1 80-20 Pareto principle Abandonment Abnormal variability A principle that states that 20% of problem types account for

80% of all occurrences. A situation when a customer, havin waited in !ueue for some time, leaves the process but before bein served. "npredictable variability that disturbs the state of statistical e!uilibrium of the process by chan in parameters of its distribution in an une#pected way $he simplest form of transformation% the buildin bloc& of a process. $he time re!uired by a typical flow unit to complete the activity once. A statistical principle that states that the standard deviation of the sum of random variables is less than the sum of the individual standard deviations. $he manufacturin system be un in 1810 that introduced the use of interchan eable parts, thereby eliminatin the need to custom fit parts durin assembly. 'iterally, andon means a display board. (n the $oyota Production )ystem, a wor&er is empowered to stop the line by pullin a cord. A display board identifies the station that pulled the cord enablin the supervisor to locate it easily. *esource availability loss as a fraction of scheduled availability. $he avera e number of flow units that flow throu h +into and out of, the process per unit over time. Also called throughput. $he avera e of the flow times across all flow units that e#it the process durin a specific span of time. $he situation in which customers must wait to have their demand satisfied. $he si.e of an order or production in response to the economies of scale. $he process of continually searchin for the best methods, practices, and processes, and adoptin or adaptin the ood features to become /the best of the best. An event that occurs when resources are prevented from

Activity Activity time A re ation, principle of American system of manufacturin Andon

Availability loss factor Avera e flow rate Avera e flow time -ac&lo -atch -enchmar&in ed

-loc&a e

2 producin more flow units because there is no place to store the already processed flow units, or because additional processin has not been authori.ed. -loc&in -ottlenec& -uffer -uffer capacity -ull whip effect -usiness process -usiness strate y A situation that occurs because input buffers have only limited capacity to accommodate arrivals waitin to be processed. )lowest resource pool% also see $heoretical bottlenec& and 0ffective bottlenec&. $he part of the process that stores flow units that have finished with one activity but are waitin for the ne#t activity to start. $he ma#imum number of customers that can wait in !ueue. $he phenomenon of upstream variability ma nification that indicates a lac& of synchroni.ation amon supply chain members. A networ& of activities performed by resources that transform inputs into outputs. $he aspect of strate ic plannin that defines the scope of each division or business unit in terms of the attributes of the products that it will offer and the mar&et se ments that it will serve.

1apacity utili.ation of $he de ree to which resources are utili.ed by a process% $he ratio of a resource pool throu hput and theoretical capacity of resource pool. 1apital 1ascadin 1ausal models 1ause-effect dia ram 2i#ed assets such as land, buildin , facilities, e!uipment, machines, and information systems. *epresentin a iven process at several levels of detail simultaneously in a process flow chart. 2orecastin methods that assume data plus other factors influence demand. An illustration that shows a chain of cause-effect relationships that allows one to find the root-causes of the observed variability% also called fishbone or Ishikawa diagram. A layout of resources where all stations that performs successive operations on a product +or product family, are rouped to ether and or ani.ed accordin to the se!uence of activities. $he cleanin , resettin , or retoolin of e!uipment in order for it to process a different product. Also called setup.

1ellular layout

1han eover

3 1hase demand strate y 1hec& sheet 1oefficient of variation A strate y to deal with demand fluctuations whereby a firm produces !uantities to e#actly match demand. A tally of the types and fre!uency of problems with a product or a service e#perienced by customers. A measure of variability relative to its mean. (t is obtained by computin the ratio of the standard deviation to the mean.

1ollaborative An initiative in the consumer oods industry desi ned to coordinate Plannin , 2orecastin , plannin , forecastin and replenishment across the supply chain. and *eplenishment +1P2*, 1ompetitive product space 1ontinuous improvement 1ontinuous *eplenishment Pro ram +1*P, 1ontinuous review, reorder point policy 1ontrol band 1ontrol chart 1ontrol limits 1orporate strate y A representation of the firm4s product portfolio as measured alon four dimensions or product attributes -- product cost, response time, variety, and !uality 5n oin incremental improvement in process performance. Also see kaizen. A partnership pro ram under which the supplier automatically replenishes its customer inventories based on contractually a reed upon levels. An order policy wherein a process mana er, havin initially ordered a fi#ed !uantity, monitors inventory level continuously and then reorders once available inventory falls to a pre-specified reorder point. A ran e within which any variation is to be interpreted as normal, unavoidable aspect of any process. A run chart of process performance with control limits overlaid to ive it decision-ma&in power. $he lower and upper ran e of the control band. $he aspect of strate ic plannin that defines the businesses in which the corporation will participate and specifies how &ey corporate resources will be ac!uired and allocated to each business. Activities that lie on the critical path. $he lon est path in the flow chart. $he avera e inventory that results from intermittent procurement or production practices.

