) A network of autonomous, distri-
statements. Periodic audits are then conducted to mon-
buted human or computer systems with the capability
itor progress.H
to act in an integrated manner. 2) A network of compa-
nies dynamically interacting to act as one system. Each host computerAny computer on a network that is a
company or holon has a different process and core repository for services available to other computers on
competency. Virtual enterprises are created by organiz- the network. It is common to have one host machine
ing the holons, to take advantage of core provide several services such as the World Wide Web.H
housekeepingThe manufacturing activity of identifying
homogeneous productA product that is effectively and maintaining an orderly environment for preventing
identical from producer to producer.H errors and contamination in the manufacturing
honeycombingThe practice of removing a pallet of process.H
merchandise where the space is not exhausted in an house of quality (HOQ)A structured process that re-
orderly fashion, resulting in a vacant space not usable lates customer-defined attributes to the products tech-
for storage of other items. This is one of the hidden nical features needed to support and generate these
costs of warehousing.H attributes. This technique achieves this mapping by
honeycomb lossThe usable empty storage space in a means of a six-step process: (1) identification of cus-
stack due to storage of only a single stockkeeping unit tomer attributes; (2) identification of supporting tech-
in the stack to permit better access.H nical features; (3) correlation of the customer attributes
with the supporting technical features; (4) assignment
hopper carsRail cars that permit bulk commodities to
of priorities to the customer requirements and technical
be loaded at the top and removed from the bottom of
features; (5) evaluation of competitive stances and
the car. Some hopper cars have permanent tops that
competitive products; and (6) identification of those
provide protection from bad weather.H
technical features to be used (deployed) in the final de-

76 APICS Dictionary, 14th edition

hub ICC

sign of the product. HOQ is part of the quality function inventory model, optional replenishment model, order
deployment (QFD) process and forces designers to con- point system.H
sider customer needs and the degree to which the pro-
hybrid layoutThis layout combines two or more layout
posed designs satisfy these needs. See: customer-
defined attributes, quality function deployment.H
hybrid manufacturing processSyn: hybrid production
hubA large manufacturer or retailer doing business

with many trading partners.H
hybrid organizational structureAn organizational struc-
hub-and-spoke systemsIn warehousing, a system that
ture that embodies multiple organizational forms (func-
has a hub (or center point) where sorting or transfers
tional, product, or geographical) simultaneously. For
occur, and the spokes are outlets serving the destina-
example, some functions may be centralized (such as
tions related to the hub.H
finance and accounting), whereas others may be dupli-
human factors engineeringA merging of those cated geographically (such as sales).H
branches of engineering and the behavioral sciences
hybrid production methodA production planning me-
that concern themselves principally with the human
thod that combines the aspects of both the chase and
component in the design and operation of human-
level production planning methods. Syn: hybrid manu-
machine systems. Human factors engineering is based
facturing process, hybrid strategy. See: chase produc-
on a fundamental knowledge and study of human phys-
tion method, level production method, production
ical and mental abilities and emotional characteristics.H
planning method.H
human-machine interfaceThe location where data is
hybrid purchasing organizationA mix of the centralized
transferred from a worker to a computer, or vice-versa.H
and decentralized purchasing formatusually decentra-
human relations movementA movement started in the lized at the corporate level and centralized at the busi-
early 1900s among managers who believed that em- ness unit level.H
ployees are humans who should be treated with respect
hybrid strategySyn: hybrid production method.H
in the workplace.H
hypermediaAn addition to hypertext to include sound,
human resourcesThe portion or department of a com-
pictures, or music.H
pany that sets personnel policies and practices.H
hypertextA system of relating information without us-
human resource utilizationUsing labor to its fullest po-
ing menus or hierarchies.H
tential to maximize product or service output.H
hypertext linksLinks contained within text connecting
hundredweight (cwt)One hundred pounds.H
to other websites or other pages on the current site.H
hurdle rateThe minimum acceptable rate of return on
hypertext markup language (HTML)A language used to
a project.H
create web pages that permits the user to create text,
hybrid EDIA situation in which only one trading partner hypertext links, and multimedia elements within the
is EDI-enabled, while the other continues to use paper page. HTML is not a programming language, but a way
and fax. Usually the EDI-enabled partner would have to format text.H
electronic documents converted to fax.H
hypertext transfer protocol (HTTP)A protocol that tells
hybrid inventory systemAn inventory system combining computers how to communicate with each other. Most
features of the fixed reorder quantity inventory model internet addresses begin with http://.H
and the fixed reorder cycle inventory model. Features of
hypothesis testingUse of statistical models to test
the fixed reorder cycle inventory model and the fixed
conclusions about a population or universe based on
reorder quantity inventory model can be combined in
sample information.H
many different ways. For example, in the order point-
periodic review combination system, an order is placed
if the inventory level drops below a specified level be-
fore the review date; if not, the order quantity is deter- I
mined at the next review date. Another hybrid inventory
ICCAbbreviation for Interstate Commerce
system is the optional replenishment model. See: fixed
reorder cycle inventory model, fixed reorder quantity

APICS Dictionary, 14th edition 77

ideal quality incentive pay system

ideal qualityA term used by Genichi Taguchi to refer to import/export licenseOfficial authorization issued by a
the target value of a particular measure. Loss to society government allowing the shipping or delivery of a
increases with the square of the deviation of an actual product across national boundaries.I
product from this ideal point.I
import merchantPurchasing agent who buys and takes
idle capacityThe available capacity that exists on non- the title for goods and then resells them.I
constraint resources beyond the capacity required to
importsProducts bought in one country and produced

I support the constraint. Idle capacity has two compo-

nents: protective capacity and excess capacity.I
idle inventoryThe inventory generally not needed in a
in another.I
imposed dateA fixed date given to an activity usually
start no earlier than or finish no later than.I
system of linked resources. From a theory of constraints
perspective, idle inventory generally consists of protec- improve phaseOne of the six sigma phases of quality.
tive inventory and excess inventory. See: excess inven- In this phase, the improvements to products and/or
tory, productive inventory, protective inventory.I processes are adopted. See: design-measure-analyze-
improve-control process.I
idle timeThe time when operators or resources (e.g.,
machines) are not producing product because of setup, impulse responseHow quickly an estimate or forecast
maintenance, lack of material, lack of tooling, or lack of changes when the underlying data of the estimate have
scheduling.I changed.I

IFBAbbreviation for invitation for bid.I inactive inventoryStock designated as in excess of

consumption within a defined period or stocks of items
IIEAbbreviation for Institute of Industrial Engineers.I
that have not been used for a defined period.I
IMCAbbreviation for intermodal marketing company.I
inbound logisticsThe group in charge of moving mate-
imperfectionA quality characteristics departure from rials from suppliers or vendors into production
its intended level or state without any association to processes or storage facilities; or, the actual movement
conformance to specification requirements or to the of such material.I
usability of a product or service. See: blemish, defect,
inbound stockpointA defined location next to the place
of use on a production floor. Materials are brought to
implementationThe act of installing a system into op- the stockpoint as needed and taken from it for imme-
eration. It concludes the system project with the excep- diate use. Inbound stockpoints are used with a pull sys-
tion of appropriate follow-up or post-installation review.I tem of material control.I
implied authorityThe right of an agent, when directed incentiveA reward, financial or otherwise, that com-
by a principal to accomplish a task, to do what is rea- pensates a worker for high or continued performance
sonably necessary to accomplish it.I above standard. An incentive is also a motivating influ-
ence to induce effort above normal.I
implied contractA binding agreement inferred from the
actions of the parties.I incentive arrangementsThe incentive contract allows
for the sharing of the cost responsibility between the
implied warrantyA warranty imposed on sellers beyond
buyer and seller. Incentives are incorporated into the
any express agreement in the contract.I
contracts to motivate the supplier to improve its per-
implode1) Compression of detailed data in a formance in areas such as quality, on-time delivery, and
summary-level record or report. 2) Tracing a usage customer satisfaction. There are three elements of an
and/or cost impact from the bottom to the top (end incentive agreement: target cost, target profit, and the
product) of a bill of material using where-used logic.I sharing agreement.I
implosionThe process of determining the where-used incentive contractA contract where the buyer and sel-
relationship for a given component. Implosion can be ler agree to a target cost and maximum price. Cost sav-
single-level (showing only the parents on the next higher ings below the target are shared between buyer and
level) or multilevel (showing the ultimate top-level par- seller. If actual cost exceeds the target cost, the cost
ent). See: where-used list. Ant: explosion.I overrun is shared between buyer and seller up to the
import broker or sales agentPurchasing agent who maximum price.I
charges a fee for transactions but does not take the incentive pay systemA way to compensate employees
title of the goods.I based on their job performance.I

78 APICS Dictionary, 14th edition

incentive rate independent trading exchange

incentive rateIn transportation, a discounted rate de- than once, under every subassembly in which it is
signed to convince a shipper to ship a higher volume in used.I
a particular load.I
indented trackingThe following of all lot numbers of
incomeSyn: profit.I intermediates and ingredients consumed in the manu-
facture of a given batch of product down through all le-
income statementA financial statement showing the vels of the formula.I

net income for a business over a given period of time.
See: balance sheet, funds flow statement.I indented where-usedA listing of every parent item, and
the respective quantities required, as well as each of
incoming businessThe number of orders, the dollar their respective parent items, continuing until the ulti-
value of orders, or the quantity of units that have been mate end item or level-0 item is referenced. Each of
received on orders from customers. This volume is par- these parent items calls for a given component item in
ticularly important to the forecaster, who must compare a bill-of-material file. The component item is shown
incoming business against the forecast rather than closest to the left margin of the listing, with each parent
against actual shipments when actual shipments do not indented to the right, and each of their respective par-
reflect true customer demand. This situation may exist ents indented even further to the right.I
because of back-ordered items, bottlenecks in the ship-
independent actionIn transportation, the publication
ping room, and so forth.I
of a freight rate that differs from that of the rate bureau
in-control processA process in which the statistical to which the publisher is a member. This is a permitted
measure being evaluated is in a state of statistical con- action.I
trol (i.e., the variations among the observed sampling
independent demandThe demand for an item that is
results can be attributed to a constant system of
unrelated to the demand for other items. Demand for
chance causes). Ant: out-of-control process.I finished goods, parts required for destructive testing,
incotermsShort for International Commercial Terms; and service parts requirements are examples of inde-
created to simplify international transactions.I pendent demand. See: dependent demand.I

incremental analysisA method of economic analysis in independent demand item management models
which the cost of a single additional unit is compared to Models for the management of items whose demand is
its revenue. When the net contribution of an additional not strongly influenced by other items managed by the
unit is zero, total contribution is maximized.I same company. These models can be characterized as
follows: (1) stochastic or deterministic, depending on
incremental available-to-promiseSyn: discrete the variability of demand and other factors; (2) fixed
available-to-promise.I quantity, fixed cycle, or hybrid (optional replenishment).
See: fixed reorder cycle inventory model, fixed reorder
incremental cost1) Cost added in the process of fi-
quantity inventory model, optional replenishment
nishing an item or assembling a group of items. If the
cost of the components of a given assembly equals $5
and the additional cost of assembling the components independent floatIn project management, the amount
is $1, the incremental assembly cost is $1, while the of float on an activity that does not affect float on pre-
total cost of the finished assembly is $6. 2) Additional ceding or succeeding activities. See: float, free float,
cost incurred as a result of a decision.I total float.I

incremental utilization heuristicUsing a workers full independent projectA project which, whether or not it
capacity by adding one task at a time (in priority order) is accepted, does not eliminate other projects from eli-
up to the maximum capacity, or waiting for the utiliza- gibility. See: contingent project, mutually exclusive
tion to fall and then adding more tasks.I project.I
independent trading exchangeA business-to-business
indented bill of materialA form of multilevel bill of ma-
marketplace ownership model. These are public sites
terial. It exhibits the highest-level parents closest to the
often used for indirect materials and commodity pur-
left margin, and all the components going into these
chases where the price is the primary factor and where
parents are shown indented toward the right. All subse-
any buyers and sellers for a particular market meet to
quent levels of components are indented farther to the
gain access to a wider market to find the best deals.
right. If a component is used in more than one parent
See: public marketplaces.I
within a given product structure, it will appear more

APICS Dictionary, 14th edition 79

index information data warehouse

indexA value, expressed as a percentage, giving the industryA set of companies providing a product or ser-
relationship of a measurement to a base value. A result vice where each companys offering is a close substi-
of 100 would be average while numbers greater than tute for its competitors offerings.I
100 would be above average and those less than 100
industry analysisA major study of an industry; its major
would be below average.I
competitors, customers, and suppliers; and the focus
indicatorAn index of business activities.I and driving forces within that industry.I

I indifference pointThe point at which two options

create the same costs for a specific output level.I
industry structure typesEconomists have developed
models of the types of competition faced by various
indirect costsCosts that are not directly incurred by a firms. These types are (1) Pure monopolyOnly one firm
particular job or operation. Certain utility costs, such as provides a particular product or service. The monopoly
plant heating, are often indirect. An indirect cost is typi- may be regulated or unregulated; (2) Pure oligopolyA
cally distributed to the product through the overhead few companies produce essentially the same product or
rates.I service and market it within a given area. A company is
forced to price its product at the going rate unless it can
indirect laborWork required to support production in
differentiate its product; (3) Differentiated oligopolyA
general without being related to a specific product (e.g.,
few companies produce partially differentiated products
floor sweeping).I
or services that are marketed within a given area.
indirect labor costThe compensation paid to workers Differentiation may be based on quality, features, styl-
whose activities are not related to a specific product.I ing, or services offered along with the product; (4)
indirect materialsSyn: supplies.I Monopolistic competitionMany competitors offer par-
tially differentiated products or services. Most competi-
indirect retail locationsA retailer who sells products to tors focus on market segments where they can meet
the public but who buys products indirectly through a customers needs somewhat better than their competi-
third-party distributor, rather than directly from the tors; and (5) Pure competitionMany competitors offer
seller.I undifferentiated products or services.I
industrial buyersBuyers who purchase materials main-
inefficiency riskThe risk of losing customers because
ly for conversion.I
another firm has lower unit costs.I
industrial engineeringThe engineering discipline con-
infinite loadingCalculation of the capacity required at
cerned with facilities layout, methods measurement and
work centers in the time periods required regardless of
improvement, statistical quality control, job design and
the capacity available to perform this work. Syn: infinite
evaluation, and the use of management sciences to
solve business problems.I
industrial facilities managementThe installation and infinite schedulingSyn: infinite loading.I
maintenance of the physical plant, its surroundings, and inflationAn ongoing rise in the overall level of prices.
the physical assets of an organization.I Inflation reduces the purchasing power of money.I
industrial marketA market where most or all custom-
influence filterIn e-commerce, a device to make
ers are individuals or businesses that buy products to
stakeholders better satisfied with a website.I
produce other goods and services. Syn: business mar-
ket, producer market. See: consumer market, govern- informal cultureOrganizational characteristics and re-
ment market, institutional market.I lationships that are not part of the formal structure but
industrial revolutionA movement to the use of facto- that influence how the organization accomplishes its
ries and machines and away from activities done by goals.I
hand without mechanical assistance.I informationData that have been interpreted and that
industrial trucksVehicles powered by hand, electricity, meet the need of one or more managers.I
or propane for material handling activities in a ware-
information data warehouseA repository (typically
house. More flexible but slower and less constant than
large) of corporate data that can be accessed using
conveyors, they are not in a fixed position. Industrial
specialized query tools. This technique separates the
trucks are the most-common form of materials handling
analysis of data from the recording of data and is often
used to combine data from different computing systems

80 APICS Dictionary, 14th edition

information distribution institutional market

to make information access more convenient and cohe- inputWork arriving at a work center or production
rent. See: data warehouse.I facility.I

information distributionMaking needed data available input controlManagement of the release of work to a
to stakeholders in a timely manner.I work center or production facility.I

information flow profileA graph of the performance of input/output analysisSyn: input/output control.I
information flow compared to some set of performance

input/output control (I/O)A technique for capacity
criteria.I control where planned and actual inputs and planned
information systemInterrelated computer hardware and actual outputs of a work center are monitored.
and software along with people and processes designed Planned inputs and outputs for each work center are
for the collection, processing, and dissemination of in- developed by capacity requirements planning and
formation for planning, decision making, and control.I approved by manufacturing management. Actual input
is compared to planned input to identify when work
information system architectureA model of how the
center output might vary from the plan because work is
organization operates regarding information. The model
not available at the work center. Actual output is also
considers four factors: (1) organizational functions, (2)
compared to planned output to identify problems within
communication of coordination requirements, (3) data
the work center. Syn: input/output analysis. See:
modeling needs, and (4) management and control
capacity control.I
structures. The architecture of the information system
should be aligned with and match the architecture of input/output devicesModems, terminals, or various
the organization.I pieces of equipment whose designed purpose relates to
manual, mechanical, electronic, visual, or audio entry to
information technologyThe technology of computers, and from the computers processing unit.I
telecommunications, and other devices that integrate
data, equipment, personnel, and problem-solving me- input rate capacityMeasurement that takes rates of
thods in planning and controlling business activities. different inputs and transforms them into a common
Information technology provides the means for collect- unit to measure the input. See: capacity utilization.I
ing, storing, encoding, processing, analyzing, transmit- insourcingUsing the firms internal resources to pro-
ting, receiving, and printing text, audio, or video vide goods and services. See: make-or-buy decision.I
inspectionMeasuring, examining, testing, or gauging
information visibilityHow extensive information is one or more characteristics of a good or service and
shared throughout a firm and with other stakeholders.I comparing the results with specified requirements to
infrastructural elementsElements of a strategy includ- determine whether conformity is achieved for each cha-
ing decision rules, policies, personnel guidelines, and racteristic.I
organizational structure.I inspection orderAn authorization to an inspection de-
partment or group to perform an inspection operation.I
ingredientIn the process industries, the raw material
or component of a mixture. See: component.I inspection ticketFrequently used as a synonym for an
inspection order; more properly a reporting of an in-
initial public offering (IPO)A firms first sale of common
spection function performed.I
instantaneous receiptThe receipt of an entire lot-size
innovation riskThe risk of losing customers because
quantity in a very short period of time.I
another firm creates more innovative products.I
Institute for Supply Management (ISM)A nonprofit so-
innovative productsProducts that tend to have a high
ciety for purchasing managers and others, formerly the
profit margin, be unique, have less competition, and
National Association of Purchasing Management
have dynamic demand.I
in-process inventorySyn: work in process.I
Institute of Industrial Engineers (IIE)A nonprofit educa-
in-process waiver requestsRequests for waivers on tional organization with members interested in the field
normal production procedures because of deviations in of industrial engineering.I
materials, equipment, or quality metrics, where normal
institutional marketA market in which most or all cus-
product specifications are maintained.I
tomers are one of the following: schools, hospitals, pris-

APICS Dictionary, 14th edition 81

instruction sheet intermittent production

ons, and other institutions that provide products and interactiveA characteristic of those applications where
services to individuals who are under their care. See: a user communicates with a computer program via a
consumer market, government market, industrial terminal, entering data and receiving responses from
market.I the computer.I

instruction sheetSyn: routing.I interactive computer systemA computer system that

supports real-time interaction with a user. The response

intangibleOne distinguishing feature of pure services.
time to the user is similar to the actual timing of the
Pure services cannot be inventoried or carried in stock
business or physical process. See: interactive system.I
for long periods of time.I
interactive customer careA generic term for a variety
intangible costsThose costs that are difficult to quanti-
of services provided over the internet. These services
fy such as the cost of poor quality or of high employee
include customer service and technical support.I
interactive schedulingComputer scheduling where the
integrated carrierA company that provides a variety of
process is either automatic or manually interrupted to
transportation services including ground, sea, air car-
allow the scheduler the opportunity to review and
riage, and freight forwarding.I
change the schedule.I
integrated change controlIn project management, a
interactive systemRefers to those computer applica-
system under which any changes are coordinated
tions in which a user communicates with a computer
across the entire project.I
program via a system, entering data and receiving res-
integrated enterpriseA business or organization made ponses from the computer. See: interactive computer
up of individuals who have acquired the knowledge and system.I
skills to work with others to make the organization a
interarrival timeTime between the arrival of two se-
greater success than the sum of each individuals out-
quential customers or events.I
put. Integration includes increased communication and
coordination between individuals and within and across interest1) Financial share in a project or enterprise. 2)
teams, functions, processes, and organizations over Periodic compensation for lending money. 3) In an
time. See: cross-functional integration.I economy study, synonymous with required return, ex-
pected profit, or charge for the use of capital. 4) The
integrated internet marketing (I2M)The use of internet
cost for the use of capital. Sometimes referred to as the
facilities to sell products, influence stakeholder atti-
time value of money.I
tudes, and improve the companys image.I
interest rateThe ratio of the interest payment to the
integrated logisticsSyn: service response logistics.I
principal for a given unit of time. It is usually expressed
integrated logistics service providersOrganizations as a percentage of the principal.I
that provide one or many logistics services to a custom-
interleavingAssigning multiple tasks to be performed
er for a fee.I
concurrently, often the assignment of multiple picking
integrated resource management (IRM)Syn: resource orders to a single picker to pick concurrently.I
intermediately positioned warehouseA warehouse lo-
integrated services digital network (ISDN)Emerging cated between customers and manufacturing plants to
international standard for using public phone lines to provide increased customer service and reduced distri-
transmit voice and data over the same line.I bution cost.I

integrating mechanismA physical, organizational, or intermediately positioned strategyTo position a ware-

informational entity that allows people and functions to house halfway between the supplier and the customer.I
interact freely by transcending boundaries.I
intermediate partMaterial processed beyond raw ma-
intellectual propertyVarious legal entitlements that terial and used in higher level items. See: component.I
attach to certain names, written and recorded media,
intermittent productionA form of manufacturing in
and inventions.I
which the jobs pass through the functional departments
intelligent agentA program that regularly gathers in- in lots, and each lot may have a different routing. See:
formation without the owner being present.I job shop.I

