CANNIBALIZATION: Cannibalization refers to the notion of a company making a conscious business decision that will have a negative impact

on either a current product or member of a distribution channel (or entire channel, via disintermediation). This type of decision is typically designed to allow the company to survive in the long-term, and avoid having its products challenged by competitors products as technology progresses. PRODUCT BUILDING !roduct "undling refers to the bundling together of more than one product for a sale. This is very common for digital products, where the marginal costs of each product is very low. #f most of the marginal cost is associated with packaging and distribution, this is further reduced when the products are bundled together, as they share the same costs of packaging and distribution. Thus the incremental cost to the firm (i.e. $icrosoft%) for bundling together additional software products is very small (actually zero aside from any opportunity cost). Thus a suite of products may allow for greater market penetration into different software markets than if the software was sold separately. &or software that is not currently used by the consumer, but is purchased through a bundled package, it works to lock-in the consumer once he'she decides to use that category of software. Thus bundled software can ensure strong market positions across multiple markets. (hile product bundling is a regular phenomena for software and related products, product unbundling may occur in the traditional content provider markets as microtransactions can provide payment options for smaller increments of the product. Thus rather than having to buy an entire C) (a bundling of different song titles, mostly of little relevance to each other) the consumer may be able to pay for a single song title, unbundled.

BRAND * brand is a product from a known source (organization). The name of the organization can also serve as a brand. The brand value reflects how a product s name, or company name, is perceived by the marketplace, whether that is a target audience for a product or the marketplace in general (clearly these can have different meanings and therefore different values). #t is important to understand the meaning and the value of the brand (for each target audience) in order to develop an effective marketing mi+, for each target audience. ADVERTISING: *),-.T#/#01 is a paid form of communicating a message by the use of various media. #t is persuasive, informative, and designed to influence purchasing behavior or thought patterns.

BARTERING: "*.T-.#01 is a system of trading goods and services for advertising time or space. &or e+ample, a hotel might trade-out the value of one or two nights stay to the newspaper in return for the same value in advertising space. BENCHMARKS: "-0C3$*.4/ are standards or averages by which similar items ca !e c"m#are$. CONTE%TUAL MARKETING: C50T-6T7*8 $*.4-T#01 is marketing that occurs in the conte+t of when a person is more likely to be interested in the product'industry. Thus, a page sponsorship can be considered conte+tual, as the viewer has elected to view the page, and assuming the sponsorship is for a product that is related to the content of the page, the product has the right conte+t (the viewer self-selected to view the content). Te+t advertisements that are relevant to the content of the web page they appear are another e+ample of conte+tual marketing. Conte+tual $arketing will also become more evident with the evolution of wireless marketing (m-commerce). (ireless marketing will take advantage of knowing where the consumer is located using 1!/. This can then translate into marketing messages that have direct relevance to the consumer as the messages relate to the conte+t of the consumer at the point in time they are being delivered. COOPERATIVE ADVERTISING: C55!-.*T#,- *),-.T#/#01 (co-op advertising) is an arrangement between manufacturer and retailer to reimburse the retailer in full or in part for local placement of manufacturer-produced ads and commercials. These ads would include the addition of the retailer s name in the copy. Co-op advertising might also mean a 9oint effort between two or more businesses to pool advertising money for more buying power. The ads would feature both company names and benefits. CPT: C!T (cost per thousand) divides the cost of an advertising medium by the number of persons in the target audience who are reached by the medium. DEMOGRAPHICS: )-$51.*!3#C/ are the physical characteristics of a population such as age, se+, marital status, family size, education, geographic location, and occupation.

LOGO: 8515 is a uni;ue symbol or design that represents a company. *lso called, a trademark.

MARKETING: $*.4-T#01 includes identifying unmet needs< producing products and services to meet those needs= and pricing, distributing, and promoting those products and services to produce a profit. MARKETING MI% & NICHE: $*.4-T#01 $#6 includes a combination of product, packaging, price, channels of distribution, advertising, promotion, and personal selling to get the product in the hands of the customer. $*.4-T 0#C3- is the uni;ue advantage or benefit a product or service offers a particular group of customers. $arketing success is dependent upon establishing how a product stands out from similar ones. MEDIA: $-)#* (singular medium) are the print (newspaper, magazines, etc.) and electronic (radio and television) communication devices used for advertising. POSITIONING: !5/#T#50#01 is the attempt to control the public s perception of a product or service as it relates to competitive products. PUBLIC RELATIONS: !7"8#C .-8*T#50/ is a form of communication primarily directed tiward gaining public understanding and acceptance. !ublic relations usually deals with issues rather than products or services, and is used to build goodwill with public or employeess. -+amples of public relations are employee training, support of charitable events, or a news release about some positive community participation.

PURCHASE C'CLES:

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!7.C3*/- C?C8-/ are the time periods between purchases of a product, which is important in estimating product or service demand. TARGET MARKET: Target $arket is the specific group of customers that a company aims to capture. They have been identified as people with needs or wants that can be met with the products or services from this company. TEST MARKETING: Test $arketing is a limited introduction of a product or service to test public reaction for a full market strategy. 1iving the public a small sample of what is to be offered is a form of test marketing. OUTSOURCING: !aying another company to provide services which a company might otherwise have employed its own staff to perform, e.g. software development. (2@@A-B>-:C) AVERAGE COST: The average cost of a unit of product is made up of its fi+ed costs'Dunits produced, and the variable cost per unit. (ith digital products, where the variable costs are very small (and in some instances zero) the average cost of the product declines as more units are produced and sold. Thus the market leader for a product typically has the lowest average costs per unit. This allows the leader to have increased margins, and increased fle+ibility to lower price. This is one of the reasons why first-mover advantage can be so important. BREAK EVEN ANAL'SIS: "reak -ven *nalysis refers to the calculation to determine how much product a company must sell in order to break even on that product. #t is an effective analysis to measure the impact of different marketing decisions. #t can focus on the product, or incremental changes to the product to determine the potential outcomes of marketing tactics. The formula for a break even analysis is= "reak even point (E) F (Total &i+ed Costs G Total ,ariable Costs). Total ,ariable Costs F ,ariable cost per unit + units sold 7nit contribution (contribution margin) F !rice per unit - ,ariable cost per unit. (hen looking at making a change to the marketing program, one can calculate the incremental break even volume, to determine the merits of the change. This determines the re;uired volume needed such that there is no effect to the company due to the change.

#f making changes to fi+ed costs (changing advertising e+penditure etc.)= #ncremental break even volume F change in e+penditure ' unit contribution. Thus if a company increased its advertising e+penditure by E2 million, and its unit contribution for the specific product is E:B, then the company would need to sell an additional AB,BBB units to break even on the decision. #f making changes to the unit contribution (change in price, or variable costs)= #ncremental break even volume F (5ld 7nit ,olume + (5ld 7nit Contribution - 0ew 7nit Contribution)) ' 0ew 7nit Contribution Thus if a company increased its price from E2A to E:B, and had variable costs of E2B, it is increasing its unit contribution from EA to E2B, assume also an old unit volume of 2 million. #t could therefore reduce its volume by ABB,BBB to break even on the decision. (hen making changes to a specific product, cannibalization of other products may occur. To calculate the effect of cannibalization, the "reak -ven Cannibalization rate for a change in a product is= 0ew !roduct 7nit Contribution ' 5ld !roduct 7nit Contribution. 0ew !roduct is the planned addition to a product line (or change to a product within a product line), 5ld !roduct is the product that loses sales to the new product (or the product line that loses sales). The cannibalization rate refers to the percentage of new product that would have gone to the old product, this must be lower than the break even cannibalization rate in order for the change to be profitable. (I%ED COSTS: &i+ed costs refer to the costs associated with a product, that are fi+ed over a number of units. Thus regardless of the number of units produced and sold, the fi+ed costs remain the same. -+amples of fi+ed costs are rent on e;uipment, utility costs, and research and development costs. (ith digital products, much of the fi+ed costs are actually sunk costs, and therefore non-recoverable costs. * large portion of the costs associated with digital products are fi+ed, and sunk, and not variable costs, which are more typical of traditional manufactured goods. "reak even analysis, which is a tool that determines the volume at which a company must sell a product in order to break even, distinguishes between fi+ed and variable costs in its calculations. SUNK COSTS: /unk costs refer to costs that are non-recoverable fi+ed costs. )igital products usually have significant sunk costs (when compared to other fi+ed costs) in the form of research I development and intellectual property (patents etc.) for the product. #f the product is not successful in the marketplace, the costs associated with the the product development (intellectual property, labor) cannot be recovered. Thus when making pricing decisions about the product in the future, one should not factor in the sunk costs. #f a product s cost structure is made up of sunk costs (no other fi+ed costs) and zero marginal costs then any price above zero will contribute to the company s bottom line. 5ther fi+ed costs, that are not sunk (rent, depreciation on e;uipment etc.) should be factored in when making

pricing decisions in the future, since these are ongoing costs to the company. The company will continue to have to pay these costs in the future, this is not the case for sunkcosts. The development of the 0etscape browser is a good e+ample of a product whose cost structure was comprised primarily of sunk costs. .egardless of the success of the product in the market, the ma9or parts of the costs were already e+pended (product development). This enabled 0etscape tremendous fle+ibility as it used its web site to allow users to download the product for free (actually it was not free, but 0etscape did not pursue individual consumers for sales revenue). The only type of cost this presented to 0etscape was the opportunity costs of lost sales from those who downloaded the browser for free. These free downloads enabled 0etscape to build market share ;uickly, thus establishing first mover advantage and significant market leadership (for a short time%) *nother e+ample of a sunk cost is the cost of a seat on an airplane to the airline. The Cost of an airline seat is primarily fi+ed and sunk (as long as one assumes the flight was going to take place regardless of whether the seat was sold) with a small portion attributed to variable costs if one considers the food and beverage service. Thus it makes sense for the airline to develop a pricing structure designed to ma+imize the revenue of the aircraft during a flight. They can do this by changing their pricing depending on the demand for a particular flight, and by offering additional benefits to their fre;uent flyers (to upgrade etc. course # am writing this on an airplane%) -ssentially, as long as the price of a seat covers the variable cost of the seat, its revenue will contribute to the bottom line of the airline. This assumes opportunity costs are not a factor. BARRIER TO ENTR': "arrier to -ntry refers to the costs incurred for a new entrant to enter a marketplace. -+amples include fi+ed costs such as the development of a factory (for traditional manufactured goods), branding and lock-in established by current competitors in the form of switching costs. "arriers to entry can also refer to any JhiddenJ cost established to reduce freedom of choice. Thus traditional retailing environments, that rely on geography as a competitive advantage, are building barriers to entry to those not in close pro+imity to their customer base. ECONOMIES O( SCALE: -conomies of scale refers to the notion of increasing efficiencies of the production of goods as the number of goods being produced increases. Typically the average costs of producing a good will diminish as each additional good is produced, since the fi+ed costs are shared over an increasing number of goods. )ue to economies of scale, larger companies have greater access to markets in terms of selecting media to access those markets, and can operate with larger geographic reach.

&or traditional companies, size does have its limits, where additional size actually increases costs to companies (impacts communications costs etc., diminishing returns). Thus many industries tend to operate more effectively in an oligopolistic fashion, with few large firms, rather than one monopolist. (This should occur even if the government allowed monopolists and monopolists behaved legally). )igital companies tend not to suffer from this size limitation. OPPORTUNIT' COSTS: 5pportunity costs refer to the costs associated with giving up an opportunity. They are relevant in the marketing of digital products when one considers the value lost to the company when giving away a product for free. /ince digital goods primarily consist of fi+ed costs and often have zero marginal costs then marketing strategy often dictates to give-away a version of the product to encourage consumers to upgrade at a later time (assuming lock-in etc.) The only cost incurred here would be the opportunity cost of the lost revenue from the consumers that would have paid for this version of the product in the first place. To avoid this situation, companies typically segment their markets, and offer a free product, with limited functionality (and no customer support or documentation) to a casual user group, and an upgraded version, at a price, with customer support etc. to a more sophisticated customer. The company will hope the casual user will upgrade to the upgraded version as they become more sophisticated users and more reliant on the product. They also assume the sophisticated user will not be satisfied with the free version, due to its lack of functionality. CONTRIBUTION MARGINS: Contribution margin (or margins) refer to the amount of revenue per product that is available to JcontributeJ towards the fi+ed costs and the profit of the company. /ince, for digital products, the variable costs are typically very small, or zero, most of the revenue earned from the sale of a product form the contribution margin. *ssuming the contribution margin (unit price - unit variable cost) L B, then the product is worth marketing, since the fi+ed costs are sunk. This also assumes the product does not cannibalize sales from another product in the product line, if so, the opportunity costs need to be considered. REVERSE PRICING MODEL: .everse !ricing $odel refers to a model that allows the consumer to establish his'her re;uirements and offer those re;uirements for bid by the seller. Thus rather than the seller marketing a product to the buyer, the reverse is occuring. !riceline has pioneered this model in the consumer marketplace, using airline tickets as the product. This model further reflects the changing power in the market from the supplier to the consumer. (hen this model can be effectively combined with the group buying model one can envision powerful groups of buyers creating interesting demands on companies. AUCTION PRICING S'STEM:

7sing an auction pricing system, sellers are not constrained by having to fi+ a price without knowing what the market will bare (traditional pricing methodology). #f a seller sets a price too low, using a classified advertisement for e+ample, the demand will be high and the product will be purchased. The seller, however, will not get the most revenue the market would have paid, if the buyers had had to compete for the purchase. The buyer who wanted the product most (willing to pay the highest price) would not automatically receive the product. Conversely, if the seller advertises too high a price, using a classified adversitement, the product will not sell. "y allowing buyers to bid up the price from a low price point, the product will sell to the highest bidder (assuming it clears a minimum asking price). The auction pricing system is a dynamic pricing model, much like the reverse pricing model. 1ame Theory can impact the strategies involved in setting a starting price (for the seller) and bidding strategies for the buyers. D'NAMIC PRICING: )ynamic !ricing refers to a fluid pricing scheme between the buyer and seller, rather than the more traditional (and more recent, over the last 2BB years) fi+ed pricing. )ynamic pricing is a legacy from the past, that has losts its significance with the advent of the industrial revolution and mass marketing and mass communication. "efore the industrial revolution, most trade occured in markets, with many buyers and sellers bartering for goods. Current, and evolving models for dynamic pricing include the auction pricing system, group pricing system and reverse pricing system. Typically these systems will better reflect the true market value of the product involved, but also re;uire additional work on the part of the purchaser. These systems will evolve more rapidly when better standards are established and when intelligent agents evolve. 0ot all markets will be served well with a dynamic pricing model. DE )act" sta $ar$: * widespread consensus on a particular product or NprotocolO which has not been ratified by any official NstandardOs body, such as N#/5O, but which nevertheless has a large market share. The archetypal e+ample of a de facto standard is the N#"$ !CO which, despite is many glaring technical deficiencies, has gained such a large share of the Npersonal computerO market that it is now popular simply because it is popular and therefore en9oys fierce competition in pricing and software development. (2@@H-2B-:M) (irst M"*er A$*a ta+e De)i iti" The &irst-$over *dvantage refers to the advantage gained by the first company that enters a certain market. This advantage is e+acerbated for digital products and markets. There are a number of reasons this advantage e+ists. * company that is able to increase sales ;uickly is able to reduce the average cost of the product, over other competitors. This allows the first company to have more fle+ibility with pricing, either reducing the price to make it less attractive for new entrants (increasing barriers to entry) or increasing

the margin and therefore profit while prices remain fi+ed, this additional profit can then be used for further innovation. The first-mover can also take advantage of the learning curve effect. &irst-mover advantage can be further successful if the company is able to achieve lock-in of its installed-base. Thus once lock-in occurs, it is more difficult for other marketers to attract those customers away from the first marketer. &irst-mover advantage is not always sustainable, and $icrosoft has been very effective at being the second company in many markets, and subse;uently dominating those markets. * simple e+ample of this was the 0etscape s browser vs. $icrosoft s #nternet -+plorer. 0etscape was the first-mover, gaining upwards of @BP market-share, but was not able to sustain its position with the onslaught of $icrosoft. 0etscape did not establish *0? lock-in, either due to the user interface, or proprietary functionality and both products were essentially being given away, so there was no price advantage. $icrosoft is clearly positioned to give a product away for the long-term to gain market share. ISO,-..//0 The #nternational /tandards 5rganization (#/5) specification 2MM@@ provides a baseline for information security management. $any organizations utilize the #/5 2MM@@ standard as guidelines for developing their own policies. 0umerous regulations utilize the #/5 framework as the basis for their own logical and technological control re;uirements. ERP: (-.!) *ny NsoftwareO system designed to support and automate the business processes of medium and large businesses. This may include manufacturing, distribution, personnel, pro9ect management, payroll, and financials. -.! systems are accountingoriented information systems for identifying and planning the NenterpriseO-wide resources needed to take, make, distribute, and account for customer orders. -.! systems were originally e+tensions of N$.! ##O systems, but have since widened their scope. *n -.! system also differs from the typical $.! ## system in technical re;uirements such as Nrelational databaseO, use of Nob9ect oriented programmingO language, Ncomputer aided software engineeringO tools in development, Nclient'serverO NarchitectureO, and Nopen systemO NportabilityO. NQ"5!/O are the ma9or producers of -.! software. Ma 1)act1rer Res"1rce Pla i +:

($.! ##) * system based on N$.!O which allows manufacturers to optimise materials, procurement, manufacturing processes, etc., and provide financial and planning reports. #n the late 2@MBs and early 2@CBs, manufacturers integrated $.! and other manufacturing and business functions. This renaissance is commonly known as $anufacturing .esource !lanning ($.! ##). *ccording to the *merican !roduction and #nventory Control /ociety, #nc. (*!#C/), $.! ## is a method for the effective planning of all resources of a manufacturing company. #deally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer Jwhat ifJ

;uestions. #t includes business planning, sales and operations planning, production scheduling, material re;uirements planning ($.!), capacity re;uirements planning, and the e+ecution support systems for capacity and material. 5utput from these systems is integrated with financial reports such as the business plan, purchase commitment report, shipping budget, and inventory pro9ections in dollars. $anufacturing resource planning is a direct outgrowth and e+tension of closed-loop $.!. /ee also N-nterprise .esource !lanningO, N/*!O .':, .'>, and N"aanO. (2@@@-B:-2K) Electr" ic (1 $s Tra s)er P"i t ") Sale: * method of electronic payment which allows money to be transferred from the account of the shopper to the merchant in close-to real-time. 1enerally the shopper will give the merchant a credit or debit card, which will be swiped to obtain the account information. The shopper will then be re;uired to either sign a receipt or enter a N!#0O via a keypad to authorise the transaction. (:BB>-BK-::) EDI: (-)#) The e+change of standardised document forms between computer systems for business use. -)# is part of Nelectronic commerceO. -)# is most often used between different companies (Jtrading partnersJ) and uses some variation of the N*0/# 62:O NstandardO (7/*) or N-)#&*CTO (70 sponsored global standard). RN-lectronic Commerce )ictionaryOS. (2@@A-2B-BK) DBMS: ()"$/) * suite of programs which typically manage large structured sets of persistent data, offering ad hoc ;uery facilities to many users. They are widely used in business applications. * database management system ()"$/) can be an e+tremely comple+ set of software programs that controls the organisation, storage and retrieval of data (fields, records and files) in a database. #t also controls the security and integrity of the database. The )"$/ accepts re;uests for data from the application program and instructs the operating system to transfer the appropriate data. (hen a )"$/ is used, information systems can be changed much more easily as the organisation s information re;uirements change. 0ew categories of data can be added to the database without disruption to the e+isting system. )ata security prevents unauthorised users from viewing or updating the database. 7sing passwords, users are allowed access to the entire database or subsets of the database, called subschemas (pronounced Jsub-skeemaJ). &or e+ample, an employee database can contain all the data about an individual employee, but one group of users may be authorised to view only payroll data, while others are allowed access to only work history and medical data. The )"$/ can maintain the integrity of the database by not allowing more than one user to update the same record at the same time. The )"$/ can keep duplicate records out of the database< for e+ample, no two customers with the same customer numbers (key fields) can be entered into the database. NTuery languagesO and Nreport writersO allow users to interactively interrogate the database and analyse its data. #f the )"$/ provides a way to interactively enter and update the database, as well

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as interrogate it, this capability allows for managing personal databases. 3owever, it may not leave an audit trail of actions or provide the kinds of controls necessary in a multiuser organisation. These controls are only available when a set of application programs are customised for each data entry and updating function. * business information system is made up of sub9ects (customers, employees, vendors, etc.) and activities (orders, payments, purchases, etc.). )atabase design is the process of deciding how to organize this data into record types and how the record types will relate to each other. The )"$/ should mirror the organisation s data structure and process transactions efficiently. 5rganisations may use one kind of )"$/ for daily transaction processing and then move the detail onto another computer that uses another )"$/ better suited for random in;uiries and analysis. 5verall systems design decisions are performed by data administrators and systems analysts. )etailed database design is performed by database administrators. The three most common organisations are the Nhierarchical databaseO, Nnetwork databaseO and Nrelational databaseO. * database management system may provide one, two or all three methods. #nverted lists and other methods are also used. The most suitable structure depends on the application and on the transaction rate and the number of in;uiries that will be made. )atabase machines are specially designed computers that hold the actual databases and run only the )"$/ and related software. Connected to one or more mainframes via a high-speed channel, database machines are used in large volume transaction processing environments. )atabase machines have a large number of )"$/ functions built into the hardware and also provide special techni;ues for accessing the disks containing the databases, such as using multiple processors concurrently for high-speed searches. The world of information is made up of data, te+t, pictures and voice. $any )"$/s manage te+t as well as data, but very few manage both with e;ual proficiency. Throughout the 2@@Bs, as storage capacities continue to increase, )"$/s will begin to integrate all forms of information. -ventually, it will be common for a database to handle data, te+t, graphics, voice and video with the same ease as today s systems handle data. /ee also= Nintelligent databaseO. DSD: * NdatabaseO from which data is e+tracted and analysed statistically (but not modified) in order to inform business or other decisions. This is in contrast to an Noperational databaseO which is being continuously updated. &or e+ample, a decision support database might provide data to determine the average salary of different types of workers, whereas an operational database containing the same data would be used to calculate pay check amounts. 5ften, decision support data is e+tracted from operation databases. B1si ess A##licati" Pr"+rammi + I ter)ace ("*!#) 'bap ee' * set of NmethodsO provided by an N/*!O business Nob9ectO. .elease H.B of N/*! *1O s N.'>O system supports Nob9ect-oriented programmingO via an interface defined in terms of Nob9ectsO and NmethodsO called "*!#s. &or e+ample if a material ob9ect provides a function to check availability, the corresponding /*! business ob9ect type J$aterialJ might provide a "*!# called J$aterial.Check*vailabilityJ. The definitions of /*! business ob9ects and their "*!#s are kept in an /*! business ob9ect

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repository. /*! provide NclassesO and NlibrariesO to enable a programming team to build /*! applications that use business ob9ects and "*!#s. /upported environments include NC5$O and NQavaO. The N5pen "*!# 0etwork (http=''www.sap.com'solutions'technology'bapis'inde+.htm)O. gives background information and lists ob9ects and "*!#s. (:BB:-BC->B) BACKO((ICE: * suite of network NserverO software from N$icrosoftO that includes N(indows 0TO /erver, "ack5ffice /erver (for the integrated development, deployment, and management of "ack5ffice applications in departments, branch offices, and medium sized businesses)< N-+change /erverO< N!ro+y /erverO< N/ite /erverO for NintranetO publishing, management, and search< /ite /erver Commerce -dition &or comprehensive N#nternet commerceO transactions< N/mall "usiness /erverO for business operations, resource management, and customer relations< N/0* /erverO for the integration of e+isting and new systems and data< N/T8 /erverO for scalable, reliable database and datawarehousing< N/ystems $anagement /erverO (/$/) for centralised change- and Nconfiguration-managementO. 8atest version= H.A, as of :BBB-2:-2K. N3ome (http=''www.microsoft.com'backofficeserver')O. (i a cial I )"rmati" e2c3a +e: (&#6) * NstandardO messaging NprotocolO for the Nreal-timeO electronic e+change of securities transactions. O##"rt1 it4 Ma a+eme t S4stem: (5$/) * system that stores sales opportunities and related information. -ach sales lead can be tracked with information such as source, type, worth, status, likelihood of closure etc. *n 5$/ can perform other related tasks such as prioritising sales calls and generating analyses that assist the fine-tuning of marketing strategies. /ee also NCustomer .elationship $anagementO. IBM: (#"$) The best known *merican computer manufacturer, founded by Thomas Q. (atson (born 2CMH-B:-2M), known as J"ig "lueJ after the colour of its logo. #"$ makes everything from NmainframesO to Npersonal computersO (!Cs) and has been immensely successful in selling them, chiefly to business. #t has often been said that J0obody has ever been sacked for buying #"$J. The N#"$ !CO in its various versions has been so successful that un;ualified reference to a J!CJ almost certainly means a !C from #"$, or one of the many brands of NcloneO produced by other manufacturers to cash in on #"$ s original success. *lternative e+pansions of J#"$J such as #nferior "ut $arketable< #t s "etter $anually< #nsidious "lack $agic< #t s "een $alfunctioning< #ncontinent "owel $ovement, illustrate the considerable antipathy most hackers have long felt toward the

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Jindustry leaderJ (see Nfear and loathingO). Tuarterly sales E2A>A2$, profits EKC@$ (*ug 2@@H). N3ome (http=''www.ibm.com')O.