1ritical activities 1ritical path 1ycle inventory

6 1ycle inventory 1ycle service level 7elayed differentiation 7emand mana ement strate ies 7ivision of labor 7ue date !uotation 0conomic order !uantity 0conomies of scale 0ffective bottlenec& 0ffective capacity of a process 0ffective capacity of a resource unit 0veryday low pricin +07'P, 0veryday low purchase prices +07'PP, 2eedbac& control $he avera e inventory arisin from a specific batch si.e $he probability that there will be no stoc&out within an order cycle Also called service level. A strate y in which part of a process is delayed in order to reduce the need for safety inventory. Also called postponement. Actions by a firm that attempt to influence demand pattern. $he brea&down of labor into its components and the distribution of labor amon people and machines to increase efficiency of production. $he practice of promisin a time frame within which the product will be delivered after an order has been placed. $he optimal order si.e that minimi.es total fi#ed and variable costs.

A process e#hibits economies of scale when the avera e unit cost of output decreases with volume. $he resource pool with least effective capacity. $he effective capacity of the effective bottlenec&. $he ma#imum flow rate of a resource unit if it were fully utili.ed durin its net availability that is if there were no periods of resource idleness. $he retail practice of char in constant, everyday low prices with no temporary discounts. $he wholesale practice of char in constant, everyday low prices with no temporary discounts. $he process of periodically monitorin the actual process performance, comparin it to planned levels of performance, investi atin causes of the observed discrepancy between the two, and ta&in corrective actions to eliminate those causes. $he fraction of total demand satisfied from inventory on hand. )ee cause-effect dia ram. $he administrative cost of processin an order, transportin material,

2ill rate 2ishbone 7ia ram 2i#ed order cost

8 receivin the product+s,, and inspectin the delivery, re ardless of order si.e. 2i#ed setup cost 2le#ible 9anufacturin )ystem +29), 2le#ible mass production 2low rate 2low shop 2low time 2low time efficiency 2low unit $he time and materials re!uired to setup a process A repro rammable manufacturin system capable of producin a lar e variety of parts. A method of hi h-volume production that allows differences in products. $he number of flow units that flow throu h a specific point in the process per unit of time. A type of process architecture that uses speciali.ed resources to produce a low variety of products at hi h volumes. $he total time that a flow unit spends within process boundaries. $he ratio between theoretical flow time and the avera e flow time that indicates the amount of waitin time associated with the process. $he item bein analy.ed within a process view. 0#amples of flow units include an input unit such as a customer order, or an output unit such as a finished product. A flow unit can also be the financial value of the input or output. A process in which products all fall within a small re ion of the competitive product space. $his process supports a focused strate y. A business process that is committed to a limited, con ruent set of ob:ectives in terms of demand and supply. $he process of predictin the future. $he ta&in advanta e of price discounts to purchase for future needs. A type of process desi n that roups or ani.ational resources by processin activity or /function; in /departments.; Also called process layout. A process and or ani.ational structure where people are speciali.ed by function, meanin each individual is dedicated to a specific tas&. +$he other or ani.ational structure is product specialization., $he part of strate ic plannin that defines the purpose of mar&etin ,