82 APICS Dictionary, 14th edition

intermodal marketing companies (IMCs) interrelationship digraph

intermodal marketing companies (IMCs)Organizations staff to execute procurement activities that add value to
that are the intermediary for shippers and intermodal the overall supply chain. Such tasks as local supplier
rail carriers.I development, contract negotiations, quality audits, and
best practice operations provide reduced dependence
intermodal transport1) Shipments moved by different
on third parties and improve overall efficiency and
types of equipment combining the best features of each
mode. 2) The use of two or more different carrier modes
in the through movement of a shipment.I
internal controlsThe policies and procedures, the do-
cumentation, and the plan for an organization that au-
international standardsStandards established by in-
ternational standards-setting organizations to promote
interoperability among operating environments.I
thorize transactions, safeguard assets, and maintain internetA worldwide network of computers belonging
the accuracy of financial records.I to businesses, governments, and universities that
internal customerThe recipient (person or department) enables users to share information in the form of files
of another persons or departments output (good, ser- and to send electronic messages and have access to a
vice, or information) within an organization. See: cus- tremendous store of information.I
tomer, external customer.I internet operationsOperations performed over the in-
internal environmentThe chosen domain or scope of ternet encompassing such things as email, telnet, new-
activities within which an organization operates, for ex- sgroups, file transfer protocol, and the World Wide
ample, the tasks associated with goods or services to Web.I
be delivered by the organization. See: external environ- internet service provider (ISP)A business or organiza-
ment, organizational environment.I tion that sells access to the internet and related servic-
internal failure costsThe cost of things that go wrong es to consumers. For a monthly fee, the service provider
before the product reaches the customer. Internal fail- offers a software package, username, password, and
ure costs usually include rework, scrap, downgrades, access to the internet (via various technologies such as
reinspection, retest, and process losses.I dial-up and DSL), which enables users to browse the
World Wide Web and USENET and send and receive
internal rate of returnThe rate of compound interest at
email. The ISP may also provide a combination of ser-
which the companys outstanding investment is repaid
vices, including internet transit, domain name registra-
by proceeds from the project.I
tion and hosting, web hosting, and colocation.I
internal setup timeThe time associated with elements
of a setup procedure performed while the process or interoperation timeThe time between the completion
machine is not running. Ant: external setup time.I of one operation and the start of the next.I

internal supply chainA structure for sharing informa- interplant demandOne plants need for a part or prod-
tion within a firm and creating an atmosphere for coop- uct that is produced by another plant or division within
eration between functions to strengthen the firm.I the same organization. Although it is not a customer
order, it is usually handled by the master production
international companyCompany that uses production scheduling system in a similar manner. See: interplant
sharing and sells its products in a different country.I transfer.I
international logisticsAll functions concerned with the
interplant transferThe shipment of a part or product by
movement of materials and finished goods on a global
one plant to another plant or division within the corpo-
ration. See: interplant demand, transfer pricing.I
International Organization for Standardization (ISO)
interpolationThe process of finding a value of a func-
Group of cooperating institutes from 155 countries
tion between two known values. Interpolation may be
working to develop and publish international standards.
performed numerically or graphically.I
It acts as a bridge between public and private sectors.I
interrelationship digraphA technique used to define
international procurement office (IPO)Establishes a
how factors relate to one another. Complex multivaria-
global presence for a company by providing localized
ble problems or desired outcomes can be displayed
supply management services in a region that is strateg-
with their interrelated factors. The logical and often
ically important. This management approach is a long-
causal relationships between the factors can be
term commitment that takes advantage of a region's
language and cultural capabilities to use trusted local

APICS Dictionary, 14th edition 83

interrogate inventory effectiveness index

interrogateRetrieve information from computer files by inventory accountingThe branch of accounting dealing
use of predefined inquiries or unstructured queries with valuing inventory. Inventory may be recorded or va-
handled by a high-level retrieval language.I lued using either a perpetual or a periodic system. A
perpetual inventory record is updated frequently or in
interruptA break in the normal flow of a computer rou-
real time, while a periodic inventory record is counted or
tine such that the flow can be resumed from that point
measured at fixed time intervals (e.g., every two weeks
at a later time. An interrupt is usually caused by a signal
or monthly). Inventory valuation methods of LIFO, FIFO,

I from an external source.I

interstate commerceThe movement of persons or
property across one or more state lines for business
or average costs are used with either recording system.I
inventory accuracyWhen the on-hand quantity is within
purposes.I an allowed tolerance of the recorded balance. This im-
portant metric usually is measured as the percent of
Interstate Commerce Commission (ICC)A U.S. regula- items with inventory levels that fall within tolerance.
tory agency charged with enforcing regulations control- Target values usually are 95 percent to 99 percent, de-
ling railroads, motor carriers, pipelines, domestic water pending on the value of the item.I
carriers, domestic surface freight forwarders, and
brokers.I inventory adjustmentA change made to an inventory
record to correct the balance, to bring it in line with ac-
intranetA privately owned network that makes use of tual physical inventory balances. The adjustment either
internet technology and applications to meet the needs increases or decreases the item record on-hand
of an enterprise. It resides entirely within a department balance.I
or company, providing communication and access to
information, similar to the internet, with web pages, and inventory balance location accuracyWhen the invento-
so on for internal use only.I ry count is accurate at specific locations.I

in-transit inventoryMaterial moving between two or inventory bufferInventory used to protect the through-
more locations, usually separated geographically; for put of an operation or the schedule against the negative
example, finished goods being shipped from a plant to a effects caused by delays in delivery, quality problems,
distribution center.I delivery of incorrect quantity, and so on. Syn: inventory
cushion. See: fluctuation inventory, safety stock.I
in-transit lead timeThe time between the date of
shipment (at the shipping point) and the date of receipt inventory controlThe activities and techniques of
(at the receivers dock). Orders normally specify the maintaining the desired levels of items, whether raw
date by which goods should be at the dock. materials, work in process, or finished products. Syn:
Consequently, this date should be offset by in-transit material control.I
lead time for establishing a ship date for the supplier.I inventory conversion periodThe time period needed to
intrastate commerceMoving people or materials be- produce and sell a product, measured from procure-
tween points within a single state.I ment of raw materials to the sale of the product.I
intrinsic forecast methodA forecast based on internal inventory costsCosts associated with ordering and
factors, such as an average of past sales. Ant: extrinsic holding inventory. See: carrying costs, ordering cost.I
inventory cushionSyn: inventory buffer.I
inventory1) Those stocks or items used to support
inventory cycleThe length of time between two con-
production (raw materials and work-in-process items),
secutive replenishment shipments.I
supporting activities (maintenance, repair, and operat-
ing supplies), and customer service (finished goods and inventory diversionThe shipment of parts against a
spare parts). Demand for inventory may be dependent project or contract other than the original project or con-
or independent. Inventory functions are anticipation, tract for which the items were purchased.I
hedge, cycle (lot size), fluctuation (safety, buffer, or re- inventory driversThose conditions that would lead a
serve), transportation (pipeline), and service parts. 2) All company to hold inventory.I
the money currently tied up in the system. As used in
theory of constraints, inventory refers to the equipment, inventory effectiveness indexA system to identify non-
fixtures, buildings, and so forth that the system owns value-adding inventory and make it visible and provide a
as well as inventory in the forms of raw materials, work- process to measure non-value adding inventory and sell
in-process, and finished goods.I or write it off to keep working capital in control.I

84 APICS Dictionary, 14th edition

inventory investment irregular maintenance

inventory investmentThe dollars that are in all levels of inventory shrinkageLosses of inventory resulting from
inventory.I scrap, deterioration, pilferage, and so forth.I
inventory issue1) Items released from an inventory inventory taxTax based on the value of inventory on
location for use or sale. 2) The inventory record transac- hand at a particular time.I
tion reducing the inventory balance by the amount
inventory turnoverThe number of times that an inven-
tory cycles, or turns over, during the year. A frequently
inventory managementThe branch of business man-
agement concerned with planning and controlling
used method to compute inventory turnover is to divide
the average inventory level into the annual cost of
sales. For example, an average inventory of $3 million
inventory optimization softwareA computer application divided into an annual cost of sales of $21 million
having the capability of finding optimal inventory strate- means that inventory turned over seven times. Syn: in-
gies and policies related to customer service and return ventory turns, turnover. See: inventory velocity.I
on investment over several echelons of a supply chain.I inventory turnsSyn: inventory turnover.I
inventory ordering systemInventory models for the rep- inventory usageThe value or the number of units of an
lenishment of inventory. Independent demand inventory inventory item consumed over a period of time.I
ordering models include but are not limited to fixed
inventory valuationThe value of the inventory at either
reorder cycle, fixed reorder quantity, optional reple-
its cost or its market value. Because inventory value
nishment, and hybrid models. Dependent demand in-
can change with time, some recognition is taken of the
ventory ordering models include material requirements
age distribution of inventory. Therefore, the cost value
planning, kanban, and drum-buffer-rope.I
of inventory is usually computed on a FIFO basis, LIFO
inventory plannerSyn: material planner (first basis, or a standard cost basis to establish the cost of
definition).I goods sold.I
inventory planningThe activities and techniques of de- inventory velocityThe speed with which inventory
termining the desired levels of items, whether raw ma- passes through an organization or supply chain at a
terials, work in process, or finished products including given point in time as measured by inventory turnover.
order quantities and safety stock levels. Syn: material See: inventory turnover.I
inventory visibilityThe extent to which inventory infor-
inventory policyA statement of a companys goals and mation is shared within a firm and with supply chain
approach to the management of inventories.I partners.I
inventory poolingThe act of holding inventory in a sin- inventory write-offA deduction of inventory dollars from
gle location instead of multiple locations.I the financial statement because the inventory is of less
inventory receiptAn inventory record transaction that value. An inventory write-off may be necessary because
records the receipt or arrival of inventory into physical the value of the physical inventory is less than its book
stores by increasing the inventory on-hand balance by value or because the items in inventory are no longer
the received quantity. Often associated with receipt of a usable.I
purchase or production order quantity.I invitation for bid (IFB)Syn: request for proposal.I
inventory recordA history of the inventory transactions invoiceA list of goods shipped by the supplier to the
of a specific material.I buyer stating prices, quantities, and other costs.I
inventory reserveAn accounting deduction from earn- involuntary servicesServices that are not sought by
ings to fairly and reasonably represent the value of in- customers. These include hospitals and prisons.I
ventoried assets on a balance sheet. The inventory
reserve is used to make up for the fact that all inventory I/OAbbreviation for input/output control.I
will not be sold at the cost to the firm.I IPO1) Abbreviation for initial public offering. 2)
inventory returnsItems returned to the manufacturer Abbreviation for international procurement office.I
as defective, obsolete, overages, and so forth. An inven- IRMAbbreviation for integrated resource
tory item record transaction records the return or re- management.I
ceipt into physical stores of materials from which the
irregular maintenanceSyn: breakdown maintenance.I
item may be scrapped.I

APICS Dictionary, 14th edition 85

ISDN item record

ISDNAbbreviation for integrated services digital ISO 31000A standard adopted by the International
network.I Standards Organization that outlines principles and a
set of guidelines to manage risk in any endeavor. The
Ishikawa diagramSyn: cause-and-effect diagram.I
standard includes guidelines for understanding risk, de-
islands of automationStand-alone pockets of veloping a risk management policy, integrating risk
automation (e.g., robots, CAD/CAM systems, numerical management into organizational processes (including
control machines) that are not connected into a accountability and responsibility), and establishing in-

I cohesive system.I
ISOAbbreviation for International Organization for
ternal and external risk communication processes. ISO
31000 is not a management system standard and is
Standardization.I not intended or appropriate for certification purposes or
regulatory or contractual use.I
ISO certificationIn quality management, denotes that a
company has obtained an ISO9000 quality standard. ISO 26000An international standard adopted by the
Also, it is the process by which a firm achieves such cer- International Standards Organization to assist organiza-
tification.I tions in contributing to sustainable development beyond
ISO 14000 Series StandardsA series of generic envi- legal compliance through a common understanding of
ronmental management standards developed by the social responsibility. ISO 26000 is not a management
International Organization of Standardization, which system standard and is not intended or appropriate for
provide structure and systems for managing environ- certification purposes or regulatory or contractual use.I
mental compliance with legislative and regulatory re-
ISPAn abbreviation for internet service provider.I
quirements and affect every aspect of a companys
environmental operations.I I2MAbbreviation for integrated internet marketing.I
isolationThe determination of the location of a failure issue1) The physical movement of items from a stock-
through the use of accessory support and diagnostic ing location. See: disbursement. 2) Often, the transac-
equipment.I tion reporting of this activity.I
ISO 9000A set of international standards on quality
issue cycle timeThe time required to generate a requi-
management and quality assurance developed to help
sition for material, pull the material from an inventory
companies effectively document the quality system
location, and move it to its destination.I
elements to be implemented to maintain an efficient
quality system. The standards, initially published in itemAny unique manufactured or purchased part, ma-
1987, are not specific to any particular industry, terial, intermediate, subassembly, or product.I
product, or service. The standards were developed by
the International Organization for Standardization, item demandDemand disaggregated into specific con-
known as ISO, a specialized international agency for figurations of goods or services. See: item.I
standardization composed of the national standards
item master fileA file containing all item master
bodies of 91 countries. The standards underwent major
records for a product, product line, plant, or company.
revision in 2008 and now include ISO 9000:2008
See: master file.I
(definitions), ISO 9001:2008 (requirements), and ISO
9004:2008 (continuous improvement). See: ISO/TS item master recordSyn: item record.I
16949, QS 9000.I
item numberA number that serves to uniquely identify
ISO 9000:2000A certification process requiring a
an item. Syn: part number, product number, stock code,
third-party audit that defines in broad terms what must
stock number.I
be done to manage company quality and to document
these quality processes. It recently was updated by ISO item recordThe master record for an item. Typically,
9000:2008.I it contains identifying and descriptive data and control
ISO/TS 16949A standard written by the International values (lead times, lot sizes, etc.) and may contain data
Automotive Task Force that applies only to automotive on inventory status, requirements, planned orders, and
companies. It includes quality management system; costs. Item records are linked by bill of material records
management responsibility; resource management; (or product structure records), thus defining the bill of
product realization; and measurement, analysis, and material. Syn: item master record, part master record,
improvement. See: QS 9000.I part record.I

86 APICS Dictionary, 14th edition

Java joint replenishment

jobs, and its purpose is to reduce employee

J dissatisfaction.J
job enrichmentAn increase in the number of tasks that
JavaA general-purpose computer language created by an employee performs and an increase in the control
Sun Microsystems.J over those tasks. It is associated with the design of jobs
and especially the production workers job. Job enrich-
jidokaThe Japanese term for the practice of stopping
the production line when a defect occurs.J
jigA device that holds a piece of work in a desired po-
ment is an extension of job enlargement.J
job gradeA form of job evaluation that assigns jobs to
predetermined job classifications according to the jobs
sition and guides the tool or tools that perform the ne-
relative worth to the organization. Pay scales are usually
cessary operations. See: fixture.J
set for each job grade.J
jishukenA Japanese word meaning voluntary study
job lotA specific quantity of a part or product that is
produced at one time.J
JITAcronym for just in time.J
job orderSyn: manufacturing order.J
JIT master scheduleSyn: level schedule (second
job order costingSyn: job costing.J
JIT supplier environmentTo effectively participate as a job progress chartSyn: Gantt chart.J
supplier under just in time (JIT), a company must supply job rotationThe practice of an employee periodically
components and subassemblies in exact quantities, de- changing job responsibilities to provide a broader pers-
livery time, and quality. Shipments are made within nar- pective and a view of the organization as a total system,
row time windows that are rigidly enforced. Virtually to enhance motivation, and to provide cross-training.J
every component must be delivered on time and be
job sequencing rulesA set of priorities and conditions
within specifications.J
that specify the order in which jobs are processed be-
job1) The combination of tasks, duties, and responsi- cause of scarce resources.J
bilities assigned to an individual employee and usually
job shop1) An organization in which similar equipment
considered his or her work assignment. 2) The contents
is organized by function. Each job follows a distinct
of a work order.J
routing through the shop. 2) A type of manufacturing
job analysisA process of gathering (by observation, process used to produce items to each customers spe-
interview, or recording systems) significant task- cifications. Production operations are designed to han-
oriented activities and requirements about work re- dle a wide range of product designs and are performed
quired of employees.J at fixed plant locations using general-purpose equip-
jobbingSyn: job shop.J ment. Syn: jobbing. See: intermittent production, project
job costingA cost accounting system in which costs
are assigned to specific jobs. This system can be used job shop layoutSyn: functional layout.J
with either actual or standard costs in the manufactur- job shop schedulingThe production planning and con-
ing of distinguishable units or lots of products. Syn: job trol techniques used to sequence and prioritize produc-
order costing.J tion quantities across operations in a job shop.J
job descriptionA formal statement of duties, qualifica- job statusA periodic report showing the plan for com-
tions, and responsibilities associated with a particular pleting a job (usually the requirements and completion
job.J date) and the progress of the job against that plan.J
job designThe function of describing a job with respect job ticketSyn: time ticket.J
to its content and the methods to be used. Criteria,
joint orderAn order on which several items are com-
such as the degree of job specialization, job enrich-
bined to obtain volume or transportation discounts.J
ment, and job enlargement are useful in designing work
content.J joint rateA rate for a route involving two or more carri-
ers to move a shipment.J
job enlargementAn increase in the number of tasks
that an employee performs. Job enlargement is asso- joint replenishmentCoordinating the lot sizing and or-
ciated with the design of jobs, particularly production der release decision for related items and treating them

APICS Dictionary, 14th edition 87

joint replenishment system key supply chain processes

as a family of items. The objective is to achieve lower minating waste in machinery, labor, or production me-
costs because of ordering, setup, shipping, and quantity thods. See: continuous process improvement.K
discount economies. This term applies equally to joint
kaizen blitzA rapid improvement of a limited process
ordering (family contracts) and to composite part (group
area, for example, a production cell. Part of the im-
technology) fabrication scheduling. Syn: joint reple-
provement team consists of workers in that area. The
nishment system.J
objectives are to use innovative thinking to eliminate

K joint replenishment systemSyn: joint replenishment.J

joint ventureAn agreement between two or more firms
non-value-added work and to immediately implement
the changes within a week or less. Ownership of the im-
provement by the area work team and the development
to risk equity capital to attempt a specific business
objective.J of the teams problem-solving skills are additional bene-
fits. See: kaizen event.K
judgment itemsThose inventory items that cannot be
effectively controlled by algorithms because of age (new kaizen eventA time-boxed set of activities carried out
or obsolete product) or management decision (promo- by the cell team during the week of cell implementation.
tional product).J The kaizen event is an implementation arm of a lean
manufacturing program. See: kaizen blitz.K
Juran trilogySyn: quality trilogy.J
kanbanA method of just-in-time production that uses
jurisdictionThe authority of a governmental agency to
standard containers or lot sizes with a single card at-
undertake its activities.J
tached to each. It is a pull system in which work centers
jury of executive opinionA forecast given by a group of signal with a card that they wish to withdraw parts from
executives who are knowledgeable about the industry, feeding operations or suppliers. The Japanese word
competition, and the firm.J kanban, loosely translated, means card, billboard, or
just in time (JIT)A philosophy of manufacturing based sign but other signaling devices such as colored golf
on planned elimination of all waste and on continuous balls have also been used. The term is often used syn-
improvement of productivity. It encompasses the suc- onymously for the specific scheduling system developed
cessful execution of all manufacturing activities re- and used by the Toyota Corporation in Japan. See: move
quired to produce a final product, from design card, production card, synchronized production.K
engineering to delivery, and includes all stages of con- keiretsuA form of cooperative relationship among
version from raw material onward. The primary ele- companies in Japan where the companies largely re-
ments of just in time are to have only the required main legally and economically independent, even
inventory when needed; to improve quality to zero de- though they work closely in various ways such as finan-
fects; to reduce lead times by reducing setup times, cial backing. A member of a keiretsu generally owns a
queue lengths, and lot sizes; to incrementally revise the limited amount of stock in other member companies. A
operations themselves; and to accomplish these activi- keiretsu generally forms around a bank and a trading
ties at minimum cost. In the broad sense, it applies to company, but distribution (supply chain) keiretsu al-
all forms of manufacturingjob shop, process, and re- liances have been formed of companies ranging from
petitiveand to many service industries as well. Syn: raw material suppliers to retailers.K
short-cycle manufacturing, stockless production, zero
inventories.J key performance indicator (KPI)A financial or nonfi-
nancial measure that is used to define and assess
just-in-time purchasingThis type of purchasing uses
progress toward specific organizational goals and typi-
few suppliers who have long-term commitments with
cally is tied to an organization's strategy and business
the organization. Long-term contracts are used, which
stakeholders. A KPI should not be contradictory to other
enable the purchaser to develop and certify the quality
departmental or strategic business unit performance
process at the supplier.J

K key success factorsThe product attributes, organiza-

tional strengths, and accomplishments with the great-
est impact on future success in the marketplace.K
kaizenThe Japanese term for improvement; continuing
key supply chain processesImportant steps in produc-
improvement involving everyonemanagers and work-
ing, marketing, and servicing goods and services.K
ers. In manufacturing, kaizen relates to finding and eli-