IE: (#-, $/#-) N$icrosoftO s free N(orld-(ide (ebO NbrowserO for N$icrosoft (indowsO, N(indows @AO, N(indows 0TO, and N$acintoshO. #nternet -+plorer is the main rival to N0etscape 0avigatorO (which runs on many more NplatformsO). "oth support the same core features and offer incompatible e+tensions. $icrosoft combined later versions of #with their Nfile systemO browser, J-+plorerJ and bundled it with N(indows @AO in an attempt to use their dominance of the NdesktopO Noperating systemO market to force users to abandon 0etscape s browser, which they perceived as a potential threat. This, and other dubious business moves, became the sub9ect of a 7/ )epartment of Qustice antitrust trial in late 2@@C'early 2@@@. N3ome (http=''www.microsoft.com'ie')O. B1si ess Pr"cess Re5e +i eeri +: ("!.) *ny radical change in the way in which an organisation performs its business activities. "!. involves a fundamental re-think of the business processes followed by a redesign of business activities to enhance all or most of its critical measures - costs, ;uality of service, staff dynamics, etc. Asset ma a+eme t: The process whereby a large organisation collects and maintains a comprehensive list of the items it owns such as hardware and software. This data is used in connection with the financial aspects of ownership such as calculating the total cost of ownership, depreciation, licensing, maintenance, and insurance. CON(ERENCE CALLS: Conference calls are calls made between multiple parties either using a phone built for calling out on multiple lines or by using a Jmeet meJ or conferencing line where multiple partiescancallin. Conference calls are used widely by businesses to have virtual meetings. Conferencing e;uipment is built by multiple manufacturers. BANKRUPTC': * condition in which a business cannot meet its debt obligations and petitions a federal district court for either reorganization of its debts or li;uidation of its assets. #n the action the property of a debtor is taken over by a receiver or trustee in bankruptcy for the benefit

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of the creditors. This action is conducted as prescribed by the 0ational "ankruptcy *ct, and may be voluntary or involuntary. BAD DEBTS: &unds owing to a business which are determined to be uncollectible. ANNUAL RECEIPTS: .eceipts are averaged over a firm s latest > completed fiscal years to determine its average annual receipts. J.eceiptsJ means the firm s gross or total income, plus cost of goods sold, as defined by or reported on the firm s &ederal #ncome Ta+ return. The term does not include, however, net capital gains or losses, nor ta+es collected for and remitted to a ta+ing authority if included in gross or total income. The firm may not deduct income ta+es, property ta+es, cost of materials or funds paid to subcontractors. Travel, real estate and advertising agents, providers of conference management services, freight forwarders and customs brokers may deduct amounts they collect on behalf of another. #f a firm has not been in business for > years, the average weekly receipts for the number of weeks the firm has been in business is multiplied by A: to determine its average annual receipts. ACCOUNTS PA'ABLE: Trade accounts of businesses representing obligations to pay for goods and services received 678 L"a Pr"+ram: Typically, a ABH pro9ect includes a loan secured with a senior lien from a private-sector lender covering up to AB percent of the pro9ect cost, a loan secured with a 9unior lien from the Certified )evelopment Company (C)C) (backed by a 2BB percent /"*-guaranteed debenture) covering up to HB percent of the cost, and a contribution of at least 2B percent e;uity from the small business being helped. The ma+imum /"* debenture is E2,BBB,BBB for meeting the 9ob creation criteria or a community development goal. 1enerally, a business must create or retain one 9ob for every E>A,BBB provided by the /"*. The ma+imum /"* debenture is E2.> million for meeting a public policy goal. Ve t1re Ca#ital De)i iti" The ,enture Capital (,C) #ndustry is a ma9or source of funding for the entrepreneurial community. The industry itself has evolved over a number of years, but has only recently emerged as a popular career for many new $"*s. The industry focus is on early stage, pre-#!5 funding opportunities. Typically a fund will be raised, that will be invested in a number of different opportunities, that are reasonably high risk. #n return for the investment, the ,C receives an e;uity stake in the business. The ,C also helps the business develop its management team, and takes seats on the board of the company. ,Cs are typically interested in making few large investments, due to the manpower needed to

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support each investment (recruiting and board seats). They focus not only on the business opportunity that is presented to them, but closely on the management team that is offered (human capital is clearly becoming the differentiating advantage of any business at this point%) #n order for an entrepreneur to have an audience with a ,C, s'he needs to have a pre-e+isting connection (a reference to the ,C). (ithout this, the ,C is unlikely to review the business plan. This further supports the notion that the ,C and entrepreneurial community in /ilicon ,alley is a ecosystem that benefits from the mutual relationships that are already established, and is resistent to outsiders looking in (almost a closed system%) * recent growth of alternative sources of pre-#!5 investment is coming from *ngel #nvestors. These are typically successful entrepreneurs (cashed out) who are looking for additional investment opportunities in order to remain connected to the entrepreneuarial community. Acc"1 ts Recei*a!le: Trade accounts of businesses representing moneys due for goods sold or services rendered evidenced by notes, statements, invoices or other written evidence of a present obligation. Pre5M" e4 Val1ati" : !re-$oney ,aluation refers to the value of the company before an outside investment is made. Thus if a company has a pre-money valuation of EA million, and a ,enture Capitalist invests E2B million, then the ,enture Capital firm will own KKP of the business after the investment (E2B$ ' E2A$ F KKP) M5C"mmerce: $Commerce ($obile Commerce) refers to access to the internet via a mobile device, such as a cell phone or a !)*. 5nce m-commerce becomes ubi;uitous (it has greater rates of acceptance in places like -urope and Qapan than it does in the 7/ due to standards that have developed (Qapan the standard is #-mode, in europe is is (*!), it will change the utility of the web from a business standpoint. Conte+tual $arketing, the ability to communicate with a person when the person is likely to be receptive to the communication, will begin to occur, due to the mobility of access versus a !C. /$/ is the messaging system across mobile devises that complements m-commerce. Ec"s4stem *n ecosystem is a system whose members benefit from each other s participation via symbiotic relationships (positive sum relationships). #t is a term that originated from biology, and refers to self-sustaining systems. The bumblebee hive is an e+ample of an ecosystem, highlighted in "ernd 3einrich s book, "umblebee -conomics. The bumblebees hive is a living system with one goal, to gather enough energy to ensure the survival of the bumblebee s genetic information.

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"umblebees (unlike most other species) live in colonies and depend on each other for survival. "umblebees e+tract pollen for protein and nectar for their sole source of energy from neighboring plants. !lants, in turn, rely on bumblebees to inadvertently brush pollen from one plant to another, to enable the plants reproduction process to begin. The relationship between the bumblebee and the plant is symbiotic, as each benefits from each other s participation. The bumblebee hive goes through a life cycle, through the year. -ntering the fall the ;ueen bee lays eggs that are fed a different diet. These eggs turn into virgin ;ueens and males. (hen the frost hits, the remaining worker bees die as does the ;ueen, the virgin ;ueens and males fly off, mate, the males die and the inseminated ;ueens seek shelter through the winter. The process then begins again. *s it applies to business, an ecosystem can be viewed as a system where the relationships established across different industries become mutually beneficial, self-sustaining and (somewhat) closed. This is clearly the case for /ilicon ,alley with the entrepreneurial industry, the venture capital industry needed to fund the entrepreneurial industry, and /tanford 7niversity, supplying the human capital needed to develop innovative'creative ideas and technologies. The goal of this ecosystem is to generate entrepreneurial ventures. 5nce an ecosystem is established, and is able to take first-mover advantage, it becomes very difficult for other regions to emulate. The region e+hibits network effects and is able to establish lock-in since the switching costs associated with moving to another region are prohibitive. The collective costs of many moving out of the region (i.e. if another region tried to incentivize a large move) would be prohibitive. Thus current members have a clear incentive to remain, and new would-be entrepreneurs, venture capitalists and students interested in this industry have a significant incentive to relocate to this region. C3a el C" )lict:

Channel conflict is the outcome of developing additional channels between the producer and consumer (often direct in terms of using the web). This creates a JconflictJ with traditional channel members along the value chain, which are concerned with getting disintermediated. This occurs with legacy businesses as they e+plore the web for comme Tec3 "l"+4 Di))1si" Pr"cess: The diffusion process refers to the process of adoption of new products by the consumer marketplace. The consumer marketplace is segmented into four groups= innovators (:.AP of population), early adapters (2>.AP), early ma9ority (>HP), late ma9ority (>HP), and laggards (2KP). Thus innovators are more likely to adopt a new product earlier than the early ma9ority etc. This has implications for target marketing with new products. Permissi" Mar9eti + : !ermission $arketing refers to a communications process, between the marketer and the consumer, that the consumer gave JpermissionJ to the marketer to participate. This is becoming more common with the web, as consumers Jopt-inJ to a mailing list from a

2K

company s web-site. This allows the marketer to develop an ongoing dialog, in order to build a positive relationship and communicate messages relevant to the marketer s product. !roduct information, combined with additional incentives (prizes or other rewards) are usually used. /eth 1odin has pioneered this area.

SUPPL' CHAIN : /upply Chain refers to the distribution channel of a product, from its sourcing, to its delivery to the end consumer (also known as the value chain). The supply chain is typically comprised of multiple companies who are increasingly coordinating activities via an e+tranet. Mes"t3eli"ma: $esothelioma is a rare form of cancer in which malignant (cancerous) cells are found in the mesothelium, a protective sac that covers most of the body s internal organs. $ost people who develop mesothelioma have worked on 9obs where they inhaled asbestos particles. (orking with asbestos is the ma9or risk factor for mesothelioma. * history of asbestos e+posure at work is reported in about MB percent to CB percent of all cases. 3owever, mesothelioma has been reported in some individuals without any known e+posure to asbestos. *sbestos is the name of a group of minerals that occur naturally as masses of strong, fle+ible fibers that can be separated into thin threads and woven. *sbestos has been widely used in many industrial products, including cement, brake linings, roof shingles, flooring products, te+tiles, and insulation. #f tiny asbestos particles float in the air, especially during the manufacturing process, they may be inhaled or swallowed, and can cause serious health problems. #n addition to mesothelioma, e+posure to asbestos increases the risk of lung cancer, asbestosis (a noncancerous, chronic lung ailment), and other cancers, such as those of the laryn+ and kidney. $esothelioma cancer as a byproduct of asbestos in the workplace has caused many lawsuits affecting companies who have asbestos products in the workplace environment. Lear i + C1r*e: The learning curve represents the outcome of a company s e+perience when developing a product. *s the company becomes more e+perienced, it is able to develop a better product, or develop products more efficiently at reduced cost. The learning curve effect has a significant role in helping companies benefit from first-mover advantage. 8ater entrants into the marketplace have a difficult time overcoming the e+perience advantage, as first-movers release additional versions of the product.

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S:ITCHING COSTS: /witching Costs refer to the notion of the hidden costs a consumer is faced when switching from one product to another in the marketplace. Consumers should really try to factor in the switching costs when making purchasing decisions, since these impact purchasing decisions they may be faced with in the future (limiting freedom of choice). /witching costs are developed by companies in order to try to establish lock-in. The airlines have a good understanding of switching costs consumers face, and have developed the fre;uent flyer program to raise switching costs and increase loyalty among their installed bases. )igital products can establish switching costs in a variety of ways, including user interfaces, user training, accumulated data storage etc. BUSINESS: * commercial activity engaged in as a means of livelihood or profit, or an entity which engages in such activities. )efinition of a "usiness "usiness 8icence "y-law 0o. @CC-:BBB re;uires every person or company proposing to operate a business in the City of *bbotsford to obtain a business licence prior to commencing operation. * business means= Jcarrying on a commercial or industrial undertaking of any kind or nature, or providing professional, personal, or other services for the purpose of gain or profit, but does not include an activity carried on by the government, its agencies, or government-owned corporations. &or the purpose of this definition, farming and the sale of produce grown on the property, are e+empt from the re;uirement to obtain a business license.J "usinesses are not permitted to open or operate until a "usiness 8icence has been issued and authorized by the "usiness 8icence #nspector pursuant to the City of *bbotsford "usiness 8icence "y-law 0o. @CC-:BBB. !ersons failing to comply with this "y-law are sub9ect to a E2BB fine. 8ogistics - (business definition) 8ogistics is defined as a business planning framework for the management of material, service, information and capital flows. #t includes the increasingly comple+ information, communication and control systems re;uired in today s business environment. -- (8ogisti+ !artners 5y, 3elsinki, &#, 2@@K) 8ogistics - The procurement, maintenance, distribution, and replacement of personnel and materiel. -- ((ebsters )ictionary)