2ocused process 2ocused strate y 2orecastin 2orward buyin 2unctional layout

2unctional speciali.ation 2unctional strate y

< operations and finance -- the three main functions of or ani.ations. =ei:un&a =isto ram (deal process (nflow rate (n-process inventory (nputs )ee 'evel Production. A bar plot that displays the fre!uency distribution of an observed performance characteristic. A process that achieves synchroni.ation at the lowest possible cost. $he avera e rate of customer arrivals per unit of time. An inventory classification% flow units that are bein processed. Also see work-in-process inventory and in-transit inventory. Any tan ible or intan ible items that flow into the process from the environment and are transformed% they include raw materials, component parts, ener y, data, and customers in need of service. An inventory classification% flow units that are waitin to be in processin $he difference between instantaneous inflow rate and outflow rate, written R+t,. Also called instantaneous inventory build-up rate. $he difference between instantaneous inflow rate and outflow rate, written R+t,. Also called instantaneous inventory accumulation rate. $he time between consecutive customer arrivals. A cate ory of in-process inventory% flow units bein transported. Also called pipeline inventory. $he total number of flow units present within process boundaries. An illustration that depicts inventory fluctuation over time. $he financial cost of carryin inventory two main components of which are physical holding cost and the opportunity cost of capital. $he ratio of throu hput to avera e inventory. (t is the reciprocal avera e of flow time. Also called turnover ratio. )ee cause-effect dia ram. (ntelli ent Automation whereby the ability to detect errors is

(nputs inventory (nstantaneous inventory accumulation rate (nstantaneous inventory build-up rate (nterarrival time (n-transit inventory (nventory (nventory build-up dia ram (nventory holdin cost (nventory turns (shi&awa 7ia ram >ido&a

? automatically built into the machine. >ob shop >ust-in-$ime A type of process architecture that uses fle#ible resources to produce low volumes of customi.ed, hi h-variety products. An action ta&en only when it becomes necessary to do so. (n the conte#t of manufacturin , it means production of only necessary flow units in necessary !uantities at necessary times. (mprovement by continuously identifyin and eliminatin sources of waste in a process such as inventory, waitin time, or defective parts. $he si nalin device formali.ed by $oyota that allows the customer to inform the supplier of its need. (t is a card attached to an output flow unit in the buffer between customer and supplier processes and lists the customer process, the supplier process, parts description and production !uantity. =uman resource assets such as en ineers, operators, customer service representatives and sales staff. $he time la between the arrival of the replenishment and the time the order was placed. $he total flow unit re!uirement durin replenishment lead time. A production schedule where small !uantities of different products are produced fre!uently to match with customer demand% also called Hei unka. $he maintenance of a constant processin rate when demand fluctuates seasonally and thus the buildin of inventories in periods of low demand and the depletin of inventories when demand is hi h. $he law that describes the relationship amon the three performance measures. (t states that average inventory e!uals average throughput times average flow time. $he phenomenon of a resource processin several flow units simultaneously% the number of units processed simultaneously is called the load batch. $he number of units processed consecutively after a setup. Also called setup batch. 'ower ran e of the control limits.

@ai.en @anban

'abor 'ead time 'ead time demand 'evel production

'evel-production strate y 'ittle4s 'aw

'oad batchin

'ot si.e 'ower 1ontrol 'imit +'1',

8 'ower )pecification +'), 9a&e-to-order 9a&e-to-stoc& 9anufacturin 9ar inal analysis 9ar&et-driven strate y 9ass production 9aterial *e!uirements Plannin +9*P, 9ulti-vari chart Aet availability of a resource Aet mar inal benefit Aet mar inal cost Aet present value 'ower ran e of acceptable performance. Produce in response to customer orders. Produce in anticipation of customer orders. $he process of producin oods. Also called product operations.

$he process of comparin e#pected costs and benefits of purchasin each incremental unit. 5ne of two approaches to strate ic fit wherein a firm starts with &ey competitive priorities and then develops processes to support them. +$he other approach to strate ic fit is process-driven strategy." $he production of products in lar e +massive, !uantities. A plannin tool usin which the end-product demand forecasts are /e#ploded; bac&wards to determine parts re!uirements at intermediate stations, based on the product structure +/bills of materials;,, processin lead times, and levels of inventories at those stations. A plot of hi h, avera e, and low values of performance measurement sampled over time. $he actual time durin which a resource is available for processin flow units% $he difference between the scheduled availability and resource availability loss of a resource unit. $he difference between the unit price of the product and unit mar inal cost of procurement $he difference between unit mar inal cost of procurement and its salva e value. A measure of e#pected a re ate monetary ain or loss that is computed by discountin all e#pected future cash inflows and outflows to their present value. Process activities lin&ed so that the output of one becomes an input into another, often throu h an intermediate buffer. A basic model of decision ma&in under uncertainty whereby the decision ma&er balances the e#pected costs of orderin too much with the e#pected costs of orderin too little to determine the optimal order !uantity