88 APICS Dictionary, 14th edition

kit last in, first out (LIFO)

kit1) The components of a parent item that have been rate. The variance is unfavorable if the actual hours ex-
pulled from stock and readied for movement to a pro- ceed the standard hours. Syn: labor usage variance.L
duction area. 2) A group of repair parts to be shipped
labor gradeA classification of workers whose capability
with an order. Syn: kitted material, staged material.K
indicates their skill level or craft. See: skill-based com-
kitted materialSyn: kit.K pensation, skills inventories.L

kittingThe process of constructing and staging kits.K labor-intensiveWhen an operation has more expendi-

knowledge-based systemA computer program that

employs knowledge of the structure of relations and
tures on labor than capital. See: capital-intensive.L

labor productivityA partial productivity measure, the

reasoning rules to solve problems by generating new rate of output of a worker or group of workers per unit
knowledge from the relationships about the subject.K of time compared to an established standard or rate of
output. Labor productivity can be expressed as output
knowledge creationThe propensity for generating
per unit of time or output per labor hour. See: machine
productivity, productivity.L
knowledge managementConcept of information being
labor rate varianceLabor rate variance is the sum of
used by executives, managers, and employees to more
the actual wage rate minus the standard wage rate mul-
effectively produce product, interface with customers,
tiplied by the actual number of labor hours. The va-
and navigate through competitive markets.K
riance is unfavorable if the actual rate is greater than
knowledge management toolProvides an assortment the standard rate.L
of information quickly to stakeholders for faster and labor standardUnder normal conditions, the quantity
better decisions.K of worker minutes necessary to finish a product or
knowledge workerA worker whose job is the accumu- process.L
lation, transfer, validation, analysis, and creation of in- labor ticketSyn: labor claim.L
labor usage varianceSyn: labor efficiency variance.L
KPIAbbreviation for key performance indicator.K
labor voucherSyn: labor claim.L

L ladingThe cargo being transported by a vehicle.L

lag capacity strategyNot adding capacity until the firm

laboratory orderSyn: experimental order.L is operating at or beyond full capacity. This keeps unit
costs minimized by working at full capacity, but does
laborThe people who produce value in a product not satisfy total demand.L
laid-down costThe sum of the product and transporta-
labor claimA factory workers report that lists the jobs tion costs. The laid-down cost is useful in comparing the
an employee worked on (number of pieces, number of total cost of a product shipped from different supply
hours, etc.) and often the amount of money to which the sources to a customers point of use.L
employee is entitled. A labor claim is usually made on a
LANAcronym for local area network.L
labor chit or time ticket. Syn: labor ticket, labor
voucher.L land bridgeMoving goods over water, then land, and
then water again to the final point.L
labor costThe dollar amount of labor performed during
manufacturing. This amount is added to direct material landed costThis cost includes the product cost plus
cost and overhead cost to obtain total manufacturing the costs of logistics, such as warehousing, transporta-
cost.L tion, and handling fees.L
labor efficiency1) Syn: worker efficiency. 2) The aver- lap phasingSyn: overlapped schedule.L
age of worker efficiency for all direct workers in a de-
last in, first out (LIFO)A method of inventory valuation
partment or facility.L
for accounting purposes. The accounting assumption is
labor efficiency varianceLabor efficiency variance is that the most recently received (last in) is the first to be
(actual number of hours worked minus standard num- used or sold (first out) for costing purposes, but there is
ber of hours worked) multiplied by standard labor wage no necessary relationship with the actual physical

APICS Dictionary, 14th edition 89

late finish date (LF) lean production

movement of specific items. See: average cost lead management toolA tool used by sales personnel
systems.L that helps them follow a specified sales process to
close deals.L
late finish date (LF)In the critical path method of
project management, the last date upon which a given lead time1) A span of time required to perform a
activity can be completed without delaying the comple- process (or series of operations). 2) In a logistics con-
tion date of the project.L text, the time between recognition of the need for an

L latenessDelivery date minus due date. Lateness may

be positive or, in the case of early jobs, negative. See:
earliness, tardiness.L
order and the receipt of goods. Individual components
of lead time can include order preparation time, queue
time, processing time, move or transportation time, and
receiving and inspection time. Syn: total lead time. See:
late orderSyn: past due order.L manufacturing lead time, purchasing lead time.L
late start date (LS)In the critical path method of lead-time inventoryInventory that is carried to cover
project management, the last date upon which a given demand during the lead time.L
activity can be started without delaying the completion
lead-time offsetA technique used in MRP where a
date of the project.L
planned order receipt in one time period will require the
launch phaseIn this last phase of product develop- release of that order in an earlier time period based on
ment, either the product is fed into the supply chain or the lead time for the item. Syn: component lead-time
the service is made available to consumers.L offset, offsetting.L
law of diminishing marginal returnsA principle that as lead-time schedulingDevelopment of a schedule of
the quantity of a variable factor applied to a fixed factor start and completion times of planned operations for a
is increased, the additional units of the variable factor manufacturing order by calculation of the lead time. The
will result in smaller and smaller increases in output. calculation includes the duration of all operations, inte-
See: marginal product.L roperation times, and order administration times. See:
law of variabilityThe more that variability exists in a back scheduling, central point scheduling, forward
process, the less productive that process will be.L scheduling, probable scheduling.L

layoffThe process by which employees that are not leanSyn: lean production.L
needed for some extended amount of time are given lean enterpriseA group of individuals, functions, and
notice that their services are not needed. Benefits may sometimes legally separate but operationally synchro-
or may not continue in a layoff.L nized organizations. The value stream defines the lean
layoutPhysical arrangement of resources or centers of enterprise. The objectives of the lean enterprise are to
economic activity (machines, groups of people, worksta- correctly specify value to the ultimate customer, and to
tions, storage areas, aisles, etc.) within a facility. analyze and focus the value stream so that it does eve-
Layouts include product (linear or line), functional (job rything from product development and production to
shop or process), cellular, and fixed position.L sales and service in a way that actions that do not
create value are removed and actions that do create
LBOAbbreviation for leveraged buyout.L value proceed in a continuous flow as pulled by the cus-
LCL1) Abbreviation for less than carload (lot ship- tomer. Lean enterprise differs from a virtual corpora-
ment). 2) Abbreviation for lower control limit.L tion in which the organizational membership and
structure keeps changing.L
LDIAbbreviation for logistics data interchange.L
lean manufacturingSyn: lean production.L
lead capacity strategyA capacity strategy in which, as
demand increases and is expected to increase, capacity lean metricA metric that permits a balanced evalua-
is added prior to the realization of demand.L tion and responsequality without sacrificing quantity
objectives. The types of metrics are financial, behavior-
leading indicatorA specific business activity index that
al, and core-process performance.L
indicates future trends. For example, housing starts is a
leading indicator for the industry that supplies builders lean productionA philosophy of production that em-
hardware.L phasizes the minimization of the amount of all the re-
sources (including time) used in the various activities of
lead logistics providers (LLPs)Organizations that over-
the enterprise. It involves identifying and eliminating
see the third-party logistics operations of their clients.L
non-value-adding activities in design, production, supply

90 APICS Dictionary, 14th edition

learning curve level of service

chain management, and dealing with customers. Lean too expensive to replace. It often runs on antiquated
producers employ teams of multiskilled workers at all hardware.L
levels of the organization and use highly flexible, in-
legal environmentThe governmental restrictions
creasingly automated machines to produce volumes of
placed on an organization regarding the goods and
products in potentially enormous variety. It contains a
services provided by the business, for example,
set of principles and practices to reduce cost through
environmental regulations, export/import restrictions,
the relentless removal of waste and through the simpli-
fication of all manufacturing and support processes.
Syn: lean, lean manufacturing.L
safety regulations, and mandated deregulations.L
lesseeAn entity to which a lease is given.L L
learning curveA curve reflecting the rate of improve- lessorAn entity which gives a lease.L
ment in time per piece as more units of an item are less-than-carload (LCL)Either a small shipment that
made. A planning technique, the learning curve is par- does not fill the railcar or a shipment of not enough
ticularly useful in project-oriented industries in which weight to qualify for a carload quantity rate discount.L
new products are frequently phased in. The basis for
less-than-truckload (LTL)Either a small shipment that
the learning curve calculation is that workers will be
does not fill the truck or a shipment of not enough
able to produce the product more quickly after they get
weight to qualify for a truckload quantity (usually set at
used to making it. Syn: experience curve, manufacturing
about 10,000 lbs.) rate discount, offered to a general
progress curve.L
commodity trucker.L
learning management systemA software system for
letter of creditAn assurance by a bank that payment
delivering and managing education and training within
will be made as long as the sales terms agreed to by the
an organization.L
buyer and seller are met. This method of payment for
learning organization1) Group of people who have wo- sales contracts provides a high degree of protection for
ven a continuous, enhanced capacity to learn into the the seller.L
corporate culture. 2) An organization in which learning levelEvery part or assembly in a product structure is
processes are analyzed, monitored, developed, and assigned a level code signifying the relative level in
aligned with competitive goals.L which that part or assembly is used within the product
leaseA rental agreement lasting an extended period.L structure. Often times the end items are assigned level
0 with the components and subassemblies going into it
least changeover costDetermining the lowest cost of
assigned to level 1 and so on. The MRP explosion
making machine changeovers between jobs by se-
process starts from level 0 and proceeds downward one
quencing the jobs accordingly.L
level at a time.L
least-squares methodA method of curve fitting that level-demand strategyA strategy of keeping capacity
selects a line of best fit through a plot of data to minim- level and not variable with demand.L
ize the sum of squares of the deviations of the given
points from the line. See: regression analysis.L levelingSyn: resource leveling.L
level loadingSyn: load leveling.L
least total costA dynamic lot-sizing technique that cal-
culates the order quantity by comparing the setup (or level of effortIn project management, support activity
ordering) costs and the carrying cost for various lot siz- (e.g., customer liaison) that is not easily measured by
es and selects the lot size where these costs are most discrete accomplishment. It usually has a uniform work
nearly equal. See: discrete order quantity, dynamic lot rate.L
level of serviceA measure (usually expressed as a per-
least unit costA dynamic lot-sizing technique that adds centage) of satisfying demand through inventory or by
ordering cost and inventory carrying cost for each trial the current production schedule in time to satisfy the
lot size and divides by the number of units in the lot customers requested delivery dates and quantities. In
size, picking the lot size with the lowest unit cost. See: a make-to-stock environment, level of service is some-
discrete order quantity, dynamic lot sizing.L times calculated as the percentage of orders picked
complete from stock upon receipt of the customer or-
legA portion of a complete trip.L
der, the percentage of line items picked complete, or
legacy systemsA computer application program that is the percentage of total dollar demand picked complete.
old and interfaces poorly with other applications but is In make-to-order and design-to-order environments, lev-

APICS Dictionary, 14th edition 91

level production method line

el of service is the percentage of times the customer- terial, and environmental inputs and outputs.
requested or acknowledged date was met by shipping Sometimes called cradle-to-grave analysis, LCA includes
complete product quantities. Syn: measure of service, raw material extraction through materials processing,
service level. See: cycle service level.L manufacture, distribution, use, repair and maintenance,
and disposal or recycling.L
level production methodA production planning method
that maintains a stable production rate while varying life cycle analysisA quantitative forecasting technique

L inventory levels to meet demand. Syn: level strategy,

production leveling. See: level schedule.L
level production scheduleSyn: level schedule.L
based on applying past patterns of demand data cover-
ing introduction, growth, maturity, saturation, and de-
cline of similar products to a new product family.L

level schedule1) In traditional management, a produc- life cycle costingIn evaluating alternatives, the consid-
tion schedule or master production schedule that gene- eration of all costsincluding acquisition, operation,
rates material and labor requirements that are as and disposition coststhat will be incurred over the en-
evenly spread over time as possible. Finished goods in- tire time of product ownership.L
ventories buffer the production system against seasonal life testingThe simulation of a products life under con-
demand. See: level production method. 2) In JIT, a level trolled real-world conditions to see if it holds up and
schedule (usually constructed monthly) in which each performs as required.L
days customer demand is scheduled to be built on the
LIFOAcronym for last in, first out.L
day it will be shipped. A level schedule is the output of
the load-leveling process. Syn: JIT master schedule, lev- lighterA short-haul flat-bottomed barge.L
el production schedule. See: load leveling.L
lightless plantSyn: dark factory.L
level strategySyn: level production method.L
LIMITAcronym for lot-size inventory management in-
leverage-capital structure ratioAn indicator of whether terpolation technique.L
or not a company has the ability to retire its long-term
limited accessSecuring inventory, usually in a locked
environment, to protect it from theft and to help im-
leveraged buyout (LBO)A takeover of a company using prove inventory count accuracy.L
borrowed funds where assets of the acquired company
limited liability companyIn the United States, a busi-
are used as partial collateral for the loan.L
ness organization that, as with a corporation, enjoys li-
leveraging purchase volumeBuying in large quantities mited liability yet is not a taxable entity.L
to take advantage of volume price or shipping
limited life materialMaterial having a finite shelf life.L
LFAbbreviation for late finish date.L limited partnershipA partnership having two types of
partners: (1) limited partners contribute assets to the
liabilitiesAn accounting/financial term (balance sheet company without participating in management and (2)
classification of accounts) representing debts or general partners manage the company and are respon-
obligations owed by a company to creditors. Liabilities sible for all debts.L
may have a short-term time horizon, such as accounts
payable, or a longer-term obligation, such as mortgage limiting operationThe operation with the least capacity
payable or bonds payable. See: assets, balance sheet, in a series of operations with no alternative routings.
debt, owners equity.L The capacity of the total system can be no greater than
the limiting operation, and as long as this limiting condi-
licensingPaying a fee for permission to manufacture tion exists, the total system can be effectively sche-
and sell a product created by another.L duled by scheduling the limiting operation and providing
life cycle analogy methodA method for forecasting the this operation with proper buffers. See: protective ca-
life cycle of a new product or service, including the in- pacity, protective inventory.L
troduction, growth, maturity, and decline phases. In ad-
line1) A specific physical space for the manufacture of
dition to time frames, this qualitative technique tries to
a product that in a flow shop layout is represented by a
estimate demand levels.L
straight line. In actuality, this may be a series of pieces
life cycle assessment (LCA)Understanding the human of equipment connected by piping or conveyor systems.
and environmental aspects and impacts during the life 2) A type of manufacturing process used to produce a
of a product, process, or service, including energy, ma- narrow range of standard items with identical or highly

92 APICS Dictionary, 14th edition

linear decision rules listserv

similar designs. Production volumes are high, produc- work through that assembly line at the planned line
tion and material handling equipment is specialized, rate.L
and all products typically pass through the same se-
line efficiencyA measure of actual work content versus
quence of operations. See: assembly line.L
cycle time of the limiting operation in a production line.
linear decision rulesA modeling technique using simul- Line efficiency (percentage) is equal to the sum of all
taneous equations (e.g., the establishment of aggregate station task times divided by the longest task time mul-
workforce levels) based upon minimizing the total cost
of hiring, firing, holding inventory, backorders, payroll,
overtime, and undertime.L
tiplied by the number of stations. In an assembly line
layout, the line efficiency is 100 percent minus the bal-
ance delay percentage.L
linearity1) Production at a constant quantity. 2) Use of line functionsAreas involved in daily operations.
resources at a level rate, typically measured daily or Logistics line functions include inventory control, order
more frequently.L processing, warehousing and packaging.L

linear layoutA layout of various machines in one line haul costsBasic costs of carrier operation to move
straight line. This type of layout makes it difficult to real- a container of freight, including driver's wages and
locate operations among workers and machinery.L usage depreciation. These vary with the cost per mile,
the distance shipped, and the weight moved.L
linear productionActual production to a level schedule,
so that a plotting of actual output versus planned out- line itemOne item on an order, regardless of quantity.L
put forms a straight line, even when plotted for a short line loadingThe loading of a production line by multip-
segment of time.L lying the total pieces by the rate per piece for each item
linear programmingMathematical models for solving to come up with a finished schedule for the line.L
linear optimization problems through minimization or line managerA manager involved in managing a de-
maximization of a linear function subject to linear con- partment that is directly involved in making a product.L
straints. For example, in blending gasoline and other
petroleum products, many intermediate distillates may line manufacturingRepetitive manufacturing per-
be available. Prices and octane ratings as well as upper formed by specialized equipment in a fixed sequence.L
limits on capacities of input materials that can be used line scrapThe worth of work in process and raw mate-
to produce various grades of fuel are given. The prob- rials scrapped because of faulty processing as a per-
lem is to blend the various inputs in such a way that (1) centage of the total value of production at standard
cost will be minimized (profit will be maximized), (2) cost.L
specified optimum octane ratings will be met, and (3)
the need for additional storage capacity will be line of balance planningA project planning technique
avoided.L using a lead-time offset chart and a chart of required
final assembly completions to graph a third bar chart
linear regressionA statistical data technique that ex- showing the number of each component that should be
presses a variable as a linear function of an indepen- completed to date. This bar chart forms a descending
dent variable. Linear regression can be used to develop line, and aggregate component completions are then
forecasting models.L plotted against this line of balance. This is a crude form
of material planning.L
linear trend forecastingUsing simple linear regression
to estimate future trends.L line of creditA contract that enables a company to bor-
row funds at any time up to a predetermined limit.L
line balancing1) The balancing of the assignment of
the tasks to workstations in a manner that minimizes linkThe transportation method used in a logistics sys-
the number of workstations and minimizes the total tem to connect the nodes of the system.L
amount of idle time at all stations for a given output
liquidityThe ability of a firm to pay debts as they come
level. In balancing these tasks, the specified time re-
quirement per unit of product for each task and its se-
quential relationship with the other tasks must be liquidity ratioFinancial ratios that are indicators of a
considered. See: uniform plant loading. 2) A technique firms ability to retire short-term financial obligations.L
for determining the product mix that can be run down
listservSyn: listserver.L
an assembly line to provide a fairly consistent flow of

APICS Dictionary, 14th edition 93

list server logistics system

list serverSoftware running on a web-accessed com- sure that when the record shows an items location, it
puter that facilitates electronic discussions by emailing is, in fact, in that location.L
submissions from one member to all other members of
location gridA layout of a warehouse used to improve
the discussion group. Syn: listserv.L
inventory management and cycle counting.L
live loadSyn: available work.L
location tagA bar-coded sign situated at a warehouse
loadThe amount of planned work scheduled for and location. The location number can be read or scanned.L

L actual work released to a facility, work center, or opera-

tion for a specific span of time. Usually expressed in
locator fileA file used in a stockroom (or anywhere)
providing information on where each item is located.
terms of standard hours of work or, when items con-
See: locator system.L
sume similar resources at the same rate, units of pro-
duction. Syn: workload.L locator systemA system for maintaining a record of the
storage locations of items in inventory. See: locator
load centerSyn: work center.L
load-distance analysisIn layout analysis, a method of
logbookA daily record kept by an interstate driver of
choosing a facility layout based on selecting the layout
driving and duty-related and non-duty-related activities.L
with the shortest product or material travel per time
period.L logical relationshipIn project management, a depen-
dency between two activities or between a milestone
loading portThe port where cargo is loaded onto an
and an activity. The four possible relationships are (1)
exporting vessel.L
finish-to-startactivity A must be finished before activity
load levelingSpreading orders out in time or resche- B can start; (2) finish-to-finishactivity A must be fi-
duling operations so that the amount of work to be nished before activity B can finish; (3) start-to-start
done in sequential time periods tends to be distributed activity A must start before activity B can start; and (4)
evenly and is achievable. Although both material and start-to-finishactivity A must start before activity B can
labor are ideally level loaded, specific businesses and finish.L
industries may load to one or the other exclusively (e.g.,
logistics1) In an industrial context, the art and science
service industries). Syn: capacity smoothing, level load-
of obtaining, producing, and distributing material and
ing. See: level schedule.L
product in the proper place and in proper quantities. 2)
load profileA display of future capacity requirements In a military sense (where it has greater usage), its
based on released and/or planned orders over a given meaning can also include the movement of personnel.L
span of time. Syn: load projection. See: capacity
logistics channelA set of supply chain partners who
requirements plan.L
participate in storage, transportation, and communica-
load projectionSyn: load profile.L tions that contribute to the flow of goods.L
local area network (LAN)A high-speed data communi- logistics data interchange (LDI)The electronic trans-
cation system for linking computer terminals, programs, mission of logistics information via computer systems.L
storage, and graphic devices at multiple workstations
logistics managementThe part of supply chain man-
distributed over a relatively small geographic area such
agement that oversees the planning and execution of
as a building or campus.L
forward and reverse flow of goods and related informa-
local measuresThe set of measurements that relates tion between points in the supply chain to meet cus-
to a resource, operation, process, or part and usually tomer requirements.L
has low correlation to global organization measures.
logistics strategyA plan for the logistics elements of a
Examples are errors per printed page, departmental ef-
businessincluding warehousing, information systems,
ficiency, and volume discounts.L
and transportationthat is aligned with the overall
local rateA rate pertaining to two points served by a business strategy. See: strategic plan.L
single carrier.L
logistics systemThe planning and coordination of the
locational determinantsInformation or factors consi- physical movement aspects of a firms operations such
dered in determining where to put a facility.L that a flow of raw materials, parts, and finished goods is
achieved in a manner that minimizes total costs for the
location auditA methodical verification of the location
levels of service desired.L
records for an item or group of items in inventory to en-