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8ogistics - ...the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer re;uirements.J 0ote that this definition includes inbound, outbound, internal, and e+ternal movements, and return of materials for environmental purposes. -- (.eference= Council of 8ogistics $anagement, http=''www.clm2.org'mission.html, 2: &eb @C) "usiness 8ogistics - The science of planning, design, and support of business operations of procurement, purchasing, inventory, warehousing, distribution, transportation, customer support, financial and human resources. -- ($)C, 8og8ink ' 8ogistics(orld, 2@@M) Cradle-to-1rave - 8ogistics planning, design, and support which takes in to account logistics support throughout the entire system or product life cycle. -- ($)C, 8og8ink ' 8ogistics(orld, 2@@M) *c;uisition 8ogistics - *c;uisition 8ogistics is everything involved in ac;uiring logistics support e;uipment and personnel for a new weapons system. The formal definition is Jthe process of systematically identifying, defining, designing, developing, producing, ac;uiring, delivering, installing, and upgrading logistics support capability re;uirements through the ac;uisition process for *ir &orce systems, subsystems, and e;uipment. -(.eference= *ir &orce #nstitute of Technology, 1raduate /chool of *c;uisition and 8ogistics.) #ntegrated 8ogistics /upport (#8/) (2) - #8/ is a management function that provides planning, funding, and functioning controls which help to assure that the system meets performance re;uirements, is developed at a reasonable price, and can be supported throughout its life cycle. -- (.eference= *ir &orce #nstitute of Technology, 1raduate /chool of *c;uisition and 8ogistics.) #ntegrated 8ogistics /upport (#8/) (:) - -ncompasses the unified management of the technical logistics elements that plan and develop the support re;uirements for a system. This can include hardware, software, and the provisioning of training and maintenance resources. -- (.eference= -C.C 7niversity of /cranton ' )efense 8ogistics *gency #ncluded with permission from= 37$ - The 1overnment Computer $agazine J#ntegrated 8ogisticsJ )ecember 2@@>, (alter Cooke.) 8ogistics /upport *nalysis (8/*) - /imply put, 8/* is the iterative process of identifying support re;uirements for a new system, especially in the early stages of system design. The main goals of 8/* are to ensure that the system will perform as intended and to influence the design for supportability and affordability. -- (.eference= *ir &orce #nstitute of Technology, 1raduate /chool of *c;uisition and 8ogistics.) LOGISTICS:

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The management of business operations, such as the ac;uisition, storage, transportation and delivery of goods along the supply chain. SUPPL' CHAIN: The network of retailers, distributors, transporters, storage facilities and suppliers that participate in the sale, delivery and production of a particular product. BACK:ARD INTEGRATION: *c;uiring ownership of one s supply chain, usually in the hope of reducing supplier power and thus reducing input costs. MARKET SHARE: The percentage of the total sales of a given type of product or service that are attributable to a given company. MARKET: * public place where buyers and sellers make transactions, directly or via intermediaries. *lso sometimes means the stock market. ACTIVE MARKET: $arket characterized by high volume, either for a specific security or an entire e+change. 7sually, more active markets are more li;uid and have smaller bid'ask spreads. BLACKMARKET: * market where products are bought and sold illegally. BU'ER;SMARKET: * market which has more sellers than buyers. 8ow prices result from this e+cess of supply over demand. also called soft market. opposite of seller s market. SELLER;SMARKET: * market which has more buyers than sellers. 3igh prices result from this e+cess of demand over supply. DEMAND: The amount of a particular economic good or service that a consumer or group of

:B

consumers will want to purchase at a given price. The demand curve is usually downward sloping, since consumers will want to buy more as price decreases. )emand for a good or service is determined by many different factors other than price, such as the price of substitute goods and complementary goods. #n e+treme cases, demand may be completely unrelated to price, or nearly infinite at a given price. *long with supply, demand is one of the two key determinants of the market price.

CONSUMER: *n individual who buys products or services for personal use and not for manufacture or resale. MARKETPRICE: * security s last reported sale price (if on an e+change) or its current bid and ask prices (if over-the-counter)< i.e. the price as determined dynamically by buyers and sellers in an open market. also called market value. OPENMARKET: * market which is widely accessible to all investors or consumers. APPRAISAL: * professional opinion, usually written, of the market value of a property, such as a home, business, or other asset whose market price is not easily determined. 7sually re;uired when a property is sold, ta+ed, insured, or financed. PRICEDISCOVER': The process of determination of market prices through the interactions of buyers and sellers in a free marketplace. OLIGOPOL': * market dominated by a small number of participants who are able to collectively e+ert control over supply and market prices. MONOPOL': * situation in which a single company owns all or nearly all of the market for a given type of product or service. This would happen in the case that there is a barrier to entry into the industry that allows the single company to operate without competition (for e+ample, vast economies of scale, barriers to entry, or governmental regulation). #n such

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an industry structure, the producer will often produce a volume that is less than the amount which would ma+imize social welfare. PUREMONOPOL': * market in which one company has control over the entire market for a product, usually because of a barrier to entry such as a technology only available to that company. BARRIERSTOENTR': Circumstances particular to a given industry that create disadvantages for new competitors attempting to enter the market. These may include government regulations, economic factors, and marketing conditions. PER(ECTCOMPETITION: $arket in which no participant can influence prices. Characterized by a free flow of information, no barriers to entry, and a large number of buyers and sellers. PRODUCT: The end result of the manufacturing process, to be offered to the marketplace to satisfy a need or want. GNP: 1ross 0ational !roduct. 10! is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country. "asically, 10! measures the value of goods and services that the country s citizens produced regardless of their location. 10! is one measure of the economic condition of a country, under the assumption that a higher 10! leads to a higher ;uality of living, all other things being e;ual. GOAL: 1oals should be directed toward a vision and consistent with the mission. /omething the organization wants and e+pects to accomplish in the future. ETHICS: The branch of philosophy that defines what is good for the individual and for society and establishes the nature of obligations, or duties, that people owe themselves and one another.

::

The word ethics is derived from the 1reek word ethos, which means Jcharacter,J and from the 8atin word mores, which means Jcustoms.J #n modern society, it defines how individuals, business professionals, and corporations choose to interact with one another. "usiness e+ecutives are faced with two types of ethical issues in conducting their day-today affairs. $icromanagement issues include conflicts of interest, employee rights, fair performance appraisals, se+ual harassment, proprietary information, discrimination, and accepting or offering gifts. $acromanagement issues include corporate social responsibility, product liability, environmental ethics, comparable worth, layoffs and downsizings, employee screening tests, employee rights to privacy in the workplace, and corporate accountability. STRATEGIC MANAGEMENT: #t is the process of specifying an organization s ob9ectives, developing policies and plans to achieve these ob9ectives, and allocating resources so as to implement the plans. #t is the highest level of managerial activity, usually performed by the company s Chief -+ecutive 5fficer (C-5) and e+ecutive team. #t provides overall direction to the whole enterprise. *n organizationUs strategy must be appropriate for its resources, circumstances, and ob9ectives. The process involves matching the company s strategic advantages to the business environment the organization faces. 5ne ob9ective of an overall corporate strategy is to put the organization into a position to carry out its mission effectively and efficiently. * good corporate strategy should integrate an organizationUs goals, policies, and action se;uences (tactics) into a cohesive whole, and must be based on business realities. "usiness enterprises can fail despite e+cellent strategy because the world changes in a way they failed to understand. /trategy must connect with vision, purpose and likely future trends. To see how strategic management relates to other issues, see management and futures studies. OPERATIONAL STRATEG': The VlowestW level of strategy is operational strategy. #t is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. #t must operate within a budget but is not at liberty to ad9ust or create that budget. 5perational level strategy was encouraged by !eter )rucker in his theory of management by ob9ectives ($"5). 5perational level strategies are informed by business level strategies which, in turn, are informed by corporate level strategies. The unicist approach to strategy integrates the different levels as a unified field. BUSINESS STRATEG'< which refers to the aggregated operational strategies of single business firm or that of an /"7 in a diversified corporation refers to the way in which a firm competes in its chosen arenas.

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CORPORATE STRATEG', then, refers to the overarching strategy of the diversified firm. /uch corporate strategy answers the ;uestions of Jin which businesses should we competeXJ and Jhow does being in one business add to the competitive advantage of another portfolio firm, as well as the competitive advantage of the corporation as a wholeXJ SBU: * strategic business unit is a semi-autonomous unit within an organization. #t is usually responsible for its own budgeting, new product decisions, hiring decisions, and price setting. *n /"7 is treated as an internal profit centre by corporate head;uarters. -ach /"7 is responsible for developing its business strategies, strategies that must be in tune with broader corporate strategies. STOCK MARKET: * market in which stocks are bought and sold (see stock e+change). *lso, the general condition of the sale of securities in a corporation. an e+change where security trading is conducted by professional stockbrokers S3"rt selli + #n short selling, the trader borrows stock (usually from his brokerage which holds its clients shares or its own shares on account to lend to short sellers) then sells it on the market, hoping for the price to fall. The trader eventually buys back the stock, making money if the price fell in the meantime or losing money if it rose. -+iting a short position by buying back the stock is called Jcovering a short position.J This strategy may also be used by unscrupulous traders to artificially lower the price of a stock. 3ence most markets either prevent short selling or place restrictions on when and how a short sale can occur. The practice of naked shorting is illegal in most (but not all) stock markets. Mar+i !14i + #n margin buying, the trader borrows money (at interest) to buy a stock and hopes for it to rise. $ost industrialized countries have regulations that re;uire that if the borrowing is based on collateral from other stocks the trader owns outright, it can be a ma+imum of a certain percentage of those other stocks value. #n the 7nited /tates, the margin re;uirements have been ABP for many years (that is, if you want to make a E2BBB investment, you need to put up EABB, and there is often a maintenance margin below the EABB). * margin call is made if the total value of the investor s account cannot support the loss of the trade. .egulation of margin re;uirements (by the &ederal .eserve) was implemented after the Crash of 2@:@. "efore that, speculators typically only needed to put up as little as ten percent (or even less) of the total investment represented by the stocks purchased. 5ther rules may include the prohibition of free-riding: putting in an order to buy stocks without paying initially (there is normally a three-day grace period for delivery of the stock), but then selling them (before the three-days are up) and using part

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of the proceeds to make the original payment (assuming that the value of the stocks has not declined in the interim).

NICHE MARKET=* niche market is a narrowly defined group that includes all of the following= 2. #ndividuals in the group have the same specialized interests and needs. :.They have a strong desire for what you offer. >. ?ou have (or you can create) a compelling reason for prospects in the group to do business with you instead of with someone else. H.?ou can easily reach individual prospects within the group. A. The group is large enough to produce the volume of business you need. K. The group is small enough that your competition is likely to overlook it. * niche market is a smaller portion of a larger market. #t generally refers to a group whose needs are not being addressed by mainstream providers. *nother definition of a niche market would be a narrowly defined group of potential customers. 8arge businesses must move large volumes of goods to be profitable. This means they cannot cater to every segment of a market - only to the largest (and therefore, most profitable) segements. This leaves smaller segements of a market with specific needs that are not being met. This creates a profitable opportunity for smaller, more specialized businesses. PROMOTION: 1enerally, promotion is communicating with the public in an attempt to influence them toward buying your products and'or services. 3ow does promotion differ from advertisingX !romotion is the broader, all inclusive term. *dvertising is 9ust one specific action you could take to promote your product or service. !romotion, as a general term, includes all the ways available to make a product and'or service known to and purchased by customers and clients. -+amples= Contests and advertising are two e+amples of popular promotion activities. ADVERTISING: *dvertising is bringing a product (or service) to the attention of potential and current customers. *dvertising is typically done with signs, brochures, commercials, direct mailings or e-mail messages, personal contact, etc. :A

Acc"1 ta!ilit4

.esponsibility for results and an obligation to report.

Acc"1 ti +

.ecording and reporting of financial transactions, including the origination of the transaction, its recognition, processing, and summarization in the financial statements. *ction plans outline the steps re;uired to achieve a goal, typically a strategic goal. They identify who will do what, when and how< and how current issues and unforeseen contingencies are handled. *n accounting methodology designed to present a clearer picture of product and service costs through a better identification of the costs of activities (such as machine installations or purchase orders) within processes. 7nder *"C, costs are analyzed at four different levels= (2) #ndividual unit level (labor, materials, energy), (:) batch level ( setups, material movements, inspections), (>) product-line level (engineering specifications, process engineering, engineering change notices), and (H) facility level (building costs, plant maintenance, administration). /imilarly, sales costs were caused at the brand, channel, and customer level. *"C argues that only by changing the capacity constraints in each of these levels could cost be controlled. *"C differs from traditional accounting methods, which tend to lump all these costs together, as fi+ed, and charge them to the volume, or cost, of the direct labor e+pended. The aim of *"C is to provide managers a clearer insight concerning how to link activity costs to operating capacity and, by comparing actual usage with the budget, how to derive useful information regarding e+cess capacity costs. 7sing *"C, many indirect costs could be related more clearly to the products and customers that consumed them, thus providing a more accurate picture of product and customer profitability.

Acti" Pla s

Acti*it45Base$ C"sti + ,ABC0

A))i it4 Dia+ram *n *ffinity )iagram is a method of structured brainstorming. $embers of the team silently write !ost-its answering a ;uestion such as J(hat are the issues involved with ....J The !ost-its are then JscrubbedJ so that they are clear in meaning to all, and grouped into clusters and sub-clusters with header cards for each cluster. :K

Alter ati*e Dis#1te Res"l1ti" A1t3"rit4 A1t"cratic Lea$ers3i#

*n alternative to formal litigation, which includes techni;ues such as arbitration, mediation, and a non-binding summary 9ury trial.

The right to command a situation, a task or an activity. * leadership style where the leader independently makes all decisions.

Bala ce S3eet

"asic financial statement , usually accompanied by appropriate disclosures that describe the basis of accounting used in its preparation and presentation of a specified date the entity s assets, liabilities and the e;uity of its owners. *lso known as a statement of financial position. * structured and ongoing process for measuring products, services, and practices against other organizations with a view to improving performance and'or identifying processes that re;uire change. "enchmarking is done between consenting companies that may or may not be competitors. #t is a means of comparing processes and practices with the VbestYin-classW /uccessfully identifying and applying best practices can reduce business e+penses and improve organizational effectiveness. The processes, practices, and systems identified in public and private sector organizations that performed e+ceptionally well, and are widely recognized as improving an organization s performance in specific areas.