Aetwor& of activities and buffers Aewsvendor problem

B Aon-value-addin activities Aormal variability 5n-order inventory 5perational effectiveness 5perations 5perations frontier 5perations strate y Activities that are re!uired by a firm4s process that do not directly increase the value of a flow unit. )tatistically predictable variability. (t includes both structural variability and stochastic variability. $he inventory represented by outstandin orders not yet delivered. $he measure of how well a firm mana es its processes. -usiness processes that desi n, produce and deliver oods and services. A measure of a firm4s product offerin s in the competitive product spaceC the smallest curve that contains all industry positions. $he aspect of strate ic plannin that confi ures and develops business processes that best enable a firm to produce and deliver the products specified by the business strate y. $he for one return on the funds invested in inventory rather than in alternative pro:ects. Any tan ible or intan ible items that flow from the process bac& into the environment. 0#amples include finished products, processed information, material, ener y, cash, and satisfied customers. An inventory classification% processed flow units that have not yet e#ited process boundaries A bar chart that plots fre!uencies of problem-type occurrence in decreasin order. $he consolidation of all of a firm4s stoc& into one location from which it services all customers. $he out-of-poc&et e#pense of storin inventory A cate ory of in-process inventory% flow units bein transported. Also called in-transit inventory. A tool to implement continuous improvement, it involves plannin the process, operatin it, inspectin its output, and ad:ustin it in li ht of the observation. Any sin ly owned, independently mana ed and operated facility, such as a manufacturin site, a service unit, or a stora e warehouse.

5pportunity cost 5utputs

5utputs inventory Pareto chart Physical centrali.ation Physical holdin cost Pipeline inventory Plan-7o-1hec&-Act +P71A, cycle Plant

10 Plant-within-a-plant +PDP, Po&a Eo&e Poolin capacity Poolin inventory Postponement Precedence relationships Preventive maintenance Process Process capacity Process control A plant in which the entire facility is divided into several /mini-plants,; each devoted to its own specific mission by performin a process that focuses strictly on that mission. 9ista&e Proofin . 7esi n of a part, product, or a process that prevents mista&es its user from ma&in a mista&e. $he sharin of available capacity amon various sources of demand +or arrivals,. $he sharin of available inventory amon various sources of demand. A strate y in which part of a process is delayed in order to reduce the need for safety inventory. Also called delayed differentiation. $he se!uential relationships that determine which activity must be finished before another can be in. )cheduled maintenance activities for resources. Any or ani.ation or any part of an or ani.ation that transforms inputs into outputs. $he ma#imum sustainable flow rate of a process% the ability of a process to meet customer specifications. $he aspect of process mana ement that is focused on continually ensurin that in the short run, the actual process performance conforms to the planned performance. $he total cost incurred in producin and deliverin outputs. $he system of selectin the process architecture that best develops the competencies that will meet customer e#pectations. Process performance measured in terms of total processin cost. $he ability of the process to produce and deliver desired product variety. A raphical representation of a process that identifies the inputs, outputs, flow units, networ& of activities and buffers, resources allocated to activities, and information structure. A set of mana erial policies that specifies how a process should be operated over time and which resources should be allocated over time to

Process cost Process desi n Process efficiency Process fle#ibility Process flow chart

Process flow mana ement

11 the activities. Process flow measures Process flow time Process layout (nternal measures of process performance that mana ers can control. $o ether, these measures -- flow time, flow rate and inventory F capture the essence of process flow. $he total time needed to transform a flow unit from input to output. Also see flow time. A type of process desi n that roups or ani.ational resources by processin activity or /function; in /departments.; Also called functional layout. (dentifyin internal measures that trac& process competence and specifyin the mana erial policies that improve process competence alon desired dimensions. $he ability of the process to produce and deliver !uality products. $he ability of the process to meet customer demand in terms of their !uantity, time, !uality, and location re!uirements. 5ne of two approaches to strate ic fit wherein a firm starts with a iven set of process competencies and then identifies which mar&et position is best supported by those processes. +$he other approach to strate ic fit is market-driven strategy." A system that consists of information and material flows of multiple products throu h a se!uence of interconnected paths $he rate at which customers are processed by a server% also called service rate. $he avera e time re!uired by a server to process a customer% also called activity time A batch size arisin in procurement. $he properties of a product that customers consider important. $he total cost that a customer incurs in order to own and e#perience the product. $he total time that a customer must wait before receivin a product for which heGshe has e#pressed a need to the provider. A type of process desi n in which the location of resources is dictated