94 APICS Dictionary, 14th edition

log normal distribution lot splitting

log normal distributionA continuous probability distri- lot-for-lotA lot-sizing technique that generates planned
bution where the logarithms of the variable are normally orders in quantities equal to the net requirements in
distributed.L each period. See: discrete order quantity.L
longest-task-time (LTT) heuristicThe method of attach- lot numberA unique identification assigned to a ho-
ing additional jobs to a workstation based on priority mogeneous quantity of material. Syn: batch number,
order, with the longest task scheduled first.L mix number.L
long-term planningBusiness planning that addresses
the strategic needs of the organization. See: business
lot number controlAssignment of unique numbers to
each instance of receipt and carrying forth that number L
plan, resource planning.L into subsequent manufacturing processes so that, in
long-term production planSyn: aggregate production review of an end item, each lot consumed from raw ma-
plan.L terials through end item can be identified as having
been used for the manufacture of this specific end item
long tonTwo thousand two hundred and forty pounds.L lot.L
loose standardA standard time greater than that re- lot number traceabilityTracking parts by lot numbers
quired by a qualified worker with normal skill and to a group of items. This tracking can assist in tracing
effort.L quality problems to their source. A lot number identifies
loss leader pricingPricing some products below cost to a designated group of related items manufactured in a
attract customers into the store, in the expectation that single run or received from a vendor in a single
they will buy other items as well.L shipment.L

loss to societyAccording to Genichi Taguchi, a loss to lot operation cycle timeThe length of time required
society occurs whenever a dimension of a product dif- from the start of setup to the end of cleanup for a pro-
fers from its target value. This loss increases with the duction lot at a given operation, including setup, pro-
square of the deviation from the target. According to duction, and cleanup.L
this concept, a loss to society occurs even though a di- lot sizeThe amount of a particular item that is ordered
mension is within toleranceas long as the dimension from the plant or a supplier or issued as a standard
is not exactly on the target. For example, a loss to socie- quantity to the production process. Syn: order quantity.L
ty might occur because an assembly made of compo-
nents that are within specification, but not exactly on lot-size codeA code that indicates the lot-sizing tech-
target, wears out faster than an assembly comprised of nique selected for a given item. Syn: order policy code.L
components that are all exactly on the target.L lot-size inventoryInventory that results whenever
lost saleA potential sale that was not completed, quantity price discounts, shipping costs, setup costs, or
usually due to lack of availability of the item in similar considerations make it more economical to pur-
question.L chase or produce in larger lots than are needed for im-
mediate purposes.L
lost time factorThe complement of utilization, that is
one minus the utilization factor. It is the percentage of lot-size inventory management interpolation technique
time lost to machine, tool, and worker unavailability. It (LIMIT)A technique for looking at the lot sizes for
can be calculated as the planned hours minus actual groups of similar products to determine the effect eco-
hours used, divided by the planned hours. See: balance nomic lot sizes will have on the total inventory, total se-
delay, utilization.L tup costs, and machine availability.L

lotA quantity produced together and sharing the same lot-size systemSyn: fixed reorder quantity inventory
production costs and specifications. See: batch.L model.L

lot controlA set of procedures (e.g., assigning unique lot sizingThe process of, or techniques used in, deter-
batch numbers and tracking each batch) used to main- mining lot size. See: order policy.L
tain lot integrity from raw materials, from the supplier
lot splittingDividing a lot into two or more sublots and
through manufacturing to consumers.L
simultaneously processing each sublot on identical (or
lot costIn cost accounting, those costs associated with very similar) facilities as separate lots, usually to com-
processing a common lot or quantity of parts having the press lead time or to expedite a small quantity. Syn: op-
same specifications.L eration splitting.L

APICS Dictionary, 14th edition 95

lot tolerance percent defective (LTPD) maintainability

lot tolerance percent defective (LTPD)Expressed in machine breakdown, maintenance, teardown, setup,
percent defective, the poorest quality in an individual lot and other factors.M
that should be accepted. Note: The LTPD is used as a
machine flexibilityIn work-cell design, choosing be-
basis for some inspection systems and is commonly as-
tween general-purpose machinery versus special-
sociated with a value for a small consumers risk.L
purpose machinery, so that the lowest cost and most
lot traceabilityThe ability to identify the lot or batch adaptability is achieved.M

M number of product in terms of one or all of the follow-

ing: its composition, purchased parts, manufacturing
date, or shipped items. In certain regulated industries,
machine hoursThe amount of time, in hours, that a
machine is actually running. Machine hours, rather than
labor hours, may be used for planning capacity for
lot traceability may be a legislative requirement.L
scheduling, and for allocating costs.M
low-cost-provider strategyA strategy of offering the
machine-limited capacityA production environment
lowest prices in the market to gain share and increase
where a specific machine limits throughput of the
sales volume in industries composed by numerous
process. See: constraint, throughput.M
players offering the same type of products.L
machine loadingThe accumulation by workstation,
lower control limit (LCL)Control limit for points below
machine, or machine group of the hours generated from
the central line in a control chart.L
the scheduling of operations for released orders by time
lower specification limit (LSL)In statistical process period. Machine loading differs from capacity require-
control, charting the line that defines the minimum ac- ments planning in that it does not use the planned or-
ceptable level of random output. See: tolerance limits.L ders from MRP but operates solely from released
orders. It may be of limited value because of its limited
low-level codeA number that identifies the lowest level
visibility of resources.M
in any bill of material at which a particular component
appears. Net requirements for a given component are machine productivityA partial productivity measure.
not calculated until all the gross requirements have The rate of output of a machine per unit of time com-
been calculated down to that level. Low-level codes are pared with an established standard or rate of output.
normally calculated and maintained automatically by Machine productivity can be expressed as output per
the computer software. Syn: explosion level.L unit of time or output per machine hour. See: labor
productivity, productivity.M
LSAbbreviation for late start date.L
machine utilizationA measure of how intensively a
LSLAbbreviation for lower specification limit.L machine is being used. Machine utilization compares
LTLAbbreviation for less than truckload.L the actual machine time (setup and run time) to availa-
ble time.M
LTPDAbbreviation for lot tolerance percent defective.L
machining centerA machine capable of performing a
LTTAbbreviation for longest-task-time.L variety of metal, wood, or plastic removal operations on
lumpy demandSyn: discontinuous demand.L a part, usually operated by numerical control.M

macro environmentThe environment external to a

M business including technological, economic, natural,

and regulatory forces that marketing efforts cannot
machine attachmentsAdditional machine parts that
decrease the time needed to complete a task and the MADAcronym for mean absolute deviation.M
level of human involvement.M mainframeLarge computer system, typically with a
machine centerA production area consisting of one or separate central processing unit. This high-level com-
more machines (and, if appropriate for capacity plan- puter is designed for the most intensive computational
ning, the necessary support personnel) that can be con- tasks.M
sidered as one unit for capacity requirements planning maintainabilityThe characteristic of equipment design
and detailed scheduling.M and installation that provides the ability for the equip-
ment to be repaired easily and efficiently. See:
machine downtimesPeriods during which a machine is
unavailable due to tool breakage, worker unavailability,

96 APICS Dictionary, 14th edition

maintenance, repair, and operating (MRO) supplies manual rescheduling

maintenance, repair, and operating (MRO) supplies managementThe functions of planning, organizing,
Items used in support of general operations and main- and controlling the transformation process and its utility
tenance such as maintenance supplies, spare parts, in providing a good or service to customers.M
and consumables used in the manufacturing process
management by objectives (MBO)A participative goal-
and supporting operations.M
setting process that enables the manager or supervisor
maintenance, repair, and overhaul (MRO)An item for to construct and communicate the goals of the depart-
reprocessing in the remanufacturing industry.M

major setupThe equipment setup and related activi-

ment to each subordinate. At the same time, the subor-
dinate is able to formulate personal goals and influence
the departments goals.M
ties required to manufacture a group of items in se-
quence, exclusive of the setup required for each item in management by walking around (MBWA)The man-
the group.M agement technique of managers touring a facility on a
regular basis to talk with workers and staff about prob-
make-or-buy cost analysisA comparison of all of the lems, trends, and potential solutions.M
costs associated with making an item versus the cost of
buying the item.M management estimationA judgmental forecasting
technique whereby responsible individuals predict the
make-or-buy decisionThe act of deciding whether to demand for new products or alter a quantitative fore-
produce an item internally or buy it from an outside cast for existing products largely on the basis of expe-
supplier. Factors to consider in the decision include rience and intuition. Other judgmental forecasting
costs, capacity availability, proprietary and/or techniques may be used in combination with manage-
specialized knowledge, quality considerations, skill ment estimation to improve the accuracy of the esti-
requirements, volume, and timing.M mate. See: Delphi method, historical analogy, panel
consensus, pyramid forecasting.M
make-to-orderA production environment where a good
or service can be made after receipt of a customers management information system (MIS)Integrated ap-
order. The final product is usually a combination of proach for providing interpreted and relevant data that
standard items and items custom-designed to meet the can help managers make decisions. This information
special needs of the customer. Where options or acces- can reflect the progress or lack of progress made in
sories are stocked before customer orders arrive, the achieving major objectives.M
term assemble-to-order is frequently used. Syn:
management scienceSyn: operations research.M
produce-to-order. See: assemble-to-order, make-to-
stock.M managerial accountingA branch of accounting that
uses techniques such as break-even analysis, cost-
make-to-stockA production environment where prod-
volume-profit analysis, make-buy analysis, and others to
ucts can be and usually are finished before receipt of a
provide information used in day-to-day decision
customer order. Customer orders are typically filled
from existing stocks, and production orders are used to
replenish those stocks. Syn: produce-to-stock. See: man-hourA unit of measure representing one person
assemble-to-order, make-to-order.M working for one hour. The combination of n people
working for h hours produces nh man-hours. Frequent
Malcolm Baldrige National Quality Award (MB QA)An qualifications to the definition include (1) designation of
award established by Congress in 1987 to raise aware- work effort as normal effort; (2) designation of time
ness of quality management and to recognize U.S. spent as actual hours.M
companies that have implemented successful quality
management systems. Up to four awards may be given manifest systemA production control system where
annually in each of three categories: manufacturing the exact sequence of items to be assembled is
company, service company, and small business. The required.M
award is named after the late Secretary of Commerce,
manual reschedulingThe most common method of re-
Malcolm Baldrige, a proponent of quality management.
scheduling open orders (scheduled receipts). Under this
The U.S. Commerce Departments National Institute of
method, the MRP system provides information on the
Standards and Technology manages the award, and the
part numbers and order numbers that need to be re-
American Society for Quality (ASQ) administers it. Syn:
scheduled. Due dates and order quantity changes re-
Baldrige Award.M
quired are then analyzed and changed by material

APICS Dictionary, 14th edition 97

manufacturability manufacturing order

planners or other authorized persons. Syn: planner in- external environmental forces; corporate strategy;
tervention. Ant: automatic rescheduling.M business unit strategy; other functional strategies
(marketing, engineering, finance, etc.); product
manufacturabilityA measure of the design of a product
selection; product/process design; product/process
or process in terms of its ability to be produced easily,
technology; and management competencies. Often
consistently, and with high quality.M
refers to whether a company, plant, product, or service
manufacturers agentSyn: manufacturers is make-to-stock, make-to-order, or assemble-to-order.

M representative.M
manufacturers representativeOne who sells goods for
Syn: production environment.M

manufacturing execution systems (MES)Programs and

several firms but does not take title to them. Syn: man- systems that participate in shop floor control, including
ufacturers agent, manufacturing representative.M programmed logic controllers and process control com-
manufacturingA series of interrelated activities and puters for direct and supervisory control of manufactur-
operations involving the design, material selection, ing equipment; process information systems that gather
planning, production, quality assurance, management, historical performance information, then generate re-
and marketing of discrete consumer and durable ports; graphical displays; and alarms that inform opera-
goods.M tions personnel what is going on in the plant currently
and a very short history into the past. Quality control in-
manufacturing authorizationSyn: manufacturing
formation is also gathered and a laboratory information
order.M management system may be part of this configuration
manufacturing automation protocol (MAP)An to tie process conditions to the quality data that are
application-specific protocol based on the International generated. Thereby, cause-and-effect relationships can
Standards Organizations open systems interconnection be determined. The quality data at times affect the con-
(OSI) standards. It is designed to allow communication trol parameters that are used to meet product specifica-
between a companys computers and computers from tions either dynamically or off line.M
different vendors in the manufacturing shop floor
manufacturing instructionA set of detailed instructions
for carrying out a manufacturing process. It is usually
manufacturing calendarA calendar used in inventory referenced by the routing and thus can simplify the con-
and production planning functions that consecutively tent of the routing.M
numbers only the working days so that the component
manufacturing layout strategiesAn element of
and work order scheduling may be done based on the
manufacturing strategy. It is the analysis of physical
actual number of workdays available. Syn: M-day calen-
capacity, geography, functional needs, corporate
dar, planning calendar, production calendar, shop ca-
philosophy, and product-market/process focus to
lendar. See: resource calendar.M
systematically respond to required facility changes
manufacturing capital asset valueThe depreciated driven by organizational, strategic, and environmental
value of manufacturing fixed assets.M considerations.M
manufacturing cycleSyn: manufacturing lead time.M manufacturing lead timeThe total time required to
manufacturing cycle efficiencyThe ratio of value-added manufacture an item, exclusive of lower level purchas-
time to manufacturing lead time or cycle time. ing lead time. For make-to-order products, it is the
Manufacturing cycle time can be improved by the reduc- length of time between the release of an order to the
tion of manufacturing lead time by eliminating non- production process and shipment to the final customer.
value-added activities such as inspecting, moving, and For make-to-stock products, it is the length of time be-
queuing.M tween the release of an order to the production process
and receipt into inventory. Included here are order
manufacturing data sheetSyn: routing.M preparation time, queue time, setup time, run time,
manufacturing engineeringThe engineering discipline move time, inspection time, and put-away time. Syn:
concerned with designing and improving production manufacturing cycle, production cycle, production lead
processes. See: process engineering.M time. See: lead time.M

manufacturing environmentThe framework in which manufacturing orderA document, group of documents,

manufacturing strategy is developed and implemented. or schedule conveying authority for the manufacture of
Elements of the manufacturing environment include specified parts or products in specified quantities. Syn:

98 APICS Dictionary, 14th edition

manufacturing order reporting mapping

job order, manufacturing authorization, production or- ing company. Ideally, it addresses operational planning
der, production release, run order, shop order, work or- in units, financial planning in dollars, and has a simula-
der. See: assembly parts list, batch card, blend order, tion capability to answer what-if questions. It is made up
fabrication order, mix ticket, work order.M of a variety of processes, each linked together: business
planning, production planning (sales and operations
manufacturing order reportingSyn: production report-
planning), master production scheduling, material re-
ing and status control.M
quirements planning, capacity requirements planning,
manufacturing philosophyThe set of guiding principles,
driving forces, and ingrained attitudes that helps com-
and the execution support systems for capacity and ma-
terial. Output from these systems is integrated with fi-
municate goals, plans, and policies to all employees nancial reports such as the business plan, purchase
and that is reinforced through conscious and subcons- commitment report, shipping budget, and inventory pro-
cious behavior within the manufacturing organization.M jections in dollars. Manufacturing resource planning is a
direct outgrowth and extension of closed-loop MRP.M
manufacturing planning and control system (MPC)A
closed-loop information system that includes the plan-
manufacturing strategyA collective pattern of deci-
ning functions of production planning (sales and opera- sions that acts upon the formulation and deployment of
tions planning), master production scheduling, material
manufacturing resources. To be most effective, the
requirements planning, and capacity requirements
manufacturing strategy should act in support of the
planning. Once the plan has been accepted as realistic, overall strategic direction of the business and provide
execution begins. The execution functions include input-
for competitive advantages (edges).M
output control, detailed scheduling, dispatching, antic-
ipated delay reports (department and supplier), and manufacturing volume strategyAn element of manu-
supplier scheduling. A closed-loop MRP system is one facturing strategy that includes a series of assumptions
example of a manufacturing planning and control and predictions about long-term market, technology,
system.M and competitive behavior in the following areas: (1) the
manufacturing processThe series of operations per- predicted growth and variability of demand, (2) the
formed upon material to convert it from the raw materi- costs of building and operating different sized plants,
al or a semifinished state to a state of further (3) the rate and direction of technological improvement,
completion. Manufacturing processes can be arranged (4) the likely behavior of competitors, and (5) the antic-
in a process layout, product layout, cellular layout, or ipated impact of international competitors, markets,
fixed-position layout. Manufacturing processes can be and sources of supply. It is the sequence of specific vo-
planned to support make-to-stock, make-to-order, lume decisions over time that determines an organiza-
assemble-to-order, and so forth, based on the strategic tions long-term manufacturing volume strategy.M
use and placement of inventories. See: production
many-to-many communicationCommunication that
process, transformation process.M
enables many people to exchange information with
manufacturing process developmentThe definition many other people.M
and implementation of an execution system for making
a part, good, or service that is consistent with the objec- MAPAcronym for manufacturing automation
tives of the firm.M protocol.M

manufacturing progress curveSyn: learning curve.M MAPEAbbreviation for mean absolute percent error.M

manufacturing ramp-upThe final phase of new product MAPI method1) A procedure for equipment replace-
and process development, whereby the new product ment analysis sponsored by the Machinery and Allied
moves from pilot production to full-scale Products Institute. 2) A method of capital investment
manufacturing.M analysis that has been formulated by the Machinery and
manufacturing releaseThe issuance of a manufactur- Allied Products Institute. This method uses a fixed for-
ing order into the factory.M mat and provides charts and graphs to facilitate calcu-
lations. A prominent feature of this method is that it
manufacturing representativeSyn: manufacturers rep- explicitly includes obsolescence.M
mappingDrawing the organizations processes or rela-
manufacturing resource planning (MRP II)A method for
tionships that form a business process.M
the effective planning of all resources of a manufactur-

APICS Dictionary, 14th edition 99

margin market planning

marginA ratio of an organizations operating profit to marketing channelThat set of organizations through
revenues, measuring managements ability to control which a good or service passes in going from a raw
operating expenses.M state to the final consumer. See: channels of distribu-
tion, distribution channel.M
marginal analysisA decision rule that optimality occurs
where incremental revenue equals incremental cost.M marketing cost analysisThe study and evaluation of
marginal costThe incremental costs incurred when the the relative profitability or costs of different marketing

M level of output of some operation or process is in-

creased by one unit.M
operations in terms of customers, marketing units,
commodities, territories, or marketing activities. Cost
accounting is typically used.M
marginal cost of capitalThe cost of the next dollar, af-
ter taxes, that a firm expects to raise for investment.M marketing managementSyn: demand management.M

marginal pricingPricing products at a markup over the marketing mixThe concept that marketing strategy se-
marginal cost of producing the next item. Marginal costs lects product, price, promotion, and channel targets in
generally include the variable cost of producing and sell- selected markets.M
ing an additional item.M
marketing researchThe systematic gathering, record-
marginal productIn economics, the additional quantity ing, and analyzing of data about problems relating to
of total output following from a one-unit increase in va- the marketing of goods and services. Such research
riable input. See: law of diminishing marginal returns.M may be undertaken by impartial agencies or by busi-
marginal revenueThe incremental sales dollars re- ness firms or their agents. Marketing research includes
ceived when the level of output of some operation is several types: (1) market analysis (product potential is a
increased by one unit.M type) is the study of the size, location, nature, and cha-
racteristics of markets, (2) sales analysis (or research)
marginal utilityThe additional usefulness and enjoy-
is the systematic study and comparison of sales (or
ment received from consuming one more unit of a good
consumption) data, (3) consumer research (motivation
or service.M
research is a type) is concerned with the discovery and
marketA set of buyers and sellers exchanging prod- analysis of consumer attitudes, reactions, and prefe-
ucts. Prices tend to equalize through ongoing ex- rences. Syn: market research.M
changes between buyers and sellers. Markets include
marketing strategyThe basic plan marketing expects
institutional markets, government markets, industrial
to use to achieve its business and marketing objectives
markets, and consumer markets. See: consumer mar-
in a particular market. This plan includes marketing ex-
ket, government market, industrial market, institutional
penditures, marketing mix, and marketing allocation.M
market boundaryThe boundary where the laid-down market penetrationThe degree to which a product has
cost for two companies is equal. Laid-down cost is been accepted by the marketplace. Syn: market
product cost plus unit transportation cost.M reach.M

market demandIn marketing, the total demand that market planThe output of the market planning
would exist within a defined customer group in a given process. The market plan includes the current market
geographical area during a particular time period given position, opportunity and issue analysis, marketing ob-
a known marketing program.M jectives and strategies, action plans, programs,
projects, budgets, and pro forma profit and loss state-
market dominanceWhen a firm has very little
ment and management controls. Syn: brand plan, prod-
uct plan.M
market drivenResponding to customers needs.M
market planningThe process of developing market
market hedgeScheduling or holding an inventory plans for products and services. This process is com-
quantity greater than the expected demand because of posed of the following phasesidentification; research
expected inaccuracy or volatility in the forecasted de- and analysis of market opportunities; selection of target
mand. See: hedge.M markets; development of marketing strategies; devel-
marketingThe design, pricing, promotion, and distribu- opment of the marketing plans, programs, and projects;
tion of goods to create transactions with businesses and management, execution, and control of the market
and consumers.M plans, programs, and projects.M

100 APICS Dictionary, 14th edition

market-positioned strategy master production schedule (MPS)

market-positioned strategyA location strategy that fo- vice characteristics, and many other options when PCs
cuses on the customer by placing warehouses closer to are assembled on one line and at low cost.M
the customer. See: product-positioned strategy.M
mass marketingThe strategy of sending the same
market-positioned warehouseWarehouse positioned message to all potential customers.M
to replenish customer inventory assortments and to af- mass productionHigh-quantity production characte-
ford maximum inbound transport consolidation econo- rized by specialization of equipment and labor. See:
mies from inventory origin points with relatively short-
haul local delivery.M
continuous production.M
master black beltIn six sigma, quality expert capable
market reachSyn: market penetration.M of implementing strategic quality efforts including
market researchSyn: marketing research.M teaching other facilitators (black belts) the quality appli-
cations within all levels of the organization.M
market segmentA group of potential customers shar-
master budgetThe document that consolidates all
ing some measurable characteristics based on demo-
other budgets of an organization into an overall plan,
graphics, psychographics, lifestyle, geography, benefits,
including the projection of a cash flow statement and an
and so forth.M
operating statement for the budget period as well as a
market segmentationA marketing strategy in which balance sheet for the end of the budget period. Syn:
the total market is disaggregated into submarkets, or static budget.M
segments, that share some measurable characteristic
master fileA main reference file of information, such
based on demographics, psychographics, lifestyle, geo-
as the item master file or work center file. See: detail
graphy, benefits, and so forth.M
file, item master file.M
market shareThe actual portion of current market de- master packA large, protective box used to contain
mand that a company or product achieves.M smaller boxes. This reduces materials handling
market strategyThe marketing plan to support the activities.M
business strategy.M master planningA group of business processes that
market surveysQuestionnaires designed to get feed- includes the following activities: demand management
back from potential customers about demand for a (which includes forecasting and order servicing); pro-
product or service.M duction and resource planning; and master scheduling
(which includes the master schedule and the rough-cut
market targetingThe process of developing measure- capacity plan).M
ments of the desirability of given market segments and
master planning of resourcesA grouping of business
deciding in which market segments to compete.M
processes that includes the following activities: demand
market value-addedIn financial management, the sur- management, which includes the forecasting of sales,
plus of a firms equity over the capital that has been in- the planning of distribution, and the servicing of cus-
vested in the firm.M tomer orders; sales and operations planning, which in-
cludes sales planning, production planning, inventory
marks and numbersIdentifying agents placed on
planning, backlog planning, and resource planning;
products or containers used to identify a shipment or its
master scheduling, which includes the preparation of
the master production schedule and the rough-cut ca-
marquis partnersKey strategic relationships. By part- pacity plan.M
nering with big players, via equity offerings if necessary,
master production schedule (MPS)The master produc-
a company creates barriers to entry into supply chain
tion schedule is a line on the master schedule grid that
relationships for competitors.M
reflects the anticipated build schedule for those items
mass customizationThe creation of a high-volume assigned to the master scheduler. The master schedu-
product with large variety so that a customer may speci- ler maintains this schedule, and in turn, it becomes a
fy an exact model out of a large volume of possible end set of planning numbers that drives material require-
items while manufacturing cost is low due to large vo- ments planning. It represents what the company plans
lume. An example is a personal computer order in which to produce expressed in specific configurations, quanti-
the customer may specify processor speed, memory ties, and dates. The master production schedule is not
size, hard disk size and speed, removable storage de- a sales item forecast that represents a statement of