Be c3mar9i +

Best Practices

B"$4 La +1a+e $essages conveyed by a person s bearing, gestures and facial e+pressions. Brai st"rmi + *n idea-generating techni;ue built on the assumptions that two heads are better than one, and a group of people working together will come up with more and better ideas. "rainstorming works on the principle that no matter how crazy or irrelevant ideas seem, they may spark an original and worthwhile idea no one would otherwise have thought of. 7"C= &or assistance with brainstorming 5rganizational )evelopment and 8earning. e+ercises contact

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Brai st"rmi + Met3"$

1uidelines for effective brainstorming include setting a topic, setting a time limit, encourage participation from everyone, ensuring that all contributions are listed, and that none of the contributions are evaluated during the session. * dramatic improvement in work processes. #t can occur in technology, in the way work is organized, or in the way people think. This is the goal of .e-engineering. 5rganization based on rules, procedures and hierarchical authority.

Brea9t3r"1+3

B1rea1cratic

B1si ess Pr"cess * systematic, disciplined improvement approach that Ree +i eeri + critically e+amines, rethinks, redesigns, and implements the ,BPR0 redesigned processes of an organization. "!. s goal is to achieve dramatic improvements in performance in areas important to customers and other stakeholders. "!. is also referred to by such terms as business process improvement ("!#) or business process development, and business process redesign. (hile the term can be applied to incremental process improvement efforts, it is more commonly and increasingly associated with dramatic or radical overhauls of e+isting business processes. "!. typically relies on information technology to achieve breakthrough results. *t 7"C the /#$!8 pro9ect is one e+ample of a reengineering initiative. * central area that champions reengineering initiatives it is the office of the )irector of e-business, within #T /ervices. BPR C3am#i" *n individual within the organization - generally at the senior level who undertakes advocacy and support for a "!. program or ma9or pro9ect within that program. "!. programs may in fact have several champions, who may not only provide advocacy, but may also be responsible for successful implementation of the program or pro9ects.

C3a +e Ma a+eme t

The term used to describe activities involved in (2) defining and instilling new values, attitudes, norms, and behaviors within an organization that support new ways of doing business and overcoming resistance to change< (:) building consensus among customers and other stakeholders on specific changes designed to better meet their needs< and (>) planning, testing, and implementing all aspects of the transition from one organizational mission, structure, or business process to another. Change $anagement is more commonly, and increasingly associated with total organizational change programs. :C

*lso refered to as Transition $anagement. 5rganizations or units at 7"C re;uiring assistance with change management are invited to contact 5rganizational Training and )evelopment. 5T) can supply either internal or e+ternal facilitators. C3arter * document that specifies the purpose of a team, its power, its reporting relationships, and its specific responsibilities. *lso referred to as a !ro9ect Charter. Coaching is unlocking a person s potential to ma+imize his or her own performance, by helping them to learn rather than teaching them. Coaches are highly trained professionals who help clients achieve their most meaningful goals faster, and with least effort. $asterful coaches have the ability to draw out the very best in clients, and then guide them towards a more productive, balanced and fulfilling life. 7"C= Coaching services are provided through 5rganizational )evelopment and learning. Typically, coach and clients work through a process that includes= Clarifying a vision of the most successful outcome that the client might achieve through the coaching. )esigning a strong and effective coach'client working relationship. Clarifying a client s values to assist in decision-making. )eveloping a solid, step-by-step plan to achieve the desired results. 5ngoing support to help implement and follow through with the planned actions. &inding the right approach or perspective to make the entire 9ourney rewarding. C"llecti*e A+reeme ts The agreements reached through the process of collective bargaining.

C"ac3i +

C"ac3i + Pr"cess

Communities of practice are groups of people who share a concern, a C"mm1 ities ") set of problems, or a passion about a topic, and who increase their knowledge and e+pertise in that area by meeting and learning together Practice on an ongoing basis. Communities of practice= /hare information

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3elp each other solve problems -+amine common issues -+plore ideas and act as sounding boards )ocument information, such as in a manual. C" se s1s *cceptance of a team decision so that everyone on the team can live with the decision and support it. *lso referred to as JkeyJ or JidentityJ processes, these are business processes that directly affect the organization s success and survival. The term is used to distinguish these processes from sub processes, which, collectively, form a total process, and JmanagementJ or JsupportJ processes, which contribute to the delivery of core processes, but may not have as direct an affect on the success or survivability of the enterprise. The concept that all work is a process in which employees are simultaneously both customers of and suppliers to one another, forming a chain.

C"re Pr"cesses

C1st"mer5 S1##lier C3ai

Dece trali=ati"

)ispersal of decision making to lower and or peripheral levels within the organization. *uthority passed down from superior to subordinate. * leadership style where the leader encourages others to participate in decision making.

Dele+ati" Dem"cratic Lea$ers3i#

Em#l"4ee Be e)it Pla

Compensation arrangement, generally in writing, used by employers in addition to salary or wages. /ome plans such as group term life insurance, medical insurance and ;ualified retirement plans are treated favorably under the ta+ law. $ost common ;ualified retirement plans are= (2) defined benefit plans - a promise to pay participants specified benefits that are determinable and based on such factors as age, years of service, and compensation< or (:) defined contribution plans provide an individual account for each participant and benefits based

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on items such as amounts contributed to the account by the employer and employee and investment e+perience. Em#">erme t E *ir" me tal Sca 1iving someone more control over what they do and how they do it. *n environmental scan, performed within the framework of strategic planning, analyzes information about organization s e+ternal environment (economic, social, demographic, political, legal, technological, and international factors), the industry, and internal organizational factors. 8abour market pro9ections are e+amples of information that could be included in an environmental scan.

(A?

*cronym for &re;uently *sked Tuestions. )ocuments that list and answer the ;uestions most often asked about a particular sub9ect. The (orld (ide (eb contains thousands of &*Ts on sub9ects as diverse as pet grooming and cryptography. !eriod of 2: consecutive months chosen by an entity as its accounting period that may or may not be a calendar year. *ny tangible asset with a life of more than one year used in an entity s operations. $ethod of accounting and presentation whereby assets and liabilities are grouped according to the purpose for which they are to be used. 1enerally used by government entities and not-for-profits. 1ap analysis evaluates the difference between the organization s current position, and its desired future. 1ap analysis results in development of specific strategies and allocation of resources to close the gap &or e+ample, a university may aim to graduate KBP of each class first time freshmen after H years. #f the campus is currently at HBP it constitutes a :BP gap between the e+isting situation and desired one. 7nderstanding the nature of this gap will allow the university to develop specific strategies to achieve the desired KBP completion rate.

(iscal 'ear

(i2e$ Asset

(1 $ Acc"1 ti +

Ga# A al4sis

Ha>t3"r e E))ect

The idea that workers become more productive, and their behaviour changes, when attention is given to them as a group. >2

H1ma Res"1rces

The employees or personnel in a business that help it to achieve its goals. #n many firms 3uman .esources is the name of the department responsible for employees. 3uman .esources $anagement concerns the human side of the management of enterprises and employees relations with firms.

H1ma Res"1rces Ma a+eme t H1ma Res"1rces Pla i +

*n integrated approach to 3uman .esources $anagement that ensures the efficient management of human resources. #t is part of the overall business plan of an organization.

I creme tal Im#r"*eme t

* term used to connote those "!. programs which seek to improve the organization s e+isting business processes through relatively small, ongoing changes, and are not driven by a re;uirement for radical overhaul of the e+isting organization or process. /ee also "usiness !rocess .eengineering ("!.), Change $anagement, and 4aizen. The package of e;uipment (hardware and software) (#T) !latform and'or systems related to information and communications that can be used as an enabler of a process. *n audit performed within an entity by its staff rather than an independent certified public accountant. *t 7"C, the #nternal *udit )epartment conducts internal accounting audits. 3ealth /afety and the -nvironment coordinates audits of various safety systems and procedures.

I )"rmati" Tec3 "l"+4

I ter al A1$it

I ter al C" tr"l !rocess designed to provide reasonable assurance regarding achievement of various management ob9ectives such as the reliability of financial reports. I ter et&:"rl$ :i$e :e! The #nternet is the unregulated wild west show of computer networks connected together throughout the world. The (orld (ide (eb, or www, is part of the #nternet.

Kai=e

Qapanese term that means improving work through a series of small, gradual, ongoing changes

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K ">le$+e Ma a+eme t

4nowledge management is about the use of computer and communication tools to help people gather and apply their collective data, information, knowledge and wisdom in order to make better, ;uicker, wiser and more effective decisions (1ene $eieran) 4nowledge $anagement is about using information strategically to achieve one s business ob9ectives. 4nowledge $anagement is the organizational activity of creating the social environment and technical infrastructure so that knowledge can be accessed, shared and created. (.obert 4. 8ogan) .eporting designed to assist management in decision-making, planning, and control. *lso known as $anagerial *ccounting. The shared norms and values of an organization or business. * good introduction to academic culture is VThe &our Cultures of the *cademyW by (illiam "erg;uiste. The $5/T program offers workshops dealing with culture. &or information on current offerings, see the C1lt1re category in the current $5/T Catalogue.

Ma a+eme t Acc"1 ti + Or+a i=ati" al C1lt1re

Paret" A al4sis !areto analysis takes the form of a bar chart showing work related problems or issues, and the number of times (or fre;uency) each problem occurs. The bars are displayed by fre;uency, in descending order, identifying the most important problems, issues or defects. !areto *nalysis is related to the CB':B rule< a rule of thumb that :B percent of problems cause CB percent of the work. PDCA C4cle * four-phase view of the steps involved in continuously improving a process= !lan, )o, Check, and *ct. * retirement plan offered by an employer for the benefit of an employee, usually at retirement, through a Trustee who controls the plan assets. (/ee -mployee "enefit !lan). *t 7"C the !ension *dministration 5ffice administers both staff and faculty pension plans. * series of definable, repeatable, and measurable tasks leading to a useful result for an internal or e+ternal customer, or, a collection of activities that together produce a useful product or service. This collection of activities begins with an Jinput,J in the form of resources

Pe si"

Pr"cess

>>

such as investment capital, knowledge, or physical material, and ends with a specific Joutput,J in the form of a product or service of value to a customer or other key stakeholder. ?ou can summarize the elements of a process using a process map. Pr"cess O> er *n individual, or particular process team, held accountable and responsible for the workings and improvement of one of an organization s defined processes and its related sub-processes

Pr"@ect C3arter

?1alit4

Tuality in the formal business sense is defined as conformance to specifications. *ny product or service that meets its specifications is a ;uality product or service.

Re5E +i eeri + .e-engineering is the re-design or reconfiguring of business processes. The 7niversity of "ritish Columbia, like all publicly funded ReA1est )"r Bi$ institutions, procures goods and services of a significant dollar value through the competitive bidding process. * re;uest for bid, or rfb, is a ,R(B0 key part of this process. /upply $anagement (formerly known as the purchasing department, provides leadership to the campus in this area. &or more detailed information about when to use a re;uest for bid, visit the following supply management resources=

The 7niversity of "ritish Columbia, like all publicly funded institutions, procures goods and services of a significant dollar value ReA1est )"r Pr"#"sal ,R(P0 through the competitive bidding process. * re;uest for proposal, or rfp, is a key part of this process. /upply $anagement (formerly known as the purchasing department), provides leadership to the campus in this area. &or more detailed information about when to use a re;uest for proposal, visit the following supply management resources=

Ris9 Ma a+eme t

.isk $anagement is the process of identifying and monitoring business risks in a manner that offers a risk'return relationship that is acceptable to an entity s operating philosophy.

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S3"# Ste>ar$

* /hop /teward is an elected union official who represents workers interests in the place in which the shop steward works. (hat is e+pected when providing a product or service to a customer. *n individual or group with an interest in the success of an organization and it s products. 5ne of the most common and important of the stakeholder groups is the organization s customers, but, under the broader definition intended, stakeholders could include any individual or group with an interest in the organization, and with a responsibility for its success. /takeholders thus could consist of the organization s own members, higher authorities, suppliers, and in the case of 7"C, the ta+payers of "ritish Columbia and Canada. /takeholders, in summary, are groups both internal and e+ternal to the organization who affect the interests of the organization.

S#eci)icati" s Sta9e3"l$er

Strate+ic Iss1es /trategic issues are the fundamental issues the organization has to address to achieve its mission and move towards its desired future. /trategic issues for 7"C might concern tuition fee policy, or our long term approach to recruiting faculty. /trategic planning involves making decisions about ma9or, long-term goals for an organization. These long-term goals provide a focus for Strate+ic units within the organization, so that all of their goals, and the day to Pla i + day work that is carried out, moves the organization towards realizing it s plan. T.-4 :B2B is an e+ample of a strategic plan for 7"C. (/ee There are five key elements of strategic planning= #t recognizes the outside environment and e+plicitly incorporates elements of it into the planning process. #t has a long-term focus, often > to A years, but sometimes as many as 2B to :B years. #t is conducted at the top of the organization and at the top of the organization s ma9or divisions. *t 7"C we often find strategic plans at the department level, which in terms of a plan could be considered an VorganizationW. These plans typically help units focus their resources on carrying out the broad goals of T.-4 :B2B. #t involves making decisions that commit large amounts of organizational resources. #t sets the direction for the organization by focusing on the organization s identity and its place in a changing environment.