Process plannin

Process !uality Process synchroni.ation Process-driven strate y

Processin networ& Processin rate Processin time Procurement batch Product attributes Product cost Product delivery response time Product layout

12 by the processin re!uirements of the product. Product !uality Product speciali.ation $he de ree of e#cellence of a product% how well a product performs. A process and or ani.ational structure where people are speciali.ed by product, meanin each individual is dedicated to a specific product-line. +$he other or ani.ational structure is process- or functional specialization., $he price a specific customer is willin to pay for a product. $he ran e of choices offered to the customer to meet her needs. A batch size arisin in production. $he choice between manufacturin oods with hi her variety at a lower rate of productivity or manufacturin oods with low variety at a hi her rate of productivity. A tool used to match processes to products proposed by =ayes and Dheelwri ht +1B?B,. $he number of customers who enter the process but abandon it before bein served. $he avera e fraction of arrivals bloc&ed from enterin the process because the input buffer is full. A process where the si nal to produce is tri ered by the customer so that each station produces only on demand from its customer station. A process where input availability, as opposed to customer need, tri ers production. A conceptual framewor& that can be used to translate customers4 functional re!uirements of a product into concrete desi n specifications. =ow well the actual product conforms to the chosen desi n specifications. =ow well product specifications aim to meet customer re!uirements. A formula for the avera e !ueue len th as a function of the utili.ation, number of servers, and variability. $he reward that an investor demands for acceptin payment delayed by one period of time.

Product value Product variety Production batch Productivity dilemma

Product-process matri# Proportion abandonin Proportion bloc&ed Pull Push Huality function deployment +H27, Huality of conformance Huality of desi n Hueue len th formula *ate of return

13 *een ineerin 2undamental rethin&in and radical redesi n of business processes in order to achieve dramatic improvements in critical contemporary measures of performance such as cost, !uality, service and speed.

*eorder point *esource availability loss *esource brea&down *esource idleness

$he available inventory at the time a reorder is placed. A cate ory of factors that affect process capacity in which the resource itself is not available for processin . $he unavailability of a resource for processin due to e!uipment malfunctionin or wor&er absenteeism. A cate ory of factors that affect process capacity in which the resource is available but is not processin units. 0#amples of factors include starvation and bloc&a e. A collection of interchan eable resources that can perform an identical set of activities. 9a&in separate resource pools fle#ible to handle tas&s performed by each other. 0ach unit in a resource pool. $an ible assets that help transform inputs to outputs in a process. $hey are usually divided into two cate oriesC capital, which includes fi#ed assets such as land, buildin , facilities, e!uipment, machines, and information systems% and labor, which includes people such as en ineers, operators, customer service representatives, and sales staff. A common financial measure that shows how well a firm uses its assets to earn income for the sta&eholders who are financin it. $he desi nin of a product in such a way that its actual performance will not suffer despite any variability in the production process or in the customer4s operatin environment. A plot of some measure of process performance monitored over time. $he e#cess processin capacity available to handle customer inflows. (nventories maintained to insulate the process 2rom disruptions in supply or uncertainty in demand. Also called safety stock. (nventories of inputs maintained to insulate the process and continue operation despite supply shorta es. Also called safety inventories.