APICS Dictionary, 14th edition 101

master route sheet material receipt inspection

demand. The master production schedule must take material classA means to describe a grouping of mate-
into account the forecast, the production plan, and oth- rials with similar characteristics for planning and sche-
er important considerations such as backlog, availability duling purposes.M
of material, availability of capacity, and management
material constraintUsually a misnomer. Material
policies and goals. See: master schedule.M
shortages are rarely the constraint, rather temporary
master route sheetThe authoritative route process material shortages hinder effective constraint

M sheet from which all other format variations and copies

are derived.M
management by inhibiting the ability to fully exploit
and/or subordinate to the constraint.M

master scheduleThe master schedule is a format that material controlSyn: inventory control.M
includes time periods (dates), the forecast, customer material definitionA definition of the properties and
orders, projected available balance, available-to- characteristics of a substance. material-dominated
promise, and the master production schedule. The mas- scheduling (MDS)A technique that schedules mate-
ter schedule takes into account the forecast; the pro- rials before processors (equipment or capacity). This
duction plan; and other important considerations such technique facilitates the efficient use of materials. MDS
as backlog, availability of material, availability of capaci- can be used to schedule each stage in a process flow
ty, and management policies and goals. See: master scheduling system. MRP systems use material-
production schedule.M dominated scheduling logic. See: processor-dominated
master schedule itemA part number selected to be scheduling.M
planned by the master scheduler. The item is deemed material-dominated scheduling (MDS)A technique that
critical in its impact on lower level components or re- schedules materials before processors (equipment or
sources such as skilled labor, key machines, or dollars. capacity). This technique facilitates the efficient use of
Therefore, the master scheduler, not the computer, materials. MDS can be used to schedule each stage in
maintains the plan for these items. A master schedule a process flow scheduling system. MRP systems use
item may be an end item, a component, a pseudo num- material-dominated scheduling logic. See: processor-
ber, or a planning bill of material.M dominated scheduling.M
master schedulerOften the job title of the person material flexibilityThe ability of the transformation
charged with the responsibility of managing, establish- process to handle unexpected variations in material
ing, reviewing, and maintaining a master schedule for inputs.M
select items. Ideally, the person should have substantial
product, plant, process, and market knowledge because material indexThe total of raw material weights di-
the consequences of this individuals actions often have vided by final product weight.M
a great impact on customer service, material, and ca- material listSyn: picking list.M
pacity planning. See: master production schedule.M
material lotA uniquely identifiable amount of a materi-
master schedulingThe process where the master al. This describes the actual quantity or amount of ma-
schedule is generated and reviewed and adjustments terial available, its current state, and its specific
made to the master production schedule to ensure con- property values.M
sistency with the production plan. The master produc-
material planner1) The person normally responsible
tion schedule (the line on the grid) is the primary input
for managing the inventory levels, schedules, and avail-
to the material requirements plan. The sum of the mas-
ability of selected items, either manufactured or pur-
ter production schedules for the items within the prod-
chased. Syn: inventory planner. 2) In an MRP system,
uct family must equal the production plan for that
the person responsible for reviewing and acting on or-
der release, action, and exception messages from the
match capacity strategyA capacity strategy that strikes system. Syn: parts planner, planner.M
a balance between the lead and lag capacity strategies
material planningSyn: inventory planning.M
by adding capacity at approximately the rate of actual
demand increase.M material receipt inspectionThe receiving department
compares the incoming material to the purchase order
material analystThe person assigned responsibility for
to verify that the correct material and quantity have
and identification of the planning requirements for spe-
been received. The material is then inspected for quality
cific items and responsibility for each order.M
and general condition. A material receipt report is pre-

102 APICS Dictionary, 14th edition

material release matrix bill of material

pared and copies are distributed to the appropriate de- cost and is balanced against the operating costs of the
partments such as purchasing and accounting.M facility.M
material releaseThe introduction of parts into a pro- materials handling systemThe system of transporta-
duction process.M tion that receives, moves, and delivers materials during
the production or distribution process.M
material requirements planThe result from the
process of material requirements planning.M materials handling timeThe time necessary to move
material requirements planning (MRP)A set of tech-
niques that uses bill of material data, inventory data,
materials from one work center to the next work center.
This time includes waiting for the materials handling M
and the master production schedule to calculate re- equipment and actual movement time.M
quirements for materials. It makes recommendations to materials managementThe grouping of management
release replenishment orders for material. Further, be- functions supporting the complete cycle of material
cause it is time-phased, it makes recommendations to flow, from the purchase and internal control of produc-
reschedule open orders when due dates and need tion materials to the planning and control of work in
dates are not in phase. Time-phased MRP begins with process to the warehousing, shipping, and distribution
the items listed on the MPS and determines (1) the of the finished product.M
quantity of all components and materials required to
material specificationAn explanation of the characte-
fabricate those items and (2) the date that the compo-
ristics of material to be produced or purchased.M
nents and material are required. Time-phased MRP is
accomplished by exploding the bill of material, adjusting materials requisition1) An authorization that identifies
for inventory quantities on hand or on order, and offset- the items and quantities to be withdrawn from invento-
ting the net requirements by the appropriate lead ry. 2) An authorization that identifies the items and
times.M quantities to be included in a purchase order. Syn: pro-
duction materials requisition.M
material requisitionThis is the first step to placing a
replenishment order; initiated by the material user.M materials systemConnecting material flows contained
in a production system.M
material review board (MRB)An organization within a
company, often a standing committee, that determines material sublotA uniquely identifiable subset of a ma-
the resolution or disposition of items that have ques- terial lot containing quantity and location. A sublot may
tionable quality or other attributes.M be a single item.M
materialsThe components that are processed by an material usage varianceThe difference between the
operation.M planned or standard requirements for materials to pro-
material safety data sheet (MSDS)A document that is duce a given item and the actual quantity used for a
part of the materials information system and accompa- particular instance of manufacture.M
nies the product. Prepared by the manufacturer, the material yieldSyn: yield.M
MSDS provides information regarding the safety and
materielA term, used more frequently in nonmanufac-
chemical properties and (if necessary) the long-term
turing organizations, to refer to the equipment, appara-
storage, handling, and disposal of the product. Among
tus, and supplies used by an organization.M
other factors, the MSDS describes the hazardous com-
ponents of a product; how to treat leaks, spills, and mathematical programmingThe general problem of
fires; and how to treat improper human contact with the optimizing a function of several variables subject to a
product.M number of constraints. If the function and constraints
are linear in the variables and a subset of the con-
materials efficiencyA concept that addresses the effi-
straints restricts the variables to be nonnegative, a li-
ciency with which materials are obtained, converted,
near programming problem exists.M
and shipped in the overall purchasing, production, and
distribution process. It can be considered as a compa- matrixA mathematical array having one, two, and
nion concept to labor efficiency, and it is potentially sometimes more dimensions, into which collections of
more significant as the materials portion of cost of data may be stored and processed.M
goods sold continues to grow.M
matrix bill of materialA chart made up from the bills of
materials handlingMovement and storage of goods material for a number of products in the same or similar
inside the distribution center. This represents a capital families. It is arranged in a matrix with components in

APICS Dictionary, 14th edition 103

matrix diagram mediation

columns and parents in rows (or vice versa) so that re- mean absolute deviation (MAD)The average of the ab-
quirements for common components can be summa- solute values of the deviations of observed values from
rized conveniently.M some expected value. MAD can be calculated based on
observations and the arithmetic mean of those observa-
matrix diagramA graphical technique used to analyze
tions. An alternative is to calculate absolute deviations
the relationship between two related groups of ideas.M
of actual sales data minus forecast data. These data
matrix organizational structureAn organizational struc- can be averaged in the usual arithmetic way or with ex-

M ture in which two (or more) channels of command,

budget responsibility, and performance measurement
exist simultaneously. For example, both product and
ponential smoothing. See: forecast error, tracking

functional forms of organization could be implemented mean absolute percent error (MAPE)A measure of sta-
simultaneously, that is, the product and functional tistical variation in a forecast. Computed by dividing
managers have equal authority and employees report to each absolute forecast error by the actual demand,
both managers.M multiplying that by 100 to get the absolute percentage
error, and computing the average.M
maverick spendingA term used when employees or
managers purchase from nonqualified suppliers, by- mean squared error (MSE)A measure of statistical var-
passing established purchasing procedures.M iation in a forecast. Computed by squaring the forecast
errors and then taking the average of the sum of the
maximum allowable costIn service organizations, the squared errors.M
limit of reimbursement allowed by an agency for the
cost of a supply item.M mean time between failures (MTBF)The average time
interval between failures for repairable product for a
maximum demonstrated capacityThe highest amount defined unit of measure (e.g., operating hours, cycles,
of actual output produced in the past when all efforts miles). See: reliability.M
have been made to optimize the resource; for instance,
overtime, additional personnel, extra hours, extra shifts, mean time for failures (MTFF)Average time for failure
reassignment of personnel, or use of any related of a nonrepairable product (expected life) or average
equipment. Maximum demonstrated capacity is the time to first failure of a repairable product. See:
most one could ever expect to produce in a short period reliability.M
of time but represents a rate that cannot be maintained mean time to repair (MTTR)The average time that it
over a long period of time. See: demonstrated takes to repair a product.M
measurement tonA measurement equivalent to 40
maximum inventoryThe planned maximum allowable cubic feet. It is a factor in water transportation rate-
inventory for an item based on its planned lot size and setting.M
target safety stock.M
measure of serviceSyn: level of service.M
maximum order quantityAn order quantity modifier,
applied after the lot size has been calculated, that limits measure phaseA phase in the six sigma design-
the order quantity to a pre-established maximum.M measure-analyze-improve-control process during which
current performance is evaluated. See: design-measure-
MBOAbbreviation for management by objectives.M analyze-improve-control process.M
MBNQAAbbreviation for the Malcolm Baldrige National measures constraintA common misnomer. Bad
Quality Award.M measures are not the constraint. Rather, bad measures
MBWAAbbreviation for management by walking hinder effective constraint management by inhibiting
around.M the ability to fully exploit and/or subordinate to the
M-day calendarSyn: manufacturing calendar.M
medianThe middle value in a set of measured values
M-daysAvailable manufacturing days excluding holi-
when the items are arranged in order of magnitude. If
days and weekends.M
there is no single middle value, the median is the mean
MDSAbbreviation for material-dominated of the two middle values.M
mediationThe introduction of a neutral third party who
meanThe arithmetic average of a group of values. Syn: attempts to provide alternatives to issues causing con-
arithmetic mean.M flict that have not been put forth by either party or to

104 APICS Dictionary, 14th edition

mental model MIS

change the way the parties perceive the situation. It is middlewareSoftware that interconnects incompatible
often used in collective bargaining to reach an applications software and databases from various trad-
agreement.M ing partners into decision-support tools such as ERP.M

mental modelA paradigm of how the world works milestoneIn project management, an important event
formed by a persons experiences and assumptions.M in a project, usually the realization of a significant

merchantsBuyers who purchase for the purpose of
reselling.M milestone chartSyn: Gantt chart.M

MercosurSouthern Common Market.M milestone scheduleIn project management, a high-

level schedule displaying important deliverables.M
merge in transitCombining shipments from several
military standardsProduct standards and specifica-
vendors at an intermediate point of shipment and deli-
tions for military or defense contractors, units, suppli-
vering the combined load to the customer.M
ers, and so forth. These standards sometimes become
mergerThe acquisition of the assets and liabilities of de facto standards within the civilian community.M
one company by another.M
milk runA regular route for pickup of mixed loads from
MESAbbreviation for manufacturing execution several suppliers. For example, instead of each of five
systems.M suppliers sending a truckload per week to meet the
weekly needs of the customer, one truck visits each of
message distributionThe software component of elec-
the suppliers on a daily basis before delivering to the
tronic commerce that enables the sending and receiv-
customers plant. Five truckloads per week are still
ing of messages.M
shipped, but each truckload contains the daily require-
metered issuesIssues of parts or materials from ment from each supplier. See: consolidation.M
stores in quantities that correspond to the rate at which mini-land-bridge trafficA multimodal transportation
materials are used.M solution that moves goods over water and then land,
methods analysisThat part of methods engineering with the final destination being on the opposite coast.
normally involving an examination and analysis of an See: micro-land-bridge traffic.M
operation or a work cycle broken down into its minimum cost order quantitySyn: economic order
constituent parts to improve the operation, eliminate quantity.M
unnecessary steps, and/or establish and record in
minimum inventoryThe planned lowest amount or lev-
detail a proposed method of performance.M
el of inventory for an item.M
methods studyAn analysis to improve the efficiency of
minimum order quantityAn order quantity modifier,
work by studying the existing method to identify and
applied after the lot size has been calculated, that in-
eliminate wasted motion.M
creases the order quantity to a pre-established
methods-time measurement (MTM)A system of prede- minimum.M
termined motion-time standards, a procedure that ana- minimum weightIn transportation, the rate discount
lyzes and classifies the movements of any operation volume.M
into certain human motions and assigns to each motion
a predetermined time standard selected by the nature min-max systemA type of order point replenishment
of the motion and the conditions under which it will be system where the minimum (min) is the order point, and
made.M the maximum (max) is the order up to inventory level.
The order quantity is variable and is the result of the
metricsSyn: performance measurement system.M max minus available and on-order inventory. An order is
microeconomicsThe analysis of the behavior of indi- recommended when the sum of the available and on-
vidual economic decision makers (individuals and order inventory is at or below the min.M
firms).M minor setupThe incremental setup activities required
when changing from one item to another within a group
micro-land-bridge trafficA multimodal transportation
of items.M
solution that moves goods over water and then land,
with the final destination inland. See: mini-land-bridge MISAbbreviation for management information
traffic.M system.M

APICS Dictionary, 14th edition 105

misguided capacity plans modular design strategy

misguided capacity plansPlans for capacity utilization families must be forecasted. Even though the appropri-
that are based on erroneous data or assumptions.M ate level of units is forecasted for a given product line,
an inaccurate mix forecast can create material shortag-
missionThe overall goal(s) for an organization set with-
es and inventory problems.M
in the parameters of the business scope.M
mission statementThe company statement of mix numberSyn: lot number.M

mix ticketA listing of all the raw materials, ingredients,
mistake-proofingSyn: failsafe work methods, poka- components, and such that are required to perform a
yoke.M mixing, blending, or similar operation. This listing is of-
ten printed on a paper ticket, which also may be used
mixA breakdown of the total demand or production
as a turnaround document to report component quanti-
that identifies different products in an aggregate de-
ties actually used, final quantity actually produced, etc.
mand or production run.M
This term is often used in batch process or chemical
mix controlThe control of the individual items going industries. See: assembly parts list, batch card, blend
through the plant.M formula, manufacturing order.M
mixed-flow schedulingA procedure used in some modal splitThe breakdown of use of transportation
process industries for building process train schedules modes. Statistics used for the calculation include
that start at an initial stage and work toward the ter- passenger-miles, ton-miles, and revenue.M
minal process stages. This procedure is effective for
modeThe most common or frequent value in a group
scheduling where several bottleneck stages may exist.
of values.M
Detailed scheduling is done at each bottleneck stage.M
mixed loadsA load having both regulated and exempt modelA representation of a process or system that
items in the same vehicle.M attempts to relate the most important variables in the
system in such a way that analysis of the model leads to
mixed manufacturingMake-to-stock and make-to-order insights into the system. Frequently, the model is used
manufacturing using a single plant and set of to anticipate the result of a particular strategy in the
equipment.M real system.M
mixed-model assembly lineAn assembly line with more
model numberAn item number for a finished good.
than one type of model passing through it.M
This number may encompass other parts, such as a us-
mixed-model productionMaking several different parts ers manual.M
or products in varying lot sizes so that a factory produc-
modemA device that converts digital signals to analog
es close to the same mix of products that will be sold
signals (and vice versa) so they can be sent over phone
that day. The mixed-model schedule governs the mak-
ing and the delivery of component parts, including those
provided by outside suppliers. The goal is to build every modification flexibilityThe capability of the transforma-
model every day, according to daily demand.M tion process to quickly implement minor product design
mixed-model schedulingThe process of developing changes.M
one or more schedules to enable mixed-model produc- modular architectureA type of product architecture
tion. The goal is to achieve a days production each day. where the functional pieces correspond to physical
See: mixed-model production.M pieces. The different physical pieces have their own
mixed production strategySyn: hybrid production me- function, and there is little interaction between them.M
thod. See: chase production method, level production modular bill of materialA type of planning bill that is
method.M arranged in product modules or options. It is often used
mix flexibilityThe ability to handle a wide range of in companies where the product has many optional fea-
products or variants by using equipment that has short tures (e.g., assemble-to-order companies such as au-
setup times.M tomobile manufacturers). See: pseudo bill of material.M

mix forecastForecast of the proportion of products modular design strategyThe strategy of planning and
that will be sold within a given product family, or the designing products so that components or subassem-
proportion of options offered within a product line. blies can be used in current and future products or as-
Product and option mix as well as aggregate product sembled to produce multiple configurations of a

106 APICS Dictionary, 14th edition

modularization MSE

product. Automobiles and personal computers are ex- outbound stockpoint) and taken to a point of use (usual-
amples of modular designs.M ly an inbound stockpoint). It authorizes the movement
of one part number between a single pair of work cen-
modularizationIn product development, the use of
ters. The card circulates between the outbound stock-
standardized parts for flexibility and variety. Permits
point of the supplying work center and the inbound
product development cost reductions by using the same
stockpoint of the using work center. Syn: move signal.
item(s) to build a variety of finished goods. This is the
See: kanban.M
first step in developing a planning bill of material
process.M movement inventoryA type of in-process inventory that
arises because of the time required to move goods from
modular systemA system architecture design in which
one place to another.M
related tasks are grouped in self-contained packages.
Each package, or module, of tasks performs all of the move orderThe authorization to move a particular item
tasks related to a specific function and advances in from one location to another.M
functions can be implemented without affecting other move signalSyn: move card.M
packages or modules because of the loose coupling
with other modules. One example is a multitiered archi- move ticketA document used in dispatching to author-
tecture in which application business rules are sepa- ize or record movement of a job from one work center to
rated from the data management rules. Another another. It may also be used to report other information,
example is a client-server architecture in which user in- such as the actual quantity or the material storage
terface tasks are separated from the application soft- location.M
ware. See: open system architecture.M move timeThe time that a job spends in transit from
moduleA self-contained unit of a computer program one operation to another in the plant.M
that communicates with other parts of the program moving averageAn arithmetic average of a certain
solely through inputs and outputs.M number (n) of the most recent observations. As each
moldsTools for plastic or chemical production. A mold new observation is added, the oldest observation is
is the term used for the tools that shape plastic or other dropped. The value of n (the number of periods to use
soft material parts.M for the average) reflects responsiveness versus stability
in the same way that the choice of smoothing constant
monitoringThe process of comparing actual to planned does in exponential smoothing. There are two types of
progress.M moving average, simple and weighted. See: simple mov-
monopolistic competitionA market in which many ing average, weighted moving average.M
competitors offer partially differentiated products or moving average forecastA forecasting technique that
services within a given geographical area. Most compet- uses a simple moving average or a weighted moving
itors focus on market segments where they can meet average projected forward as a forecast.M
customers needs somewhat better than their competi-
MPCAbbreviation for manufacturing planning and
tors. See: industry structure types.M
monopolySole control of a market by a company. In
MPSAbbreviation for master production schedule.M
the United States, a monopoly is a violation of Article 2
of the Sherman Act.M MRBAbbreviation for material review board.M
Monte Carlo simulationA subset of digital simulation MRO1) Abbreviation for maintenance, repair, and op-
models based on random or stochastic processes.M erating. 2) Abbreviation for maintenance, repair, and
motion studyA type of methods study focused on ther-
bligs, basic hand and body movements. See: therblig.M MRPAbbreviation for material requirements
moveThe physical transportation of inventory from one
location to another within a facility. Movements are MRP nervousnessSee: nervousness.M
usually made under the direction and control of the in- MRP IIAbbreviation for manufacturing resource
ventory system.M planning.M
move cardIn a just-in-time context, a card or other sig- MSDSAbbreviation for material safety data sheet.M
nal indicating that a specific number of units of a par-
MSEAbbreviation for mean squared error.M
ticular item are to be taken from a source (usually an