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Strate+ic T3i 9i +

/trategic thinking refers to decisions made within the framework of the organization s strategic vision and mission. (hen strategic planning becomes an organizational norm, deeply embedded within the organization s decision-making process, participants learn to think strategically as part of their regular daily work. .elated topics include strategic planning, and /(5T analysis. /uppliers are the people who provide input to a 9ob, whether from inside or outside your department. #n ;uality improvement, the customer and supplier relationship become an interactive relationship that calls for agreeing to and communicating specifications.

S1##liers

S:OT A al4sis * brainstormed list of strengths, weaknesses, opportunities, and threats. * /(5T analysis can be a part of a strategic planning session, or any initiative to consider or implement changes in an organization. /ee the following link for a good detailed presentation on the topic S4stem Arc3itect1re /ystems *rchitecture belongs in #T (information technology) nomenclature, and refers to the description of how system components (hardware and software) interact and work together to achieve system goals.

Telec"mm1ti + (orking away from the workplace, usually at home by making use of telecommunications. T"#5D"> Ma a+eme t Top-down management refers to a style of management in which all the main decisions are taken by the top managers, and handed down to the workforce to carry out.. * systematic, organization-wide approach that motivates, supports, and enables ;uality management in all activities, focusing on the needs and e+pectations of internal and e+ternal stakeholders. TT$ is perceived often as entirely compatible with "!. since both disciplines focus on performance improvement, with "!. offering tools and techni;ues to make the TT$ effort more enduring, particularly from the standpoint of business process. Total Tuality $anagement is based on five fundamental principles= 2.Customer&ocus :.Continuous#mprovement

T"tal ?1alit4 Ma a+eme t ,T?M0

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>.$easurement H.*ll A. /ystematic /upport

organizational

staff

involved

Val1e5A$$e$

,alue-added refers to those activities or steps that add to or change a product or service as it goes through a process. ,alue-adding steps are the activities that customers view as important, and are distinguished from those steps that may not add value and, hence, become candidates for abandonment. #dentification of the organization s vision and mission is the first step of any strategic planning process. The organization s vision sets out the reasons for the organization s e+istence and the JidealJ state that the organization aims to achieve< the mission identifies ma9or goals and performance ob9ectives. "oth are defined within the framework of the organization s philosophy, and are used as a conte+t for development and evaluation of intended and emergent strategies.

Visi" a $ Missi"

CHARTER * document, filed with a 7./. state by a corporation s founders, describing the purpose, place of business, and other details of a corporation. also called articles of incorporation. CORPORATION The most common form of business organization, and one which is chartered by a state and given many legal rights as an entity separate from its owners. This form of business is characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and e+istence as a going concern. The process of becoming a corporation, call incorporation, gives the company separate legal standing from its owners and protects those owners from being personally liable in the event that the company is sued (a condition known as limited liability). #ncorporation also provides companies with a more fle+ible way to manage their ownership structure. #n addition, there are different ta+ implications for corporations, although these can be both advantageous and disadvantageous. #n these respects, corporations differ from sole proprietorships and limited partnerships. INCORPORATION The process by which a business receives a state charter, allowing it to become a corporation. BOINT STOCK COMPAN'

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* company which has some features of a corporation and some features of a partnership. The company sells fully transferable stock, but all shareholders have unlimited liability. HOLDING COMPAN' * company controlling partial or complete interest in another company or other companies. :AGES Compensation for work. COMPENSATION 1enerally, something received in return for something else. DIRECT MARKETING The practice of delivering promotional messages directly to potential customers on an individual basis as opposed to through a mass medium. BUSINESS PROCESS OUTSOURCING "usiness process outsourcing ("!5) is the contracting of a specific business task, such as payroll, to a third-party service provider. 7sually, "!5 is implemented as a costsaving measure for tasks that a company re;uires but does not depend upon to maintain their position in the marketplace. "!5 is often divided into two categories= back office outsourcing which includes internal business functions such as billing or purchasing, and front office outsourcing which includes customer-related services such as marketing or tech support. "!5 that is contracted outside a company s own country is sometimes called offshore outsourcing. "!5 that is contracted to a company s neighboring country is sometimes called nearshore outsourcing, and "!5 that is contracted with the company s own county is sometimes called onshore outsourcing. 3uman .esources may be the most misunderstood of all corporate departments, but it s also the most necessary. Those who work in 3uman .esources are not only responsible for hiring and firing, they also handle contacting 9ob references and administering employee benefits. #t s true that any individual who works in 3uman .esources must be a Jpeople person.J /ince anyone in this department deals with a number of employees, as well as outside individuals, on any given day, a pleasant demeanor is a must.

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$anaging employees is a ma9or 9ob, so those in 3uman .esources must be e;ual to the task. Ten or twenty years ago, 3uman .esources personnel were rarely seen. #nstead they worked behind the scenes to ensure personnel records were in order and employee benefits were being properly administered, but the 9ob stopped there. Today s 3uman .esources personnel don t only handle small administrative tasks. They are responsible for staffing ma9or corporations. This is no minor feat. #t s not enough to be able to screen potential employees, however. Those who work in 3uman .esources also have to be able to handle a crisis in a smooth, discreet manner. (hether the issue is health care related or regarding se+ual harassment or employee disputes, a person working in 3uman .esources must be trusted to keep an employee s personal details to herself. The 3uman .esource team must also be a good 9udge of morale and realize when morale boosting incentives are needed. #t s up to them to make sure all employees are comfortable with their surroundings and working under acceptable, if not above average, conditions. &or those looking to enter a career in 3uman .esources, a college education is necessary. 5ne doesn t necessarily have to have a degree in 3uman .esources, however. $a9oring in "usiness *dministration, !sychology, 8abor .elations and !ersonnel *dministration, as well as degrees in /ocial and "ehavioral /ciences, can also be beneficial. 3uman .esources may have gotten a bum rap, but it s clearly among the most important departments in any corporation. The ne+t time you have to meet with someone from 3uman .esources, remember that without her, your company might not be running so efficiently. Vertical I te+rati" The degree to which a firm owns its upstream suppliers and its downstream buyers is referred to as vertical integration. "ecause it can have a significant impact on a business unit s position in its industry with respect to cost,differentiation, and other strategic issues, the vertical scope of the firm isan important consideration in corporate strategy.-+pansion of activities downstream is referred to as forward integration, and e+pansion upstream is referred to as backward integration. The concept of vertical integration can be visualized using the value chain. Consider a firm whose products are made via an assembly process. /uch a firm may consider backward integrating into intermediate manufacturing or forward integrating into distribution, as illustrated below=

-+ample of "ackward and &orward #ntegration 0o #ntegration .aw $aterials

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#ntermediate $anufacturing *ssembly )istribution -nd Customer "ackward #ntegration .aw $aterials #ntermediate $anufacturing *ssembly )istribution -nd Customer &orward #ntegration .aw $aterials #ntermediate $anufacturing

*ssembly )istribution -nd Customer Two issues that should be considered when deciding whether to vertically integrate is cost and control. The cost aspect depends on the cost of market transactions between firms versus the cost of administering the same activities

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internally within a single firm. The second issue is the impact of asset control, which can impact barriers to entry and which can assure cooperation of key value-adding players. The following benefits and drawbacks consider these issues. Be e)its ") Vertical I te+rati" ,ertical integration potentially offers the following advantages= .educe transportation costs if common ownership results in closer geographic pro+imity. #mprove supply chain coordination. !rovide more opportunities to differentiate by means of increased control over inputs. Capture upstream or downstream profit margins. #ncrease entry barriers to potential competitors, for e+ample, if the firm can gain sole access to a scarce resource. 1ain access to downstream distribution channels that otherwise would be inaccessible. &acilitate investment in highly specialized assets in which upstream or downstream players may be reluctant to invest. 8ead to e+pansion of core competencies. Dra>!ac9s ") Vertical I te+rati" (hile some of the benefits of vertical integration can be ;uite attractive to the firm, the drawbacks may negate any potential gains. ,ertical integration potentially has the following disadvantages=

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Capacity balancing issues. &or e+ample, the firm may need to build e+cess upstream capacity to ensure that its downstream operations have sufficient supply under all demand conditions. !otentially higher costs due to low efficiencies resulting from lack of supplier competition. )ecreased fle+ibility due to previous upstream or downstream investments. (0ote however, that fle+ibility to coordinate vertically-related activities may increase.) )ecreased ability to increase product variety if significant in-house development is re;uired. )eveloping new core competencies may compromise e+isting competencies. #ncreased bureaucratic costs. (act"rs (a*"ri + Vertical I te+rati" The following situational factors tend to favor vertical integration= Ta+es and regulations on market transactions 5bstacles to the formulation and monitoring of contracts. /trategic similarity between the vertically-related activities. /ufficiently large production ;uantities so that the firm can benefit from economies of scale. .eluctance of other firms to make investments specific to the transaction. (act"rs A+ai st Vertical I te+rati" The following situational factors tend to make vertical integration less attractive=

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The ;uantity re;uired from a supplier is much less than the minimum efficient scale for producing the product. The product is a widely available commodity and its production cost decreases significantly as cumulative ;uantity increases. The core competencies between the activities are very different. The vertically ad9acent activities are in very different types of industries. &or e+ample, manufacturing is very different from retailing. The addition of the new activity places the firm in competition with another player with which it needs to cooperate. The firm then may be viewed as a competitor rather than a partner Alter ati*es t" Vertical I te+rati" There are alternatives to vertical integration that may provide some of the same benefits with fewer drawbacks. The following are a few of these alternatives for relationships between vertically-related organizations= long-term e+plicit contracts franchise agreements 9oint ventures co-location of facilities implicit contracts (relying on firms reputation)

$ckinsey growth pyramid

I tr"$1cti" This model is similar in some respects to the well-established *nsoff $odel. 3owever, it looks at growth strategy from a slightly different perspective.

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The $c4insey model argues that businesses should develop their growth strategies based on= Z 5perational skills Z !rivileged assets Z 1rowth skills Z /pecial relationships 1rowth can be achieved by looking at business opportunities along several dimensions, summarised in the diagram below=

Z 5perational skills are the Vcore competencesW that a business has which can provide the foundation for a growth strategy. &or e+ample, the business may have strong competencies in customer service< distribution, technology. Z !rivileged assets are those assets held by the business that are hard to replicate by competitors. &or e+ample, in a direct marketing-based business these assets might include a particularly large customer database, or a well-established brand. Z 1rowth skills are the skills that businesses need if they are to successfully VmanageW a growth strategy. These include the skills of new product development, or negotiating and integrating ac;uisitions.

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Z /pecial relationships are those that can open up new options. &or e+ample, the business may have specially string relationships with trade bodies in the industry that can make the process of growing in e+port markets easier than for the competition. The model outlines seven ways of achieving growth, which are summarised below= E2isti + #r"$1cts t" e2isti + c1st"mers The lowest-risk option< try to increase sales to the e+isting customer base< this is about increasing the fre;uency of purchase and maintaining customer loyalty E2isti + #r"$1cts t" e> c1st"mers Taking the e+isting customer base, the ob9ective is to find entirely new products that these customers might buy, or start to provide products that e+isting customers currently buy from competitors Ne> #r"$1cts a $ ser*ices * combination of *nsoffUs market development I diversification strategy Y taking a risk by developing and marketing new products. /ome of these can be sold to e+isting customers Y who may trust the business (and its brands) to deliver< entirely new customers may need more persuasion Ne> $eli*er4 a##r"ac3es This option focuses on the use of distribution channels as a possible source of growth. *re there ways in which e+isting products and services can be sold via new or emerging channels which might boost salesX Ne> +e"+ra#3ies (ith this method, businesses are encouraged to consider new geographic areas into which to sell their products. 1eographical e+pansion is one of the most powerful options for growth Y but also one of the most difficult. Ne> i $1str4 str1ct1re This option considers the possibility of ac;uiring troubled competitors or consolidating the industry through a general ac;uisition programme Ne> c"m#etiti*e are as This option re;uires a business to think about opportunities to integrate vertically or consider whether the skills of the business could be used in other industries.

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st"c9 mar9et * market in which stocks are bought and sold (see stock e+change). *lso, the general condition of the sale of securities in a corporation. Ca#ti*e Mar9et * captive market is a group of consumers who have limited choice in terms of the products they can select'purchase (no choice)% This type of market was common during the production era when there was a limited supply of goods (and great demand). #t occurs when the market is monopolistic, thus there is only one supplier in the marketplace. This is more likely to occur with digital products ($icrosoft is a good e+ample of this). #t can occur when a marketer has achieved significant lock-in for its installed based. Thus the switching costs for the consumer to try a competing product become prohibitive. I $1str4 * basic category of business activity. The term industry is sometimes used to describe a very precise business activity (e.g. semiconductors) or a more generic business activity (e.g. consumer durables). #f a company participates in multiple business activities, it is usually considered to be in the industry in which most of its revenues are derived.