*esource pool *esource poolin *esource unit *esources

*eturn on total assets *obust desi n

*un chart )afety capacity )afety inventories )afety stoc&

16 )afety time $he time mar in that should be allowed over and above the e#pected time to deliver service, in order to ensure that a firm will be able to meet the promised date. A raph showin how a controllable process variable affects the resultin product characteristic. $he amount of time that a resource unit is scheduled for operation. (nventories that act as buffers to absorb seasonal fluctuations of supply and demand. $he se!uence in which waitin customers are served. Processes that deliver services. )ee processin rate. $he cleanin , resettin , or retoolin of e!uipment in order for it to process a different product. Also called changeover. $he number of units processed consecutively after a setup. Also called lot size.. A system by which the chan eover times can be reduced to less than 10 minutes. A service process in which each customer is processed by one server and all tas&s performed by that server are combined into a sin le activity. A process that produces only 2 defective units per billion produced. $he e#tent to which an activity could be delayed without affectin process flow time. $he law states that the total safety inventory re!uired to provide a specified level of service increases by the s!uare root of the number of locations in which it is held. (t is the re!uirement that the avera e inflow rate should be strictly less than the avera e processin rate to ensure a stable process. (t is necessary to limit delays or !ueues. A process in which, in the lon run, the avera e inflow rate is the same

)catter plot )cheduled availability )easonal inventories )erver order discipline )ervice operations )ervice rate )etup )etup batch )in le 9inute 0#chan e of 7ie +)907, )in le-phase service process )i# )i ma )lac& time of an activity )!uare root law

)tability condition

)table process

18 as the avera e outflow rate. )tarvation )tatistical !uality control )tochastic variability )trate ic fit $he forced idleness of resources due to the unavailability of necessary inputs. A mana ement approach that relies on samplin of flow units and statistical theory to ensure the !uality of the process. $he unpredictable or random variability e#perienced by service processes. =avin consistency between the competitive advanta e that a firm see&s and the process architecture and mana erial policies that it uses to achieve that advanta e. Activities that are e#ploded into a set of sub-activities that is then considered a process in its own ri ht, with its own set of inputs, outputs, activities, etc. An entire networ& of interconnected facilities of diverse ownership with flows of information and materials between them. (t can include raw materials suppliers, finished oods producers, wholesalers, distributors, and retailers. A resource pools with minimum theoretical capacity. $he theoretical capacity of the theoretical bottlenec&. $he sum of the theoretical capacities of all the resource units in that pool. $he ma#imum sustainable flow rate of the resource unit if it were fully utili.ed +without idle periods, resource availability loss and time lost to setups,. $he minimum amount of time re!uired for processin a typical flow unit without any waitin . $he minimum amount of inventory necessary to maintain a process throu hput rate in e!uilibrium. $he avera e number of flow units that flow throu h +into and out of, the process per unit over time. Also called average flow rate. A raph displayin the avera e flow time of a process as a function of capacity utili.ation.

)ub-process

)upply chain

$heoretical bottlenec& $heoretical capacity of a process $heoretical capacity of a resource pool $heoretical capacity of a resource unit $heoretical flow time $heoretical inventory $hrou hput $hrou hput delay curve

1< $ime-series analyses $rade promotion $rade-off $ransfer batch $urnover ratio $ype ( 0rror $ype (( 0rror "nit load of a resource unit "pper 1ontrol 'imit +'1', "pper )pecification +"), Ialue-addin activities Iendor 9ana ed (nventory +I9(, Iirtual centrali.ation 2orecastin methods that rely solely on past data. A form of price discount wherein a discount is offered for only a short period of time. 5n the operations frontier, a decreasin of one aspect to increase another. A batch size arisin in transportation or movement. $he ratio of throu hput to avera e inventory. (t is the reciprocal avera e of flow time. Also called inventory turns. A situation when process performance falls outside the control band even with normal variability. A situation when process performance measure falls within the control band, even thou h there is an assi nable cause of abnormal variability. $he amount of time re!uired by the resource to process each flow unit. "pper ran e of the control limits. "pper ran e of acceptable performance. $hose activities that increase the economic value of a flow unit because the customer values them. A partnership pro ram under which the supplier decides the inventory levels to be maintained at its customer locations and arran es for replenishments to maintain these levels. A system in which inventory poolin in a networ& of locations is facilitated usin information re ardin availability of oods and subse!uent transshipment of oods between locations to satisfy demand. $he failure to match customer demand most economically by, for e#ample, producin inefficiently, producin defective products, producin in !uantities too lar e or too small, and deliverin products too early or too late. $he activity time multiplied by the avera e number of visits at that activity. (t measures the total amount of time re!uired to perform an activity durin the transformation of a flow unit.

Daste

Dor& content of an activity

1? Dor&-in-process inventory A cate ory of in-process inventory% flow units bein processed in a manufacturin or service operation.