APICS Dictionary, 14th edition 107

MTBF multiskilled

MTBFAbbreviation for mean time between failures.M multilinear regression analysisModel used for fore-
casting with more than one independent variable.M
MTFFAbbreviation for mean time for failures.M
MTMAbbreviation for methods-time measurement.M multimediaAn interactive combination of two or more
of the following: text, graphics, video, audio, and anima-
MTTRAbbreviation for mean time to repair.M tion all controlled by a personal computer.M
muda (waste)In lean manufacturing, costs are re-

multimedia filesDigitized image, video, and audio files
duced by reducing waste within a system. There are
that can be retrieved and converted to a form usable by
seven categories of waste: (1) overproductionexcess
a human.M
or too early, (2) waitingqueuing delays, (3) transporta-
tionunneeded movements, (4) processingpoor multimodal solutionsTransportation plans that involve
process design, (5) motionactivities that do not add multiple means of transportation and coordinate the
value, (6) inventorystock that is sitting is accumulating physical and information requirements.M
cost without necessarily providing value, (7) defective
multinational corporationA company with capital in-
unitsscrap or rework.M
vestments in more than a single country.M
multiactivity chartShows how workers interact with
each other, or with machines, for different activities.M multinational strategyA strategy that focuses on op-
portunities to achieve cross-business and cross-country
multicountry strategyA strategy in which each country
coordination, thereby enabling economies of scope and
market is self-contained. Customers have unique prod-
an improved competitive position with regard to reduc-
uct expectations that are addressed by local production
ing costs, cross-country subsidization, and so on, to out-
capabilities. Syn: multidomestic strategy.M
compete rivals. See: global strategy. multiphase sys-
multicriteria decision modelsModels that enable deci- temSyn: multiple-phase queuing system.M
sion makers to evaluate various alternatives across
multiple-channel queuing systemA waiting line system
several decision criteria.M
that has parallel waiting lines with queues.M
multicurrencyHaving the capability to handle orders
using monies from several countries for billing multiple-factor productivityA measure of the productiv-
purposes.M ity of two or more inputs, especially labor, capital costs,
energy, and material. See: single-factor productivity.M
multidomestic strategySyn: multicountry strategy.M
multiple-item lot-sizing modelsProcesses or systems
multifactor productivityA productivity score that meas-
used to determine the total replenishment order quanti-
ures output levels relative to more than one input, such
ty for a group of related items.M
as labor or capital.M
multiple-phase queuing systemQueuing system that
multilevel bill of materialA display of all the compo-
performs a service in two or more sequential steps
nents directly or indirectly used in a parent, together
when there are several waiting lines. Syn: multiphase
with the quantity required of each component. If a com-
system. See: channel, queuing theory.M
ponent is a subassembly, blend, intermediate, etc., all
its components and all their components also will be multiple regression modelsA form of regression analy-
exhibited, down to purchased parts and raw sis where the model involves more than one indepen-
materials.M dent variable, such as developing a forecast of
multilevel master scheduleA master scheduling tech- dishwasher sales based upon housing starts, gross na-
nique that allows any level in an end items bill of ma- tional product, and disposable income.M
terial to be master scheduled. To accomplish this, MPS multiple sourcingSyn: multisourcing. See: dual
items must receive requirements from independent and sourcing.M
dependent demand sources. See: two-level master
schedule.M multiprocessingThe simultaneous use by a computer
of two or more central processing units, with each ex-
multilevel where-usedA display for a component listing
ecuting its own instruction set and each controlled by a
all the parents in which that component is directly used
single operating system.M
and the next higher level parents into which each of
those parents is used, until ultimately all top-level (level multiskilledIndividuals who are capable of carrying out
0) parents are listed.M a variety of tasks.M

108 APICS Dictionary, 14th edition

multisourcing net profit

multisourcingProcurement of a good or service from negative floatIn project management, the amount of
more than one independent supplier. Syn: multiple time that must be made up on an activity to get the
sourcing. Ant: single sourcing. See: dual sourcing.M project back on schedule. See: float.N

multivariate control chartA control chart for evaluating negligenceThe causing of injury to another by failure
the stability of a process in terms of the levels of two or to use reasonable care.N
more variables or characteristics.M negotiationThe process by which a buyer and a sup-
muraA Japanese word meaning unevenness or
plier agree upon the conditions surrounding the pur-
chase of an item or a service.N N
muriA Japanese word meaning strain or overburden.M nemawashiA Japanese word meaning getting a group
to agree on a strategy before beginning to implement
mutually exclusive projectIn capital budgeting, a it.N
project that will not be accepted if a competing project
nervousnessThe characteristic in an MRP system
is accepted. See: contingent project, independent
when minor changes in higher level (e.g., level 0 or 1)
records or the master production schedule cause signif-
mystery shoppersPeople who pose as customers but icant timing or quantity changes in lower level (e.g., lev-
who are really studying an organizations service quality el 5 or 6) schedules and orders. Syn: system
to provide feedback to the organization for improve- nervousness.N
ment purposes.M
nestingThe act of combining several small processes
to form one larger process.N

N net assetsTotal assets minus total liabilities.N

net change MRPAn approach in which the material
nSample size (the number of units in a sample).N requirements plan is continually retained in the com-
NAFTAAcronym for North American Free Trade puter. Whenever a change is needed in requirements,
Agreement.N open order inventory status, or bill of material, a partial
explosion and netting is made for only those parts af-
National Association of Purchasing Management fected by the change. Ant: regeneration MRP.N
(NAPM)A nonprofit society for purchasing managers
net income (loss)The final figure in the income
and others, now known as the Institute for Supply
Management (ISM).N
net inventorySyn: available inventory.N
nationalizationpublic ownership and operation of a
business enterprise.N net operating cash flowIn finance management, the
difference between cash inflow and cash outflow for a
National Labor Relations Board (NLRB)In the United period. It is found by taking the change in net operating
States, the federal agency that regulates labor law.N profit after taxes and adding the change in depreciation
national stock number (NSN)The individual identifica- then subtracting the increase in net working capital re-
tion number assigned to an item to permit inventory quirements.N
management in the U.S. supply system.N net operating incomeThe income before interest and
natural variationsThese variations in measurements taxes are subtracted. Syn: earnings before interest and
are caused by environmental elements and cannot be taxes.N
removed. See: common cause variability.N net operating profit after taxes (NOPAT)Operating prof-
it less applicable taxes.N
NCAbbreviation for numerical control.N
net present valueThe present (discounted) value of
near-critical activityIn project management, a project
future earnings (operating expenses have been de-
activity with a low slack or float value.N
ducted from net operating revenues) for a given number
need dateThe date when an item is required for its of time periods.N
intended use. In an MRP system, this date is calculated
net profitAn absolute measure of financial perfor-
by a bill-of-material explosion of a schedule and the net-
mance that is calculated as the difference between rev-
ting of available inventory against that requirement.N
enues and expenses. In throughput accounting, net

APICS Dictionary, 14th edition 109

net requirements nomogram

profit is calculated as throughput minus operating method (CPM) and the program evaluation and review
expense.N technique (PERT).N
net requirementsIn MRP, the net requirements for a neural networkA software system loosely based on
part or an assembly are derived as a result of applying how the brain works. It tries to simulate the multiple
gross requirements and allocations against inventory on layers of elements called neurons. Each neuron is tied
hand, scheduled receipts, and safety stock. Net re- to several neighbors with a value that signifies the

N quirements, lot-sized and offset for lead time, become

planned orders.N
net salesSales dollars the company receives; gross
strength of the connections. Learning is accomplished
by changing the values to cause the network to report
appropriate results. Neural networks have been used
sales minus returns and allowances.N for market forecasts and other applications.N

nettingThe process of calculating net requirements.N new product development teamSyn: participative
net weightThe weight of an article exclusive of the
weights of all packing materials and containers.N new product introductionThe development and re-
lease of an item that is new to a companys set of
network1) The interconnection of computers, termin-
als, and communications channels to facilitate file and
peripheral device sharing as well as effective data newsvendor problemA problem inventory manage-
communication. 2) A graph consisting of nodes con- ment dealing with determining the single period (e.g.,
nected by arcs.N day or week) order quantity which will minimize the cost
network analysisIn project management, the calcula- of sometimes having too much inventory and some-
tion of early and late start and finish times for those ac- times having too little.N
tivities not yet completed. See: critical path method, NLRBAbbreviation for National Labor Relations
graphical evaluation and review technique, and pro- Board.N
gram evaluation and review technique (PERT).N
nodeIn project management, a point connected by ar-
network chainA route through a chain involving mul- rows in a network.N
tiple network paths, with switching of paths due to re-
source conflicts.N noiseThe unpredictable or random difference between
the observed data and the true process.N
network diagramA graphical tool that shows the de-
pendencies between activities in a project, i.e., which nominal capacitySyn: rated capacity.N
activities precede other activities and which can be
nominal group techniqueA technique, similar to
done in parallel.N
brainstorming, used by teams to generate ideas on a
networkingDeveloping relationships with people who particular subject. Team members are asked to silently
may be able to enhance the performance of duties or come up with as many ideas as possible, writing them
responsibilities.N down. Each member is then asked to share one idea,
net working capitalThe current assets of a firm minus which is recorded. After all the ideas are recorded, they
its current liabilities. Syn: working capital.N are discussed and prioritized by the group.N

network logicActivity dependencies that make up a nominal interest rateThe noninflation-adjusted inter-
project schedule network diagram.N est rate.N

network loopA network path that crosses the same nominal trading partnerAny organization external to
activity or node twice. A network loop cannot be ana- the firm that provides an essential material or service,
lyzed by the critical path method, critical chain, or other but whose financial success is largely independent of
traditional network schedule analysis techniques.N the financial success of the supply chain community.N

network pathAny continuous series of project activities nomogramA computational aid consisting of two or
connected by precedence relationships in a project more scales drawn and arranged so that the results of
schedule network diagram.N calculations may be found by the linear connection of
points on them. Historically, it was used for calculating
network planningA generic term for techniques that
economic lot sizes or sample sizes for work measure-
are used to plan complex projects. Two of the best
ment observations. Also called an alignment chart.N
known network planning techniques are the critical path

110 APICS Dictionary, 14th edition

nonconforming material numerical control (NC)

nonconforming materialAny raw material, part, com- nonsignificant part numberA part number that is as-
ponent, or product with one or more characteristics that signed to each part but does not convey any information
depart from the specifications, drawing, or other ap- about the part. Nonsignificant part numbers are iden-
proved product description.N tifiers, not descriptors. Ant: significant part number.N

nonconformityFailure to fulfill a specified requirement. non-value-addedAn activity that does not add value to
See: blemish, defect, imperfection.N a product, for example, moving the product from one

noncurrent assetsAn accounting/financial term

(balance sheet classification of accounts) representing
work center to another inside a facility. One aspect of
continuous improvement is the elimination or reduction
of non-value-added activities.N
the long-term resources owned by a company, including
property, plant, and equipment.N non-vessel-operating common carrier (NVOCC)Carrier
that uses ocean liners and works similarly to freight
nondurable goodsGoods whose serviceability is gen- forwarders.N
erally limited to a period of less than three years (such
as perishable goods and semidurable goods).N NOPATAcronym for net operating profit after taxes.N

nonevident failureFailure occurring in either a product normal and proper usageOperation of the equipment
or a production process that is not immediately evident. with a program of regular maintenance in accordance
This may be indicative of a faulty design.N with generally accepted practices and within the rated
capacity and service classification for which it was spe-
nonexempt employeeA person filling a nonexempt po- cified and designed.N
sition. See: nonexempt positions.N
normal distributionA particular statistical distribution
nonexempt positionsEmployees not meeting the test where most of the observations fall fairly close to one
of executive, supervisory, or administrative personnel mean, and a deviation from the mean is as likely to be
who are paid overtime, as defined by the Fair Labor plus as it is to be minus. When graphed, the normal dis-
Standards Act. See: nonexempt employee.N tribution takes the form of a bell-shaped curve.N
nongovernmental organization (NGO)A legally consti- normalizeTo adjust observed data to a standard
tuted organization that operates independently from base.N
any government. The term is usually applied only to or-
normal timeIn time study, adjusting the actual time
ganizations that pursue some wider social aim with po-
observed by a factor called pace rating. See: pace
litical aspects, but that are not overtly political
organizations such as political parties. These types of
organizations are called civil society organizations and North American Free Trade Agreement (NAFTA)An
other names in some jurisdictions.N agreement among the United States, Canada, and
Mexico to promote economic prosperity by reducing
nonlinear programmingProgramming similar to linear trade barriers.N
programming but incorporating a nonlinear objective
function and linear constraints or a linear objective no-touch exchange of dies (NTED)The exchange of
function and nonlinear constraints or both a nonlinear dies without human intervention.N
objective function and nonlinear constraints.N np chartA control chart for evaluating the stability of a
process in terms of the total number of units in a sam-
nonproduction materialItems (indirect materials and
ple in which an event of a given classification occurs.
supplies) in the manufacturing process or in the main-
Syn: number of affected units chart.N
tenance or operation of a facility that do not generally
become part of the final product.N N7Abbreviation for seven new tools of quality.N

nonrecurring materialTooling, gauges, and facilities NSNAbbreviation for national stock number.N
necessary in the manufacturing of the final product and NTEDAbbreviation for no-touch exchange of dies.N
not consumed during manufacturing or shipped with the
final product.N number defective chartSyn: c chart.N
number of affected units chartSyn: np chart.N
nonscheduled hoursHours when a machine is not
generally available to be scheduled for operation; for numerical control (NC)A means of operating a ma-
example, nights, weekends, holidays, lunch breaks, ma- chine tool automatically by the use of coded numerical
jor repair, and rebuilding.N instructions.N

APICS Dictionary, 14th edition 111

NVOCC one-card kanban system

NVOCCAbbreviation for non-vessel-operating common occurrence factorWithin the repair/remanufacturing

carrier.N environment, the occurrence factor is associated with
how often a repair is required to bring the average part

to a serviceable condition (some repair operations do
not occur 100 percent of the time). The factor is
expressed at the operation level in the routing. See:
repair factor, replacement factor.O

obeyaA Japanese word meaning big room," a com-
mand center.O OC curveAbbreviation for operating characteristic
objective functionThe goal or function that is to be op-
timized in a model. Most often it is a cost function that OCRAbbreviation for optical character recognition.O
should be minimized subject to some restrictions or a
ODAbbreviation for organizational development.O
profit function that should be maximized subject to
some restrictions.O ODDAbbreviation for earliest operation due date.O

object-oriented programming (OOP)Within computer OEEAbbreviation for overall equipment effectiveness.O

programming, the use of coding techniques and tools OEMAbbreviation for original equipment
that reflect the concept of viewing the business manufacturer.O
environment as a set of elements (or objects) with
offal materialThe by-product or waste of production
associated properties (e.g., data, data
processes (e.g., chips, shavings, turnings).O
manipulation/actions, inheritance). The objects
encapsulate, through data and functions, the properties offerA contractual communication that proposes defi-
of the business that are of interest.O nite terms. A contract is created if the other party ac-
cepts those terms.O
obligated materialSyn: reserved material.O
off-gradeA product whose physical or chemical proper-
observational researchA form of research (frequently ties fall outside the acceptable ranges.O
used in marketing research) where data are gathered by
direct observation of consumers in the market place. offlineComputer work completed either when discon-
See: marketing research.O nected from the internet or from an intranet. This term
describes anytime when someone cannot be contacted
obsolescence1) The condition of being out of date. A via their computer.O
loss of value occasioned by new developments that
offloadTo reschedule or use alternate routings to re-
place the older property at a competitive disadvantage.
duce the workload on a machine, work center, or
A factor in depreciation. 2) A decrease in the value of an
asset brought about by the development of new and
more economical methods, processes, or machinery. 3) offset quantitySyn: overlap quantity.O
The loss of usefulness or worth of a product or facility
offsettingSyn: lead-time offset.O
as a result of the appearance of better or more econom-
ical products, methods, or facilities.O offshoreOutsourcing a business function to another
company in a different country than the original compa-
obsolete inventoryInventory items that have met the nys country.O
obsolescence criteria established by the organization.
For example, inventory that has been superseded by a offshore factoryA plant that imports or acquires locally
new model or otherwise made obsolescent. Obsolete all components and then exports the finished product.O
inventory will never be used or sold at full value. OJTAbbreviation for on-the-job training.O
Disposing of the inventory may reduce a companys
on-demandWork is completed only when demand oc-
curs. More specifically, it is a process in which a product
Occupational Safety and Health Act (OSHA)A U.S. law or service is made only after an order is placed for that
that applies to all employers in the United States who product or service.O
are engaged in interstate commerce. Its purpose is to
one-card kanban systemA kanban system where only
ensure safe and healthful working conditions by autho-
a move card is employed. Typically, the work centers are
rizing enforcement of the standards provided under the
adjacent, therefore no production card is required. In
many cases, squares located between work centers are

112 APICS Dictionary, 14th edition

100 percent inspection operating assets

used as the kanban system. An empty square signals to meet that goal of full deliveries and by the delivery
the supplying work center to produce a standard con- date.O
tainer of the item. Syn: single-card kanban system. See:
on-time schedule performanceA measure (percen-
two-card kanban system.O
tage) of meeting the customers originally negotiated
100 percent inspectionThe act of inspecting or testing delivery request date. Performance can be expressed as
every item in an incoming or outgoing lot.1 a percentage based on the number of orders, line
one less at a timeA process of gradually reducing the
lot size of the number of items in the manufacturing
pipeline to expose, prioritize, and eliminate waste.O
items, or dollar value shipped on time.O

OOPAbbreviation for object-oriented programming.O O

open-end purchase orderA purchase agreement simi-
one-piece flowA concept that items are processed di- lar to a blanket purchase order that provides the added
rectly from one step to the next, one unit at a time. This convenience of being able to negotiate additional items
helps to shorten lead times and lines of communication, and expiration dates.O
thus more quickly identifying problems.O
open master production scheduleThe part of the mas-
one-to-one marketingA marketing strategy for sending ter production schedule that still has available capacity
a particular message to a single customer, often as- for assigning new orders.O
sisted by a marketing database.O
open officeAn office, with moveable partitions and
one-touch exchange of die (OTED)The ideal of reduc-
furniture, that deemphasizes the compartmentalization
ing or eliminating the setup effort required between op-
of people.O
erations on the same equipment.O
open order1) A released manufacturing order or pur-
on-hand balanceThe quantity shown in the inventory
chase order. Syn: released order. See: scheduled re-
records as being physically in stock.O
ceipt. 2) An unfilled customer order.O
online processingA method of computer processing in
open periodAccounting time period for which the
which data are processed immediately on entry into the
books will still accept adjusting entries and postings.
Ant: closed period.O
online receivingAn unloading process characterized by
open system architectureThe capability of software
computers or terminals wherever shipments are re-
and diverse hardware environments to communicate
ceived and employees enter delivery data into the sys-
with each other through the use of standard messaging
tem as the shipments are unloaded.O
and protocols respectively. See: modular system.O
online serviceThe processing of transaction data as
soon as the transaction occurs. It is real-time open-to-buyA control technique used in aggregate in-
processing as opposed to batch processing. See: real ventory management in which authorizations to pur-
time.O chase are made without being committed to specific
suppliers. These authorizations are often reviewed by
on orderThe number or value of goods or services that management using such measures as commodity in
have been ordered but not received at a location.O dollars and by time period.O
on-order stockThe total of all outstanding replenish- open-to-receiveAuthorization to receive goods, such as
ment orders. The on-order balance increases when a a blanket release, firm purchase order item, or supplier
new order is released, and it decreases when material schedule. Open-to-receive represents near-term impact
is received against an order or when an order is on inventory, and is often monitored as a control tech-
canceled.O nique in aggregate inventory management. The total of
on-the-job training (OJT)Learning the skills and neces- open-to-receive, other longer term purchase commit-
sary related knowledge useful for the job at the place of ments, and open-to-buy represents the material and
work or possibly while at work.O services cash exposure of the company.O
on-time deliveryA metric measuring the percent of re- operating assetsAn accounting/financial term
ceipts that were received on time by customers. See: representing the resources owned by a company for
on-time in full.O productive purposes (to generate a profit) including
cash, accounts receivable, inventories, equipment, and
on-time in full (OTIF)A delivery scoring system that sets
a target goal, usually in percent, and the deliverer tries

APICS Dictionary, 14th edition 113

operating characteristic curve (OC curve) operation due date

operating characteristic curve (OC curve)A graph used 2) The performance of any planned work or method as-
to determine the probability of accepting lots as a func- sociated with an individual, machine, process, depart-
tion of the quality level of the lots or processes when ment, or inspection. 3) One or more elements that
using various sampling plans. There are three types: involve one of the following: the intentional changing of
Type A curves, which give the probability of acceptance an object in any of its physical or chemical characteris-
for an individual lot coming from finite production (will tics; the assembly or disassembly of parts or objects;
not continue in the future); Type B curves, which give the preparation of an object for another operation,

O the probability of acceptance for lots coming from a

continuous process; and Type C curves, which, for a
transportation, inspection, or storage; planning, calcu-
lating, or giving or receiving information.O
continuous sampling plan, give the long-run percentage
operational availabilityThe portion of time a system is
of product accepted during the sampling phase.O
available to sustain operations in full.O
operating cycleThe three primary activities of a com-
operational performance measurements1) In tradi-
pany are purchasing, producing, and selling a product.
tional management, performance measurements re-
The operating cycle is calculated by adding the invento-
lated to machine, worker, or department efficiency or
ry conversion period to the receivables conversion
utilization. These performance measurements are
usually poorly correlated with organizational perfor-
operating decisionPlanning operations to meet de- mance. 2) In theory of constraints, performance mea-
mand in the short-term or intermediate-term.O surements that link causally to organizational
performance measurements. Throughput, inventory,
operating efficiencyA ratio (represented as a percen-
and operating expense are examples. See: global per-
tage) of the actual output of a piece of equipment, de-
formance measurements, local performance measure-
partment, or plant as compared to the planned or
ments, strategic performance measurements.O
standard output.O
operational plan(s)The set of short-range plans and
operating environmentThe global, domestic, environ-
schedules detailing specific actions. Operational plans
mental, and stakeholder influences that affect the key
are more detailed than strategic and tactical plans and
competitive factors, customer needs, culture, and phi-
cover a shorter time horizon. See: operational planning,
losophy of each individual company. This environment
strategic plan, tactical plan.O
becomes the framework in which business strategy is
developed and implemented. Syn: business operational planningThe process of setting goals and
environment.O targets and establishing measures constrained by and
targeted for achieving the strategic and tactical plans.
operating expenseAll the money an organization
See: operational plan, strategic planning, tactical
spends in generating goal units.O
operating exposureThe risk introduced by flexible ex-
operation chartSyn: routing.O
change rates when operating in the global environment,
including production, storage, and buying and selling operation costingA method of costing used in batch
prices.O manufacturing environments when products produced
have common, as well as distinguishing, characteristics;
operating leverageComparing an organizations an-
for example, suits. The products are identified and
nual sales to its annual costs.O
costed by batches or by production runs, based on the
operating profit margin ratioEarnings before interest variations.O
and taxes divided by sales.O
operation descriptionThe details or description of an
operating systemA set of software programs that activity or operation to be performed. The operation de-
control the execution of the hardware and application scription is normally contained in the routing document
programs. The operating system manages the computer and could include setup instructions, operating instruc-
and network resources through storage management, tions (feeds, speeds, heats, pressure, etc.), and re-
disk input/output, communications linkages, program quired product specifications or tolerances.O
scheduling, and monitoring system usage for
operation due date1) The date when an operation
performance and cost allocations.O
should be completed so that its order due date can be
operation1) A job or task, consisting of one or more met. It can be calculated based on scheduled quantities
work elements, usually done essentially in one location. and lead times. 2) A job sequencing algorithm (dis-