Em#l"4ee relati" s is that aspect of 3uman .esources that directs attention to assist employees and management to establish a work environment that is stimulating and creative and that supports an environment in which the individual can perform to the best of his or her ability. S:OT A al4sis * scan of the internal and e+ternal environment is an important part of the strategic planning process. -nvironmental factors internal to the firm usually can be classified as strengths (/) or weaknesses ((), and those e+ternal to thefirm can be classified as opportunities (5) or threats (T). /uch an analysis of the strategic environment is referred to as a /(5T analysis. The /(5T analysis provides information that is helpful in matching the firm s resources and capabilities to the competitive environment in which it operates.*s such, it is instrumental in strategy formulation and selection. The following diagram shows how a /(5T analysis fits into an environmental scan=

/(5T *nalysis &ramework -nvironmental /can

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'[ #nternal *nalysis '[ /trengths (eaknesses \ /(5T $atri+ /trengths * firm s strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. -+amples of such strengths include= patents strong brand names good reputation among customers cost advantages from proprietary know-how e+clusive access to high grade natural resources favorable access to distribution networks (eaknesses The absence of certain strengths may be viewed as a weakness. &or e+ample, each of the following may be considered weaknesses= lack of patent protection a weak brand name poor reputation among customers high cost structure lack of access to the best natural resources lack of access to key distribution channels -+ternal *nalysis '[ 5pportunities Threats

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#n some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. (hile this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity preventsthe firm from reacting ;uickly to changes in the strategic environment. 5pportunities The e+ternal environmental analysis may reveal certain new opportunities for profit and growth. /ome e+amples of such opportunities include= an unfulfilled customer need arrival of new technologies loosening of regulations removal of international trade barriers Threats Changes in the e+ternal environmental also may present threats to the firm. /ome e+amples of such threats include= shifts in consumer tastes away from the firm s products emergence of substitute products new regulations increased trade barriers The /(5T $atri+ * firm should not necessarily pursue the more lucrative opportunities. .ather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm s strengths and upcoming opportunities. #n some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity. To develop strategies that take into account the /(5T profile, a matri+ of these factors can be constructed. The /(5T matri+ (also known as a T5(/ $atri+) is shown below=

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/(5T ' T5(/ $atri+

STRENGTHS

:EAKNESSES

OPPURTUNITIES

S5O strate+ies

:5O strate+ies

THREATS

S5T strate+ies

:5T strate+ies

/-5 strategies pursue opportunities that are a good fit to the company s strengths.

(-5 strategies overcome weaknesses to pursue opportunities.

/-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to e+ternal threats.

(-T strategies establish a defensive plan to prevent the firm s weaknesses from making it highly susceptible to e+ternal threats.

ESTOPPEL = (2) * legal principle that prevents a person from asserting or denying something in court that contradicts what has already been established as the truth. EA1ita!le est"##el * type of estoppel that bars a person from adopting a position in court that contradicts his or her past statements or actions when that contradictory stance would be unfair to another person who relied on the original position. &or e+ample, if a landlord agrees to allow a tenant to pay the rent ten days late for si+ months, it would be unfair to allow the landlord to bring a court action in the fourth month to evict the tenant for being a week H@

late with the rent. The landlord would be estopped from asserting his right to evict the tenant for late payment of rent. *lso known as estoppel in pais. Est"##el !4 $ee$ * type of estoppel that prevents a person from denying the truth of anything that he or she stated in a deed, especially regarding who has valid ownership of the property. &or e+ample, someone who grants a deed to real estate before he actually owns the property can t later go back and undo the sale for that reason if, say, the new owner strikes oil in the backyard. -stoppel by silence * type of estoppel that prevents a person from asserting something when she had both the duty and the opportunity to speak up earlier, and her silence put another person at a disadvantage. &or e+ample, -dwards .oofing Company has the wrong address and begins ripping the roof from "etty s house by mistake. #f "etty sees this but remains silent, she cannot wait until the new roof is installed and then refuse to pay, asserting that the work was done without her agreement. !romissory estoppel * type of estoppel that prevents a person who made a promise from reneging when someone else has reasonably relied on the promise and will suffer a loss if the promise is broken. &or e+ample, &orrest tells *ntonio to go ahead and buy a boat without a motor, because he will sell *ntonio an old boat motor at a very reasonable price. #f *ntonio relies on &orrest s promise and buys the motorless boat, &orrest cannot then deny his promise to sell Qohn the motor at the agreed-upon price. (:) * legal doctrine that prevents the relitigation of facts or issues that were previously resolved in court. &or e+ample, *lvin loses control of his car and accidentally sideswipes several parked cars. (hen the first car owner sues *lvin for damages, the court determines that *lvin was legally drunk at the time of the accident. *lvin will not be able to deny this fact in subse;uent lawsuits against him. This type of estoppel is most commonly called collateral estoppel.

Missi"
* mission is a statement of general purpose= the reason the organization e+ists. (ho are weX (hat do we doX &or whom do we do itX (hy do we do itX

G"al
1oals should be directed toward a vision and consistent with the mission. /omething the organization wants and e+pects to accomplish in the future.

O!@ecti*e
*n ob9ect is= a specific measurable result e+pected within a particular time period, consistent with a goal and strategy. * clear JmilepostJ along the strategically chosen path to the goal.

AB

Strate+4
The action path the organization has chosen to realize goals. /trategies establish broad themes for future actions and should reflect reasoned choices among alternative paths STRATEGIC BUSINESS UNITS

] ]

/"7 are distinct little businesses set up as units in a larger company to ensure that a certain product is promoted and handled as though it were an independent business. To be called an /"7, a business unit must meet specific criteria=

2) have its own mission, distinct from the missions of other /"7s :) have definable groups of competitors >) prepare its own integrative plans H) manage its resources in key areas A) have a proper size

AUTHORIT': a form of power= formal authority is legitimate power

8ine and staff authority

8ine authority= managers with line authority are those people in the organization who are directly responsible for achieving organizational goals
] ] line authority is represented by the standard chain of command is based on legitimate power

/taff authority= belongs to those individuals or groups in an organization who provide

services and advice to line managers

&unctional authority= is the right which is delegated to an individual or a department

to control specified processes, practices, policies, or other matters relating to activities undertaken by persons in other departments STA((ING: filling and keeping filled positions in the organizational structure

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MOTIVATION The willingness to e+ert toward high levels of effort toward organizational goals, conditioned by the effort^s ability to satisfy some individual need 0eed= an internal state that makes certain outcomes appear attractive The motivation process 7nsatisfied need---------Tension--------drives---------search need----------------reduction of tension T?M (Total Tuality $anagement) *n organizational undertaking to improve the ;uality of manufacturing and service. #t focuses on obtaining continuous feedback for making improvements and refining e+isting processes over the long term. ISO/777 * family of standards and guidelines for ;uality in the manufacturing and service industries from the #nternational 5rganization for /tandardization (#/5). #/5 @BBB defines the criteria for what should be measured. #/5 @BB2 covers design and development. #/5 @BB: covers production, installation and service, and #/5 @BB> covers final testing and inspection. #/5 @BBB certification does not guarantee product ;uality. #t ensures that the processes that develop the product are documented and performed in a ;ualitymanner. #nitially popular in -urope, #/5 @BBB certification began to increase in the 7./. in the early 2@@Bs. Certification re;uires e+acting documentation and demonstrations in practice over time. The process, which can take up to a year, involves two ma9or players in addition to the company being certified. * consultant provides (and may help implement) a plan for documenting the company s #/5 system. 5nce documented, a registrar interviews the company s management and line staff to make sure that the new system, as documented, has been effectively implemented. 5nly a few dozen companies worldwide are authorized to conduct such audits for the issuance of #/5 @BBB certificates. ISO (#nternational 5rganization for /tandardization, 1eneva, www.iso.ch) *n organization that sets international standards, founded in 2@HK. The 7./. member body is *0/#. #/5 deals with all fields e+cept electrical and electronics, which is governed by the older #nternational -lectrotechnical Commission (#-C). (ith regard to information processing, #/5 and #-C created QTC2, the Qoint Technical Committee for information technology. beh------------satisfied

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#t carries out its work through more than 2CA technical committees and :,MBB subcommittees and working groups, and is made up of standards organizations from more than @A countries, some of them serving as secretariats for these technical bodies. APL (* !rogramming 8anguage) * high-level mathematical programming language noted for its brevity and matri+ generation capabilities. )eveloped by 4enneth #verson in the mid2@KBs, it runs on micros to mainframes and is often used to develop mathematical models. #t is primarily an interpreted language, but compilers are available. *!8 uses uni;ue character symbols and, before today s graphical interfaces, re;uired special software or .5$ chips to enable the computer to display and print them. *!8 is popular in -urope. a!ac1s 5ne of the earliest counting instruments. /imilar devices predate the 1reek and .oman days. #t uses sliding beads in columns that are divided in two by a center bar. The top is Jheaven,J where each of two beads is worth A when moved to the center bar. The bottom is Jearth,J where each of five beads is worth 2 when moved toward the center. Tra$emar9s * trademark is a brand identification for a product or service, the latter technically called a Jservice mark.J The mark can be written te+t, te+t in a particular stylized form or a graphic symbol. Company names and products are often registered with the 7./. !atent I Trademark 5rganization (7/!T5) to help ensure their legal usage. &or more information, visit www.uspto.gov. (e *re 0ot a /ource of Trademark .egistrations The purpose of this -ncyclopedia is to provide a meaningful definition of computer science, telecommunications, semiconductor and electronics terms and related products, but it is not meant to be a source of trademark registration information. (hen we know of an origin of a term, we state it. There are thousands of terms in this database that do not include a lineage, because we either did not know of it at the time of writing or felt it was not pertinent. (e "elieve -verything #s a Trademark (e believe that every name of a product is a trademark of its respective organization. #f a company creates a name for its product and continues to use it, it is a de facto trademark whether or not it is registered. *mong other legal reasons, registration serves to officially document how long a name has been in use. Contact the Company #f a particular technology in this database is attributed to an organization, we do not know

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if it is a de facto or de 9ure trademark of that organization. To find out trademark information about a product in this publication, please contact the legal counsel of the organization that is mentioned as its creator. C"#4ri+3t The legal ownership of a Jwork,J which can take any of the following forms= written te+t, program source code, graphics images, sculpture, music, sound recording, motion picture, pantomime, choreograph and architecture. "efore Qanuary 2, 2@MC, a work had to be published to be copyrighted. *fter that date, any work e+pressed in paper or electronic form is automatically copyrighted for the life of the author plus MB years. .egistration with the Copyright 5ffice is not re;uired, although it is beneficial if there are disputes later on. #n the 7./., a copyright symbol is not mandatory, but recommended. &or works by an anonymous author or an author who uses a fictitious name (pseudonymous) as well as works Jmade for hire,J such as a publication written by an employee of a company, the copyright lasts 2:B years from date of creation or @A years from date of publication, whichever is shorter. Tec3 "l"+4 *pplying a systematic techni;ue, method or approach to solve a problem. $uch of today s technology implies the use of computers. Tec3 "l"+4 +a# (2) The difference in technologies used and'or developed in two companies, countries, ethnic groups, etc., where one is more advanced than the other. (:) The difference between those who have computers and high-tech devices in general and those who do not. *lso known as the Jdigital divide.J (>) The difference between current-day products and the technology on the drawing boards. 2-/ample /ign Test Test the probability of a sample median being e;ual to hypothesized value. 3B= m2Fm:Fm>FmH (null hypothesis) 3a= *t least one is different (alternate hypothesis) :-/ample t Test : - /ample t Test = The two sample t-Test is used for testing hypothesis about the location two sample means being e;ual.

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2 - /ample t Test = The one sample t-Test is used for testing hypothesis about the location of the sample mean and a target mean being e;ual. CP * >) model of TT$, having !eople, !roduct and !rocess as the > a+is. &or #mplementing TT$, all the > parameters should be improved. 2D Pe"#le= /atisfaction of both #nternal and -+ternal customer. :. Pr"$1ct= Conforming to the re;uirements specified. >. Pr"cess= Continuous #mprovement of all the operations and activities is at the heart of TT$.

6 La>s ") Lea Si2 Si+ma A 8aws of 8ean /i+ /igma have been formulated to provide direction to improvement efforts. The laws are a conglomeration of 4ey #deas of /i+ /igma and 8ean. La> 7: The 8aw of the $arket - Customer Critical to Tuality defines ;uality and is the highest priority for improvement, followed by .5#C (.eturn 5n #nvested Capital) and 0et !resent value. #t is called the _eroth law as it is the base on which others are built. La> -: The 8aw of &le+ibility - The velocity of any process is proportional to the fle+ibility of the process. La> E: The 8aw of &ocus - :BP of the activities in a process cause CBP of the delay. (.elated to !areto !rinciple) La> C:The 8aw of ,elocity - The velocity of any process is inversely proportional to the amount of (#!. This is also called J8ittle s 8awJ. La> 8: The comple+ity of the service or product offering adds more non-value, costs and (#! than either poor ;uality (low /igma) or slow speed (un-8ean) process problems. 6 :34Fs The A why s typically refers to the practice of asking, five times, why the failure has occurred in order to get to the root cause'causes of the problem. There can be more than one cause to a problem as well. #n an organizational conte+t, generally root cause analysis is carried out by a team of persons related to the problem. 0o special techni;ue is re;uired.