114 APICS Dictionary, 14th edition

operation duration operations strategy

patching rule) giving earlier operation due dates higher tems, quality management, production management,
priority.O inventory management, accounting, and other functions
as they affect the operation.O
operation durationThe total time that elapses between
the start of the setup of an operation and the comple- operations planSyn: production plan.O
tion of the operation. Syn: operation time.O
operations planningThe planning of activities that
operation listSyn: routing.O transform inputs into finished goods and services.O
operation numberA sequential number, usually two,
three, or four digits long, such as 010, 020, 030, that
operations process chartSyn: process chart.O
operation splittingSyn: lot splitting.O
indicates the sequence in which operations are to be
performed within an items routing.O operations research1) The development and applica-
tion of quantitative techniques to the solution of prob-
operation overlappingSyn: overlapped schedule.O
lems. More specifically, theory and methodology in
operation priority1) The relative importance an mathematics, statistics, and computing are adapted
operation is given based on its scheduled due date and applied to the identification, formulation, solution,
and/or start date, usually as determined by the back- validation, implementation, and control of decision-
scheduling process. 2) The relative importance a job is making problems. 2) An academic field of study con-
given in a queue of jobs by a priority dispatching cerned with the development and application of quan-
heuristic such as shortest processing time first or least titative analysis to the solution of problems faced by
slack remaining first.O management in public and private organizations. Syn:
operation/process yieldThe ratio of usable output management science.O
from a process, process stage, or operation to the input operations schedulingThe actual assignment of start-
quantity, usually expressed as a percentage.O ing or completion dates to operations or groups of op-
operation reportingThe recording and reporting of erations to show when these operations must be done if
every manufacturing (shop order) operation occurrence the manufacturing order is to be completed on time.
on an operation-to-operation basis.O These dates are used in the dispatching function. Syn:
detailed scheduling, order scheduling, shop
operationsThe group that produces the goods and/or
services that a company sells.O
operations sequenceThe sequential steps for an item
operation setback chartA graphical display of the bill
to follow in its flow through the plant. For instance, op-
of materials and lead-time information provided by the
eration 1: cut bar stock; operation 2: grind bar stock;
routing for each part. The horizontal axis provides the
operation 3: shape; operation 4: polish; operation 5:
lead time from raw materials purchase to component
inspect and send to stock. This information is normally
manufacture to assembly of the finished product.O
maintained in the routing file.O
operations finite loadingA finite loading technique that
operations sequence analysisMethod of planning a
aims to minimize possible delays to individual opera-
facility layout by using graphics to determine the place-
tions and, thus, the potential delay of each scheduled
ment of departments.O
order. Eligible operations from an order or a group of
orders are loaded period by period onto a work center operations sequencingA technique for short-term
or a group of work centers, according to operation-level planning of actual jobs to be run in each work center
priority rules. Syn: operations sequencing. See: based upon capacity (i.e., existing workforce and ma-
constraint-oriented finite loading, drum-buffer-rope, chine availability) and priorities. The result is a set of
order-oriented finite loading.O projected completion times for the operations and simu-
lated queue levels for facilities.O
operation sheetSyn: routing.O
operation start dateThe date when an operation
operations management1) The planning, scheduling,
should be started so that its order due date can be met.
and control of the activities that transform inputs into
It can be calculated based on scheduled quantities and
finished goods and services. 2) A field of study that fo-
lead times or on the work remaining and the time re-
cuses on the effective planning, scheduling, use, and
maining to complete the job.O
control of a manufacturing or service organization
through the study of concepts from design engineering, operations strategyThe total pattern of decisions that
industrial engineering, management information sys- shape the long-term capabilities of an operation and

APICS Dictionary, 14th edition 115

operation time order control

their contribution to overall strategy. Operations strate- demand during the review interval plus the replenish-
gy should be consistent with overall strategy. See: stra- ment lead time. The optional replenishment model is
tegic plan.O sometimes called a hybrid system because it combines
certain aspects of the fixed reorder cycle inventory
operation timeThe total of setup and run time for a
model and the fixed reorder quantity inventory model.
specific task. Syn: operation duration.O
See: fixed reorder cycle inventory model, fixed reorder
operator flexibilityTraining machine workers to per- quantity inventory model, hybrid inventory system, inde-

O form tasks outside their immediate jobs and in problem-

solving techniques to improve process flexibility. This is
pendent demand item management models.O

option overplanningTypically, scheduling extra quanti-

a necessary process in developing a fully cross-trained
workforce.O ties of a master schedule option greater than the ex-
pected sales for that option to protect against
opportunity cost1) The return on capital that could unanticipated demand. This schedule quantity may only
have resulted had the capital been used for some pur- be planned in the period where new customer orders
pose other than its present use. 2) The rate of return are currently being accepted, typically just after the de-
investors must earn to continue to supply capital to a mand time fence. This technique is usually used on the
firm.O second level of a two-level master scheduling approach
optical characterA printed character frequently used in to create a situation where more of the individual op-
utilities billing and credit applications that can be read tions are available than of the overall family. The histor-
by a machine without the aid of magnetic ink.O ical average of demand for an item is quantified in a
planning bill of material. Option overplanning is accom-
optical character recognition (OCR)A mechanized me-
plished by increasing this percentage to allow for de-
thod of collecting data involving the reading of hand-
mands greater than forecast. See: demand time fence,
printed material or special character fonts. If handwrit-
hedge, planning bill of material.O
ten, the information must adhere to predefined rules of
size, format, and locations on the form.O orderA general term that may refer to such diverse
items as a purchase order, shop order, customer order,
optical scanningA technique for machine recognition
planned order, or schedule.O
of characters by their images.O
order backlogSyn: backlog, past due order.O
optimal order periodWithin a fixed order period inven-
tory system, the time between a status check on the order batchingThe process of gathering a group of or-
material that balances ordering costs with carrying ders or data before sending them out to the next
costs.O stage.O
optimizationAchieving the best possible solution to a order complete manufacture to customer receipt of
problem in terms of a specified objective function.O orderThe average time starting when an order is ready
optimization modelsA class of mathematical models for delivery to a customer and when the customer ac-
used when the modeler wishes to find the ideal (maxi- tually receives the delivery.O
mum or minimum) value of some objective function order consolidation profileThe process of filling an en-
subject to a set of constraints.O tire order of one customer by bringing all parts of their
optionA choice that must be made by the customer or order together in one place. These items may or may
company when customizing the end product. In many not come from different places or departments.O
companies, the term option means a mandatory choice
order controlControl of manufacturing activities by in-
from a limited selection. See: feature.O
dividual manufacturing, job, or shop orders, released by
optional replenishment modelA form of independent planning personnel and authorizing production person-
demand item management model in which a review of nel to complete a given batch or lot size of a particular
inventory on hand plus on order is made at fixed inter- manufactured item. Information needed to complete
vals. If the actual quantity is lower than some prede- the order (components required, work centers and op-
termined threshold, a reorder is placed for a quantity M erations required, tooling required, etc.) may be printed
x, where M is the maximum allowable inventory and x on paper or tickets, often called shop orders or work
is the current inventory quantity. The reorder point, R, orders, which are distributed to production personnel.
may be deterministic or stochastic, and in either in- This use of order control sometimes implies an envi-
stance is large enough to cover the maximum expected ronment where all the components for a given order are

116 APICS Dictionary, 14th edition

order cost order policy

picked and issued from a stocking location, all at one and ship, billing, and reconciliation of the customer ac-
time, and then moved as a kit to manufacturing before count. Regarding manufacturing orders, order man-
any activity begins. It is most frequently seen in job agement includes order release, routing, manufacture,
shop manufacturing. See: shop floor control.O monitoring, and receipt into stores or finished goods
inventories. Regarding purchasing orders, order man-
order costA direct labor cost incurred when a pur-
agement includes order placement, monitoring, receiv-
chaser places an order.O
ing, acceptance, and payment of supplier.O
order cycleThe progression used by a company start-
ing with receipt of a customers order and ending with
delivery to that customer.O
order multiplesAn order quantity modifier applied after
the lot size has been calculated that increases the order
quantity to a predetermined multiple.O
order datingSyn: order promising.O
order-oriented finite loadingA set of finite loading
order entryThe process of accepting and translating techniques to schedule orders according to order-level
what a customer wants into terms used by the manu- priority rules. The techniques aim to either (1) maximize
facturer or distributor. The commitment should be capacity utilization or (2) deliver a high proportion of on-
based on the available-to-promise (ATP) line in the mas- time orders with low work in process. See: constraint-
ter schedule. This can be as simple as creating shipping oriented finite loading, drum-buffer-rope.O
documents for finished goods in a make-to-stock envi-
order penetration pointThe key variable in a logistics
ronment, or it might be a more complicated series of
configuration; the point (in time) at which a product be-
activities, including design efforts for make-to-order
comes earmarked for a particular customer.
products. See: master schedule, order service.O
Downstream from this point, the system is driven by
order entry complete to start manufactureThe average customer orders; upstream processes are driven by
time starting when an order is placed by a customer forecasts and plans. Syn: principle of postponement.
and ending when the manufacturing of that order is See: booked orders.O
order pickingSelecting or picking the required quan-
order-fill ratioSyn: customer service ratio.O tity of specific products for movement to a packaging
order fulfillment lead timesThe average amount of area (usually in response to one or more shipping or-
time between the customers order until the customer ders) and documenting that the material was moved
receives delivery; this includes every manufacturing or from one location to shipping. Syn: order selection. See:
processing step in between.O batch picking, discrete order picking, zone picking.O

ordering costUsed in calculating order quantities, the order placementThe commitment of a customer to buy
costs that increase as the number of orders placed in- a product and the subsequent administrative and data
creases. It includes costs related to the clerical work of processing steps followed by the supplier.O
preparing, releasing, monitoring, and receiving orders, order pointA set inventory level where, if the total
the physical handling of goods, inspections, and setup stock on hand plus on order falls to or below that point,
costs, as applicable. See: acquisition cost, inventory action is taken to replenish the stock. The order point is
costs.O normally calculated as forecasted usage during the rep-
order intervalThe time period between the placement lenishment lead time plus safety stock. Syn: reorder
of orders.O point, statistical order point, trigger level. See: fixed
reorder quantity inventory model.O
order level systemSyn: fixed reorder cycle inventory
model.O order point/order quantity systemSyn: fixed reorder
quantity inventory model.O
order losersCapabilities of an organization in which
poor performance can cause loss of business. Failure to order point systemThe inventory method that places
meet customer expectations with delivery of the product an order for a lot whenever the quantity on hand is re-
is an order loser. See: order qualifiers, order winners.O duced to a predetermined level known as the order
point. Syn: statistical order point system. See: fixed
order managementThe planning, directing, monitoring,
reorder quantity inventory model, hybrid system.O
and controlling of the processes related to customer
orders, manufacturing orders, and purchase orders. order policyA set of procedures for determining the lot
Regarding customer orders, order management in- size and other parameters related to an order. See: lot
cludes order promising, order entry, order pick, pack sizing.O

APICS Dictionary, 14th edition 117

order policy code organizational development (OD)

order policy codeSyn: lot-size code.O is also typically responsible for responding to customer
inquiries and interacting with the master scheduler on
order preparationAll activities relating to the adminis-
availability of products. In some companies, distribution
tration, picking, and packaging of individual customer or
and interplant requirements are handled separately.
work orders.O
See: order entry, order promising.O
order preparation lead timeThe time needed to ana-
lyze requirements and open order status and to create order shipmentActivity that extends from the time the

O the paperwork necessary to release a purchase order or

a production order.O
order is placed upon the vehicle for movement until the
order is received, verified, and unloaded at the buyers
order priorityThe scheduled due date to complete all
the operations required for a specific order.O order-to-delivery cycleThe period of time that starts
when the customer places an order and ends when the
order processingThe activity required to administra-
customer receives the order.O
tively process a customers order and make it ready for
shipment or production.O order-up-to levelSyn: target inventory level.O
order processing and communicationAll activities order winnersThose competitive characteristics that
needed to fill customer orders.O cause a firms customers to choose that firms goods
order promisingThe process of making a delivery and services over those of its competitors. Order
commitment (i.e., answering the question When can winners can be considered to be competitive
you ship?). For make-to-order products, this usually advantages for the firm. Order winners usually focus on
involves a check of uncommitted material and availabil- one (rarely more than two) of the following strategic
ity of capacity, often as represented by the master initiatives: price/cost, quality, delivery speed, delivery
schedule available-to-promise. Syn: customer order reliability, product design, flexibility, after-market
promising, order dating. See: available-to-promise, order service, and image. See: order losers, order qualifiers.O
service.O organizational breakdown structureIn project man-
order qualifiersThose competitive characteristics that agement, a representation of a projects organization
a firm must exhibit to be a viable competitor in the mar- relating work packages to organizational units.O
ketplace. For example, a firm may seek to compete on organizational change managementThe fostering and
characteristics other than price, but in order to qualify support of people who champion new technologies, new
to compete, its costs and the related price must be
operating practices, and new products and services that
within a certain range to be considered by its custom- will transform the organization, maintaining its viability
ers. Syn: qualifiers. See: order losers, order winners.O and improving its competitive position in step with the
order quantitySyn: lot size.O change in the business environment in which it
order quantity modifiersAdjustments made to a calcu-
lated order quantity. Order quantities are calculated organizational designThe creation of an organizational
based upon a given lot-sizing rule, but it may be neces- structure to support the strategic business plans and
sary to adjust the calculated lot size because of special goals of an enterprise; (e.g., for-profit and not-for-profit
considerations (scrap, testing, etc.).O companies). Given the mission and business strategy,
order releaseThe activity of releasing materials to a the organizational structure design provides the frame-
production process to support a manufacturing order. work within which the business operational and man-
See: planned order release.O agement activities will be performed.O

order reportingRecording and reporting the start and organizational development (OD)The process of build-
completion of the manufacturing order (shop order) in ing and strengthening core competencies and organiza-
its entirety.O tional capabilities that enable the execution of the
business strategy and provide a sustainable competitive
order schedulingSyn: operations scheduling.O
advantage over time. Organizational development in-
order selectionSyn: order picking.O cludes staffing the organization, building core compe-
tencies and organizational capabilities, and continuous
order serviceThe function that encompasses receiving,
improvement initiatives in response to the changing
entering, and promising orders from customers, distri-
business environment.O
bution centers, and interplant operations. Order service

118 APICS Dictionary, 14th edition

organizational environment overall factors

organizational environmentConsists of an external en- out-of-pocket costsCosts that involve direct payments
vironment (e.g., laws and regulations, technology, econ- such as labor, freight, or insurance, as opposed to de-
omy, competition) and an internal environment (e.g., the preciation, which does not.O
domain of products and services to be provided, the
out of stockA situation in which there is no inventory
processes to be executed, the organizational structure).
at a location available for sale to the customer. See:
See: external environment, internal environment.O
organization chartA graphical depiction of relation-
ships between people who work together.O
out of specA term used to indicate that a unit does not
meet a given specification.O O
original equipment manufacturer (OEM)A manufactur- outpartneringThe process of involving the supplier in a
er that buys and incorporates another suppliers prod- close partnership with the firm and its operations man-
ucts into its own products. Also, products supplied to agement system. Outpartnering is characterized by
the original equipment manufacturer or sold as part of close working relationships between buyers and suppli-
an assembly. For example, an engine may be sold to an ers, high levels of trust, mutual respect, and emphasis
OEM for use as that companys power source for its ge- on joint problem solving and cooperation. With outpart-
nerator units.O nering, the supplier is viewed not as an alternative
orthogonal arraysTools that help maintain indepen- source of goods and services (as observed under out-
dence between different iterations of a product design sourcing) but rather as a source of knowledge, exper-
experiment; introduced to quality analysis by Genichi tise, and complementary core competencies.
Taguchi.O Outpartnering is typically found during the early stages
of the product life cycle when dealing with products that
OS&DAbbreviation for over, short, and damaged.O are viewed as critical to the strategic survival of the
OSHAAcronym for Occupational Safety and Health firm. See: customer-supplier partnership, supplier part-
Act.O ner, and customer partner.O

OSIAbbreviation for open systems interconnection.O outputThe product being completed by a process or
OTEDAbbreviation for one-touch exchange of die.O
output controlA technique for controlling output where
OTIFAbbreviation for on-time in-full.O actual output is compared to planned output to identify
problems at the work center or facility.O
outbound consolidationThe gathering of a number of
small shipments to a variety of customers into a larger output standardThe expected number of units from a
load, which is then shipped to a point near the custom- process against which actual output will be measured.O
ers where it is broken down for delivery.O
outside shopSuppliers. This term is used to convey the
outbound logisticsEvery process that is involved in the idea that suppliers are an extension of the inside shop
shipping and holding of products after they are com- or the firms production facilities.O
pleted until they are received by the customer.O outsourced cost of goods soldCosts of goods sold that
outbound stockpointThe designated locations near are not created within the producing companys manu-
the point of use on a plant floor to which material pro- facturing process. Instead, they are outsourced to
duced is taken until it is pulled to the next operation.O another company and include the costs of purchasing
the service from another company.O
outlierA data point that differs significantly from other
data for a similar phenomenon. For example, if the av- outsourcingThe process of having suppliers provide
erage sales for a product were 10 units per month, and goods and services that were previously provided inter-
one month the product had sales of 500 units, this nally. Outsourcing involves substitutionthe replace-
sales point might be considered an outlier. See: abnor- ment of internal capacity and production by that of the
mal demand.O supplier. See: subcontracting.O
overall equipment effectiveness (OEE)Measuring the
out-of-control processA process in which the statistical
effectiveness of all of the equipment of a company
measure being evaluated is not in a state of statistical
based on usage, performance and production quality.O
control (i.e., the variations among the observed sam-
pling results can be attributed to a constant system of overall factorsSyn: capacity planning using overall
chance causes). Ant: in-control process.O factors.O

APICS Dictionary, 14th edition 119

overhead packing and marking

overheadThe costs incurred in the operation of a over, short, and damaged (OS&D) reportA report sub-
business that cannot be directly related to the individual mitted by a freight agent showing discrepancies in bill-
goods or services produced. These costs, such as light, ing received and actual merchandise received.O
heat, supervision, and maintenance, are grouped in
overstated master production scheduleA schedule
several pools (e.g., department overhead, factory over-
that includes either past due quantities or quantities
head, general overhead) and distributed to units of
that are greater than the ability to produce, given cur-
goods or services by some standard allocation method

P such as direct labor hours, direct labor dollars, or direct

materials dollars. Syn: burden. See: expense.O
rent capacity and material availability. An overstated
MPS should be made feasible before MRP is run.O

overtimeWork beyond normal established working

overhead allocationIn accounting, the process of ap-
hours that usually requires that a premium be paid to
plying overhead to a product on the basis of a prede-
the workers.O
termined rate.O
owners equityAn accounting/financial term (balance
overhead baseThe denominator used to calculate the sheet classification of accounts) representing the
predetermined overhead rate used in applying overhead residual claim by the companys owners or
(e.g., estimated direct labor hours, estimated direct la- shareholders, or both, to the companys assets less its
bor dollars).O liabilities. See: assets, balance sheet, liabilities.O
overhead poolThe collection of overhead costs that
are to be allocated over a specified group of products.O

overissueSyn: excess issue.O

PACAcronym for production activity control.P
overlapped productionA method of production in
which completed pieces of a production lot are pacemakerIn lean, the resource that is scheduled
processed at one or more succeeding stations while based on the customer demand rate for that specific
remaining pieces continue to be processed at the origi- value stream. It is that resource which performs an op-
nal workstation. See: overlapped schedule.O eration or process that governs the flow of materials
along the value stream. Its purpose is to maintain a
overlapped scheduleA manufacturing schedule that smooth flow through the manufacturing plant; a larger
overlaps successive operations. Overlapping occurs buffer is provided for the pacemaker than other re-
when the completed portion of an order at one work sources so that it can maintain continuous operation.
center is processed at one or more succeeding work
See: constraint.P
centers before the pieces left behind are finished at the
preceding work centers. Syn: lap phasing, operation pace ratingEstimating the level of effort of a subject of
overlapping, telescoping. See: send ahead. Ant: gapped methods study, where 100 percent would be the sus-
schedule, overlapped production.O tainable pace of an average skilled worker.P

overlap quantityThe number of items that need to be pacing processThe process in a production line used
run and sent ahead to the following operation before to signal all other processes in line of the time to pro-
the following overlap operation can begin. Syn: offset duce another unit. It generally is the final process, but it
quantity. See: process batch, transfer batch.O does not have to be.P

package to orderA production environment in which a

overloadA condition when the total hours of work out-
good or service can be packaged after receipt of a cus-
standing at a work center exceed that work centers
tomer order. The item is common across many different
customers; packaging determines the end product.P
overpackReducing total shipping costs by reducing the
packagingMaterials surrounding an item to protect it
per-item shipping cost. This is done by including mul-
from damage during transportation. The type of packag-
tiple smaller items in one larger box.O
ing influences the danger of such damage.P
overrun1) The quantity received from manufacturing
packing and markingThe activities of packing for safe
or a supplier that is in excess of the quantity ordered. 2)
shipping and unitizing one or more items of an order,
The condition resulting when expenditures exceed the
placing them into an appropriate container, and mark-
ing and labeling the container with customer shipping

120 APICS Dictionary, 14th edition

packing list Pareto chart

destination data, as well as other information that may paperless purchasingA purchasing operation that does
be required.P not employ purchase requisitions or hard-copy purchase
orders. In actual practice, a small amount of paperwork
packing listA list showing merchandise packed, a copy
usually remains, normally in the form of the supplier
of which is sent to the consignee to help verify the
parallel conversionA method of system implementa-
packing slipA document that itemizes in detail the
contents of a particular package, carton, pallet, or con-
tainer for shipment to a customer. The detail includes a
description of the items, the shippers or customers
tion in which the operation of the new system overlaps
with the operation of the system being replaced. The old
system is discontinued only when the new system is
shown to be working properly, thus minimizing the risk
part number, the quantity shipped, and the stockkeep-
and negative consequences of a poor system
ing unit (SKU) of items shipped.P
pack-out departmentThe department that performs
parallel engineeringSyn: participative design/
the final steps (often including packaging and labeling)
before shipment to the customer. See: final assembly
department.P parallel implementation strategyA system implemen-
tation technique whereby the current system and the
pageIn information systems, an internet document
new system are both executed for some period of time.
containing both text and hypertext links to other pages
The results of the two systems are compared to ensure
that are stored on the server.P
that the new system is executing properly. When a level
paired-cell overlapping loops of cards (POLCA)A spe- of confidence is built that the new system is executing
cial material control and replenishment system devel- properly, the old system is turned off and the new sys-
oped to be used with quick-response manufacturing in tem becomes the designated business system.P
cellular manufacturing environments. It is a hybrid
parallel scheduleThe use of two or more machines or
push-pull system where the push authority to proceed is
job centers to perform identical operations on a lot of
generated by high-level manufacturing resources plan-
material. Duplicate tooling and setup are required.P
ning. See: quick-response manufacturing.P
parameterA coefficient appearing in a mathematical
palletA platform designed to be loaded with packages
expression, each value of which determines the specific
and moved by a forklift. Standard pallet size is 48 inch-
form of the expression. Parameters define or determine
es by 40 inches by 4 inches.P
the characteristics or behavior of something, as when
pallet jackA type of materials handling equipment that the mean and standard deviation are used to describe a
combines pallets horizontally but has no lifting set of data.P
parameter designSpecifying the product characteris-
pallet positionsA calculation that determines the tics and production process that will create the ex-
space needed for the number of pallets for inventory pected product performance.P
storage or transportation based on a standard pallet
parametric estimatingThe use of statistical and histor-
size. Pallet dimensions vary around the globe, but are
ical data to estimate activity parameters such as time or
typically a constant in regional markets. The term is fre-
quently used to quote storage and transportation
rates.P parentSyn: parent item.P
pallet rackA single- or multiple-level structure for sto- parent/child relationshipRefers to the logical linkage
rage used to support high stacking of palletized loads.P between higher and lower level items in the bill of
pallet ticketA label to track pallet-sized quantities of
end items produced to identify the specific sublot with parent itemThe item produced from one or more com-
specifications determined by periodic sampling and ponents. Syn: parent.P
analysis during production.P
Pareto analysisUse of the Pareto principle in prioritiz-
panel consensusA judgmental forecasting technique ing or ranking a range of items to separate the vital few
by which a committee, sales force, or group of experts from the trivial many.P
arrives at a sales estimate. See: Delphi method, man-
Pareto chartA bar graph that displays the results of a
agement estimation.P
Pareto analysis. It may or may not display the 80-20 var-

APICS Dictionary, 14th edition 121

Pareto diagram part type

iation, but it does show a distinct variation from the few organization is capable of and willing to help guide and
compared to the many.P direct the organization toward agreed-on goals and
Pareto diagramSyn: Pareto chart.P
Paretos lawA concept developed by Vilfredo Pareto, part master recordSyn: item record.P
an Italian economist, that states that a small percen- partneringThe act of one organization committing to a
tage of a group accounts for the largest fraction of the

long-term relationship with another organization based
impact, value, and so on. In an ABC classification, for on trust and a shared concept of how to satisfy the
example, 20 percent of the inventory items may consti- customer.P
tute 80 percent of the inventory value. See: ABC classi-
fication, 80-20.P partnership1) A form of business ownership that is not
organized as a separate legal entity (i.e., unincorpo-
parking lotA meeting device whereby off-agenda items rated business), but entailing ownership by two or more
are noted for possible inclusion in future agendas. persons. See: corporation, private ownership, public
Often a flip chart or whiteboard is used.P ownership, sole proprietorship. 2) In a supply chain, a
par levelIn service operations, the maximum supply relationship based on trust, shared risk, and rewards
volume based on established quotas from previous use aimed toward achieving a competitive advantage.P
for a particular supply item, in a particular department,
part numberSyn: item number.P
for a specified time period.P
part period balancing (PPB)A dynamic lot-sizing
partGenerally, a material item that is used as a com-
technique that uses the same logic as the least total
ponent and is not an assembly, subassembly, blend,
cost method, but adds a routine called look ahead/look
intermediate, etc.P
back. When the look ahead/look back feature is used, a
part coding and classificationA method used in group lot quantity is calculated, and before it is firmed up, the
technology to identify the physical similarity of parts.P next or the previous periods demands are evaluated to
part familyA collection of parts grouped for some ma- determine whether it would be economical to include
nagerial purpose.P them in the current lot. See: discrete order quantity,
dynamic lot sizing.P
partial orderAny shipment received or shipped that is
less than the amount ordered.P part recordSyn: item record.P

partial productivity factorSyn: single-factor parts bank1) In the narrow sense, an accumulation of
productivity.P inventory between operations that serves to keep a
subsequent operation running although there are inter-
participative design/engineeringA concept that refers
ruptions in the preceding operations. See: buffer. 2) In
to the simultaneous participation of all the functional
the larger sense, a stockroom or warehouse. The impli-
areas of the firm in the product design activity.
cation is that the contents of these areas should be
Suppliers and customers are often also included. The
controlled like the contents of a bank.P
intent is to enhance the design with the inputs of all the
key stakeholders. Such a process should ensure that parts listA list of parts, materials, and components re-
the final design meets all the needs of the stakeholders quired to make an item. See: single level bill of
and should ensure a product that can be quickly material.P
brought to the marketplace while maximizing quality
parts plannerSyn: material planner.P
and minimizing costs. Syn: co-design, concurrent
design, concurrent engineering, new product parts requisitionAn authorization that identifies the
development team, parallel engineering, simultaneous item and quantity required to be withdrawn from an in-
design/engineering, simultaneous engineering, team ventory. Syn: requisition. See: purchase requisition.P
design/ engineering. See: early manufacturing
part standardizationA program for planned elimination
of superficial, accidental, and deliberate differences be-
participative managementA system that encompasses tween similar parts in the interest of reducing part and
various activities of high involvement in which subordi- supplier proliferation.P
nates share a significant degree of decision-making
part typeA code for a component within a bill of ma-
power with their immediate superiors. Participative
terial (e.g., regular, phantom, reference).P
management draws on the rationale that everyone in an

122 APICS Dictionary, 14th edition

passenger-mile performance and event management systems

passenger-mileOne passenger transported one mile. PDCAAbbreviation for plan-do-check-action.P

For example, a bus carrying forty passengers for one
PDFAbbreviation for portable document format.P
hundred miles would accrue 4,000 passenger miles.P
PDMAbbreviation for product data management.P
passive data gatheringData gathered when a custom-
er initiates the process by filling out a card or sending P:D ratioA ratio where P is the manufacturing lead
an email. The firm develops the feedback form but the time and D is the customer required delivery time. If the

customer initiates the use of it.P P:D ratio exceeds 1.00, either a customers order will be
delayed or production will start as the result of a fore-
passive tagA RFID tag which does not send out data
cast (make-to-stock) or an anticipated customer order
and is not self-powered. See: radio frequency identifica-
tion (RFID) tag.P
peak demandA specific time when the quantity de-
past due orderA line item on an open customer order
manded is greater than all other times.P
that has an original scheduled ship date that is earlier
than the current date. Syn: delinquent order, late order, pegged requirementA requirement that shows the
order backlog. See: backlog.P next-level parent item (or customer order) as the source
of the demand.P
patentA legal document giving exclusive rights to the
production, use, sale, or other action regarding a prod- peggingIn MRP and MPS, the capability to identify for
uct or process.P a given item the sources of its gross requirements
and/or allocations. Pegging can be thought of as active
pathIn project management, a set of serially related
where-used information. See: requirements
activities in a network diagram.P
path convergenceIn project management, the point in
penetration pricingIntroducing a product below its
a network diagram where one or more parallel paths
long-run price to secure entry into a market.P
come together. A delay on any of the parallel paths can
conceivably delay network completion.P people involvementSyn: employee involvement.P

path divergenceHaving parallel network paths exiting PE ratioAbbreviation for price to earnings ratio.P
from a single node.P perceived qualityOne of the eight dimensions of quali-
path floatSyn: float.P ty that refers to a subjective assessment of a products
quality based on criteria defined by the observer.P
pattern recognitionClassifying raw data based on ex-
perience or statistical information.P percent chartSyn: P chart.P

paybackA method of evaluating an investment oppor- percent completedA comparison of work completed to
tunity that provides a measure of the time required to the current projection of total work.P
recover the initial amount invested in a project.P percent of fillSyn: customer service ratio.P
payback periodThe period of time required for a percent value-added timeThe percentage of total cycle
stream of cash flows resulting from a project to equal time that is spent on activities that provide value to the
the projects initial investment.P product or customer.P
pay for knowledgeA pay restructuring scheme by perfect orderAn order in which the seven Rs are sa-
which competent employees are rewarded for the know- tisfied: the right product, the right quantity, the right
ledge they acquire before or while working for an organ- condition, the right place, the right time, the right cus-
ization, regardless of whether such knowledge is tomer, the right cost.P
actually being used at any given time.P
performance1) The degree to which an employee or
pay pointSyn: count point.P group applies skill and effort to an operation or task as
P chartA control chart for evaluating the stability of a measured against an established standard. 2) One of
process in terms of the percentage of the total number the eight dimensions of quality that refers to product
of units in a sample in which an event of a given classi- attributes pertaining to the functioning of a product
fication occurs over time. P charts are used where it is (e.g., horsepower, signal-to-noise ratio, decibel output).P
difficult or costly to make numerical measurements or performance and event management systemsSystems
where it is desired to combine multiple types of defects that record and measure the performance of key supply
into one measurement. Syn: percent chart.P chain processes. With these data, employees can de-

APICS Dictionary, 14th edition 123

performance appraisal perpetual inventory record

termine when the key processes have changed and why performance ratingObservation of worker performance
they have changed. These data then are utilized to ad- to rate the productivity of the workers as a percentage
just the existent data.P in terms of the standard or normal worker
performance appraisalSupervisory or peer analysis of
work performance. May be made in connection with performance standardIn a performance measurement
wage and salary review, promotion, transfer, or em- system, the accepted, targeted, or expected value for

P ployee training.P
performance benchmarkingSyn: competitive ben-
the criterion. See: performance criterion, performance
measure, performance measurement system.P
chmarking. See: benchmarking, process performance varianceThe difference between a per-
benchmarking.P formance standard and actual performance.P
performance criterionThe characteristic to be meas- performing organizationThe enterprise directly in-
ured (e.g., parts per million defective, business profit). volved in the execution of work.P
See: performance measure, performance measurement
system, performance standard.P period capacityThe number of standard hours of work
that can be performed at a facility or work center in a
performance efficiencyA ratio, usually expressed as a
given time period.P
percentage, of the standard processing time for a part
divided by its actual processing time. Setups are ex- period costsAll costs related to a period of time rather
cluded from this calculation to prevent distortion. A tra- than a unit of product (e.g., marketing costs, property
ditional definition includes setup time as part of taxes).P
operation time, but significant distortions can occur as
periodic inventoryA physical inventory taken at some
a result of dependent setups.P
recurring interval (e.g., monthly, quarterly, or annual
performance measureIn a performance measurement physical inventory). See: physical inventory.P
system, the actual value measured for the criterion.
periodic maintenanceSyn: preventive maintenance.P
Syn: performance measurement. See: performance cri-
terion, performance measurement system, performance periodic replenishmentA method of aggregating re-
standard.P quirements to place deliveries of varying quantities at
evenly spaced time intervals, rather than variably
performance measurementSyn: performance
spaced deliveries of equal quantities.P
performance measurement baselineAn approved plan periodic review systemSyn: fixed reorder cycle invento-
used to compare against actual execution to identify ry model.P
variances for management control.P period order quantityA lot-sizing technique under
performance measurement systemA system for col- which the lot size is equal to the net requirements for a
lecting, measuring, and comparing a measure to a given number of periods (e.g., weeks into the future).
standard for a specific criterion for an operation, item, The number of periods to order is variable, each order
good, service, business, etc. A performance measure- size equalizing the holding costs and the ordering costs
ment system consists of a criterion, a standard, and a for the interval. See: discrete order quantity, dynamic lot
measure. Syn: metrics. See: performance criterion, per- sizing.P
formance measure, performance standard.P perishabilityThe fact that an item has a limited shelf
performance measurement unitsTime, error rates, ac- life and may be fragile and require special handling.P
curacy rates, cost, and other measures of system
permission marketingSyn: relationship marketing.P
perpetual inventoryAn inventory recordkeeping system
performance objectivesMeasurements that enable the
where each transaction in and out is recorded and a
firm to monitor whether or not the firms strategy is be-
new balance is computed.P
ing accomplished. Thus, the measurement should be
aligned to strategy. Performance objectives may differ perpetual inventory recordA computer record or ma-
based on the hierarchical level of the firm (e.g., depart- nual document on which each inventory transaction is
ment, business unit, corporation) and should be aligned posted so that a current record of the inventory is
with the corresponding strategy for that level.P maintained.P

124 APICS Dictionary, 14th edition

personal discrimination pilot test

personal discriminationIn transportation, charging dif- stock to ship to a distribution warehouse or to a

ferent companies with similar deliveries different rates customer.P
for shipping. This is a policy decision, probably based on
picking listA document that lists the material to be
importance of the customer.P
picked for manufacturing or shipping orders. Syn: dis-
personal fatigue and unavoidable delay allowance bursement list, material list, stores issue order, stores
Factor by which the motion study term normal time is requisition.P
increased to allow for personal needs and unavoidable
pick on receiptSimilar to cross-docking, a product is
unloaded from an inbound vehicle and loaded directly P
personnel classA means to describe a grouping of on an outbound vehicle. Product is received and picked
people with similar characteristics for purposes of simultaneously, never becoming set in the warehouse.P
scheduling and planning.P pick-to-lightA pick system that uses software to light
PERTAcronym for program evaluation and review up displays at each pick location and determines how
technique.P much needs to be picked. The picker uses this as their
requirement to pull for that particular order to set of
PFEPAbbreviation for plan for every part.P orders.P
phantom bill of materialA bill-of-material coding and pick-to-trailerAn order picking system that allows the
structuring technique used primarily for transient (non- picker to transfer materials to the trailer from the pick
stocked) subassemblies. For the transient item, lead source without any confirmation/checking stages.P
time is set to zero and the order quantity to lot-for-lot. A
phantom bill of material represents an item that is phys- pickup and delivery costsCarrier charges for each
ically built, but rarely stocked, before being used in the shipment pickup and the weight of that shipment. Costs
next step or level of manufacturing. This permits MRP can be reduced if several smaller shipments are consol-
logic to drive requirements straight through the phan- idated and picked up in one trip.P
tom item to its components, but the MRP system usual- piece partsIndividual items in inventory at the simplest
ly retains its ability to net against any occasional level in manufacturing (e.g., bolts and washers).P
inventories of the item. This technique also facilitates
piece rateThe amount of money paid for a unit of pro-
the use of common bills of material for engineering and
duction. It serves as the basis for determining the total
manufacturing. Syn: blowthrough, transient bill of ma-
pay for an employee working in a piecework system.P
terial. See: pseudo bill of material.P
piece rate pay systemA compensation system based
physical distributionSyn: distribution.P
upon volume of output of an individual worker.P
physical inventory1) The actual inventory itself. 2) The
pieceworkWork done on a piece rate.P
determination of inventory quantity by actual count.
Physical inventories can be taken on a continuous, pe- piggybackSyn: trailer on a flatcar.P
riodic, or annual basis. Syn: annual inventory count, an- pilotSyn: pilot test.P
nual physical inventory. See: periodic inventory.P
pilot lotA relatively small preliminary order for a prod-
physical supplyThe movement and storage of goods uct. The purpose of this small lot is to correlate the
from suppliers to manufacturing. The cost of physical product design with the development of an efficient
supply is ultimately passed on to the customer.P manufacturing process.P
pick and placeEquipment that picks up parts from one pilot orderSyn: experimental order.P
station on an assembly line and places them on the
pilot plantA small-scale production facility used to de-
velop production processes and to manufacture small
pick dateThe start date of picking components for a quantities of new products for field testing and so forth.
production order. On or before this date, the system Syn: semiworks.P
produces a list of orders due to be picked, pick lists,
pilot test1) In computer systems, a test before final
tags, and turnaround cards.P
acceptance of a new business system using a subset of
pickingThe process of withdrawing from stock the data with engineered cases and documented results. 2)
components to make assemblies or finished goods. In Generally, production of a quantity to verify manufactu-
distribution, the process of withdrawing goods from rability, customer acceptance, or other management

APICS Dictionary, 14th edition 125

pipeline inventory planner intervention

requirements before implementation of ongoing produc- item description, and supplier or procurement
tion. Syn: pilot, walkthrough.P information.P
pipeline inventorySyn: pipeline stock.P plan makeEstablishing plans for action over time that
project appropriation of production resources to meet
pipeline stockInventory in the transportation network
production requirements.P
and the distribution system, including the flow through
intermediate stocking points. The flow time through the planned finish dateSyn: scheduled finish date.P

P pipeline has a major effect on the amount of inventory

required in the pipeline. Time factors involve order
transmission, order processing, scheduling, shipping,
planned issueA disbursement of an item predicted by
MRP through the creation of a gross requirement or al-
location. Syn: controlled issue.P
transportation, receiving, stocking, review time, and so
forth. Syn: pipeline inventory. See: distribution system, planned issue receiptA transaction that updates the
transportation inventory.P on-hand balance and the related allocation or open
placeOne of the four Ps (product, price, place, and
promotion) that constitute the set of tools used to direct planned loadThe standard hours of work required by
the business offering to the customer. Place is the dis- the planned production orders.P
tribution tactic used to provide the product to the cus- planned orderA suggested order quantity, release
tomer. Distribution answers the questions of where, date, and due date created by the planning systems
when, and how the product is made available. See: four logic when it encounters net requirements in processing
Ps.P MRP. In some cases, it can also be created by a master
place utilityUsefulness to the customer created by scheduling module. Planned orders are created by the
having the product delivered to a desired location.P computer, exist only within the computer, and may be
changed or deleted by the computer during subsequent
planA predetermined course of action over a specified processing if conditions change. Planned orders at one
period of time that represents a projected response to level will be exploded into gross requirements for com-
an anticipated environment to accomplish a specific set ponents at the next level. Planned orders, along with
of adaptive objectives.P released orders, serve as input to capacity require-
plan deliverEstablishing plans for action over time that ments planning to show the total capacity requirements
project appropriation of supply resources to meet deli- by work center in future time periods. See: planning
very requirements.P time fence.P

plan-do-check-act cycleSyn: plan-do-check-action.P planned order receiptThe quantity planned to be re-

ceived at a future date as a result of a planned order
plan-do-check-action (PDCA)A four-step process for
release. Planned order receipts differ from scheduled
quality improvement. In the first step (plan), a plan to
receipts in that they have not been released. Syn:
effect improvement is developed. In the second step
planned receipt.P
(do), the plan is carried out, preferably on a small scale.
In the third step (check), the effects of the plan are ob- planned order releaseA row on an MRP table that is
served. In the last step (action), the results are studied derived from planned order receipts by taking the
to determine what was learned and what can be pre- planned receipt quantity and offsetting to the left by the
dicted. The plan-do-check-action cycle is sometimes appropriate lead time. See: order release.P
referred to as the Shewhart cycle (because Walter A. planned receipt1) An anticipated receipt against an
Shewhart discussed the concept in his book Statistical open purchase order or open production order. 2) Syn:
Method from the Viewpoint of Quality Control) and as planned order receipt.P
the Deming circle (because W. Edwards Deming intro-
duced the concept in Japan; the Japanese subsequently planned start dateSyn: scheduled start date.P
called it the Deming circle). Syn: plan-do-check-act planned valueIn project management, the total value
cycle, Shewhart circle of quality, Shewhart cycle. See: (including overhead) of approved estimates for planned
Deming circle.P activities.P
plan for every part (PFEP)Consolidated information plannerSyn: material planner.P
stored in a single record that contains everything
planner/buyerSyn: supplier scheduler.P
needed to know about a part to plan it effectively. It in-
cludes usage, container information, storage location, planner interventionSyn: manual rescheduling.P

126 APICS Dictionary, 14th edition

planning point-of-use inventory

planningThe process of setting goals for the organiza- plan sourceEstablishing plans for action over time that
tion and choosing various ways to use the organiza- project appropriation of material resources to meet
tions resources to achieve the goals.P supply chain requirements.P

planning and control processA process consisting of plan stabilityThe percent difference between the pro-
the following steps: plan, execute, measure, and duction that was planned and the production that was