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*n e+ample is in order= ?ou are on your way home from work and your car stops= ` (hy did your car stopX "ecause it ran out of gas. ` (hy did it run out of gasX "ecause # didn t buy any gas on my way to work. ` (hy didn t you buy any gas this morningX "ecause # didn t have any money. ` (hy didn t you have any moneyX "ecause # lost it all last night in a poker game. # hope you don t mind the silly e+ample but it should illustrate the importance of digging down beneath the most pro+imate cause of the problem. &ailure to determine the root cause assures that you will be treating the symptoms of the problem instead of its cause, in which case, the disease will return, that is, you will continue to have the same problems over and over again. *lso note that the actual numbers of why s is not important as long as you get to the root cause. 5ne might well ask why did you lose all your money in the poker game last nightX aaaaa 3ere s another e+ample. # learned the e+ample using the (ashington $onument used when demonstrating the use of the A (hys. The (ashington $onument was disintegrating (hyX 7se of harsh chemicals (hyX To clean pigeon poop (hy so many pigeonsX They eat spiders and there are a lot of spiders at monument (hy so many spidersX They eat gnats and lots of gnats at monument (hy so many gnatsX They are attracted to the light at dusk. /olution= Turn on the lights at a later time. 6C AC ia a A step techni;ue very similar to A/ to stabilise, maintain and improve the safest, best working enviroment to support sustainable Tyality, Cost and )elivery. (hat are the ACsX Clear O1t= /eparate the essential from the non essential C" )i+1re= * place for everything and everything in its place. Clea a $ C3ec9= $anualy clean to spot abnormal conditions.

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C" )"rmit4= -nsures that the standard is maintained and improved. C1st"m a $ Prctice= -veryone follows the rules, understands the benefits and contributes to the improvement. 6S A/ is the Qapanese concept for 3ouse 4eeping. 2.) /ort (/eiri) :.) /traighten (/eiton) >.) /hine (/eiso) H.) /tandardize (/eiketsu) A.) /ustain (/hitsuke) Qapanese - -nglish Translations -------- -------------------/eiri - !ut things in order (remove what is not needed and keep what is needed) /eiton - !roper *rrangement (!lace things in such a way that they can be easily reached whenever they are needed) /eiso - Clean (4eep things clean and polished< no trash or dirt in the workplace) /eiketsu - !urity ($aintain cleanliness after cleaning - perpetual cleaning) /hitsuke - Commitment (*ctually this is not a part of H/ , but a typical teaching and attitude towards any undertaking to inspire pride and adherence to standards established for the four components) 6Z This standard defines the procedure of VA_ *ccreditationW which is the scheme to promote, evaluate, maintain and improve process control using the 1enba 4anri principles. VA_W is a general term for the following five actions ending with V_7Wbmeaning V)onUtW in Qapanese. -74-T5.*_7 ()onUt accept defects) -T/747.*_7 ()onUt make defects) -"*.*T/74*/*_7 ()onUt create variation) -47.#4*-/*_7 ()onUt repeat mistakes) -0*1*/*_7 ()onUt supply defects)

AM

G Ms The traditional K$s are= c $achines c $ethods c $aterials c $easurements c $other 0ature (-nvironment) c $anpower (!eople) G: ?our pro9ect planning should answer following ;uestion= (3*T = (hat will you make'do thisX (3? = (hy will you make'do thisX (3-.- = (here will you make'do thisX (35 = (ho will make'do thisX (3-0 = (hen will you start'stop this (time scheduling)X (3#C3 = (hich will you make'do this (process, tooling, material sources etcb)X . ?C T""ls 3istograms Cause and -ffect )iagram Check /heets !areto )iagrams 1raphs Control Charts /catter )iagrams . :astes O) Lea The M wastes are at the root of all unprofitable activity within your organization. The M wastes consist of= 2. )efects :. 5verproduction >. Transportation H. (aiting A. #nventory K. $otion M. !rocessing

AC

7se the acronym )5T(#$! to remember the M (astes of 8ean. The worst of all the M wastes is overproduction because it includes in essence all others and was the main driving force for the Toyota Q#T system, they were smart enough to tackle this one to eliminate the rest. H D Pr"cess The C) !rocess is a problem solving method for product and process improvement. #t is structured into C steps (the ) s) and emphasizes team. This is often re;uired in automotive industries. The C basic steps are= )efine the problem and prepare for process improvement, establish a team, describe the problem, develop interim containment, define I verify root cause, choose permanent corrective action, implement corrective action, prevent recurrence, recognize and reward the contributors. 5f course, different companies have their different twists on what they call the steps, etc...but that is the basics. C ) is short for -ight )isciplines which o5riginated from the &ord T5!/ (Team 5riented !roblem /olving) program. (&irst published appro+imately 2@CM) )D2 - -stablish the Team )D: - )escribe the problem. )D> - )evelop an #nterim Containment *ction )DH - )efine ' ,erify .oot Cause )DA - Choose ' ,erify !ermanent Corrective *ction )DK - #mplement ' ,alidate !ermanent Corrective *ction )DM - !revent .ecurrence )DC - .ecognize the Team H :astes ") Lea *n easy way # learned at a seminar to remember the wastes, they spell T#$ (55)/ T - Transport - $oving people, products I information # - #nventory - /toring parts, pieces, documentation ahead of re;uirements $ - $otion - "ending, turning, reaching, lifting ( - (aiting - &or parts, information, instructions, e;uipment 5 - 5ver production - $aking more than is #$$-)#*T-8? re;uired 5 - 5ver processing - Tighter tolerances or higher grade materials than are necessary ) - )efects - .ework, scrap, incorrect documentation / - /kills - 7nder utilizing capabilities, delegating tasks with inade;uate training

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Acce#ta!le ?1alit4 Le*el 5 A?L *cceptable Tuality 8evel. *lso referred to as *ssured Tuality 8evel. The largest ;uantity of defectives in a certain sample size that can make the lot definitely acceptable< Customer will definitely prefer the zero defect products or services and will ultimately establish the acceptable level of ;uality. Competition however, will educate the customer and establish the customer s values. There is only one ideal acceptable ;uality level - zero defects - all others are compromises based upon acceptable business, financial and safety levels. Access"r4 Pla i +

The planned utilization of remnant material for value-added purposes. Acc1rac4 2) *ccuracy refers to clustering of data about a known target. #t is the difference between a physical ;uantity s average measurements and that of a known standard, accepted truth, vs. benchmark. -nvision a target with many arrows circling the bullseye,however,none of them are near each other. :) !recision refers to the tightness of the cluster of data. -nvision a target with a cluster of arrows all touching one another but located slightly up and to the right of the bullseye. #n practice it is easier to correct a process which has good precision than it is to correct a process which is accurate. This is due to the increased amount of variation associated with accurate but not precise process. Acti*e Data *ctively and purposefully make changes in our data to monitor the corresponding impact and results on the 6s and ?s. A al4sis O) Varia ce ,ANOVA0 *nalysis of variance is a statistical techni;ue for analyzing data that tests for a difference between two or more means by comparing the variances cwithinc groups and variances cbetweenc groups. /ee the tool 2-(ay *05,*. Al#3a Ris9 *lpha risk is defined as the risk of re9ecting the 0ull hypothesis when in fact it is true. /ynonymous with= Type # error, !roducers .isk #n other words, stating a difference e+ists where actually there is none. *lpha risk is

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stated in terms of probability (such as B.BA or AP). The value (2-alpha) corresponds to the confidence level of a statistical test, so a level of significance alpha F B.BA corresponds to a @AP confidence level. A))i it4Dia+ram * tool used to organize and present large amounts of data (ideas, issues, solutions, problems) into logical categories based on user perceived relationships and conceptual frameworking. 5ften used in form of Jsticky notesJ send up to front of room in brainstorming e+ercises, then grouped by facilitator and workers. &inal diagram shows relationship between the issue and the category. Then categories are ranked, and duplicate issues are combined to make a simpler overview.

ANOVA *0alysis 5f ,*riance (*05,*), a calculation procedure to allocate the amount of variation in a process and determine if it is significant or is caused by random noise. * balanced *05,* has e;ual numbers of measurements in each group'column. * stacked *05,*= each factor has data in one column only and so does the response. AP?P *dvanced !roduct Tuality !lanning !hase 2 !lan I )efine !rogramme - determining customer needs, re;uirements I e+pectations using tools such as T&) review the entire ;uality planning process to enable the implementation of a ;uality programme how to define I set the inputs I the outputs. !hase : !roduct )esign I )evelopment - review the inputs I e+ecute the outputs, which include &$-*, )&$*, design verification, design reviews, material I engineering specifications. !hase > !rocess )esign I )evelopment - addressing features for developing manufacturing systems I related control plans, these tasks are dependent on the successful completion of phases 2 I : e+ecute the outputs. !hase H -

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!roduct I !rocess ,alidation - validation of the selected manufacturing process I its control mechanisms through production run evaluation outlining mandatory production conditions I re;uirements identifying the re;uired outputs. !hase A 8aunch, &eedback, *ssessment I Corrective *ction - focuses on reduced variation I continuous improvement identifying outputs I links to customer e+pectations I future product programmes. Control !lan $ethodology discusses use of control plan I relevant data re;uired to construct I determine control plan parameters stresses the importance of the control plan in the continuous improvement cycle. Bac95Date The start and due dates for each operation in the manufacturing process are calculated back from the ship date. (/ee also /hip )ate). Bala ce$ E2#erime t *n e+periment is balanced when all factor levels (or treatment groups) have the same number of e+perimental units (or items receiving a treatment). 7nbalanced e+periments add comple+ity to the analysis of the data but hopefully for good reason. &or e+ample, some levels are of less interest to the researcher than others. /ome levels are e+pected to produce greater variation than others and so more units are assigned to those levels. "alance is nonessential but desirable if e;ual accuracy, power, or confidence interval width for treatment comparisons is important. /evere imbalance can induce factor confounding (correlated factors or non-independent treatment levels). Bar C3art * bar chart is a graphical comparison of several ;uantities in which the lengths of the horizontal or vertical bars represent the relative magnitude of the values Bartlett Test This test is used to determine if there is a difference in variance between > or more samples'groups. #t is usefull for testing the assumption of e;ual variances, which is re;uired for one-way *05,*.

Baseli e

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* snapshot of the state of inputs'outputs frozen at a point in time for a particular process. * baseline should be recordered to establish a starting point to measure the changes achieved with any process improvement. Be c3mar9i + The concept of discovering what is the best performance being achieved, whether in your company, by a competitor, or by an entirely different industry. "enchmarking is an improvement tool whereby a company measures its performance or process against other companies best practices, determines how those companies achieved their performance levels, and uses the information to improve its own performance. "enchmarking is a continuous process whereby an enterprise measures and compares all its functions, systems and practices against strong competitors, identifying ;uality gaps in the organization, and striving to achieve competitive advantage locally and globally. Beta Ris9 "eta risk is defined as the risk of accepting the null hypothesis when, in fact, it is false. Consumer .isk or Type ## .isk. "eta risk is defined as the risk of accepting the null hypothesis when, in fact, the alternate hypothesis is true. #n other words, stating no difference e+ists when there is an actual difference. * statistical test should be capable of detecting differences that are important to you, and beta risk is the probability (such as B.2B or 2BP) that it will not. "eta risk is determined by an organization or individual and is based on the nature of the decision being made. "eta risk depends on the magnitude of the difference between sample means and is managed by increasing test sample size. #n general, a beta risk of 2BP is considered acceptable in decision making. The value (2-beta) is known as the JpowerJ of a statistical test. The power is defined as the probability of re9ecting the null hypothesis, given that the null hypothesis is indeed false. Brai st"rmi + * method to generate ideas. 1roundrules such as -no idea is a bad idea- are typical. "enefit of brainstorming is the power of the group in building ideas of each others ideas. * problem solving approach'techni;ue whereby working members in a group are conducting a deductive methodology for identifying possible causes of any problem, in order to surmount poor performance in any process or activity pursued by the group members and facilitator.

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Blac9 Belt /i+ /igma team leaders responsible for implementing process improvement pro9ects ()$*#C or )&//) within the business -- to increase customer satisfaction levels and business productivity. "lack "elts are knowledgeable and skilled in the use of the /i+ /igma methodology and tools. "lack "elts have typically completed four weeks of /i+ /igma training, and have demonstrated mastery of the sub9ect matter through the completion of pro9ect(s) and an e+am. "lack "elts coach 1reen "elts and receive coaching and support from $aster "lack "elts. Blac9 N"ise /ources of variation which are non-random B1si ess Pr"cess ?1alit4 Ma a+eme t *lso called !rocess $anagement or .eengineering. The concept of defining macro and micro processes, assigning ownership, and creating responsibilities of the owners. Ca1se a $ E))ect Dia+ram * cause and effect diagram is a visual tool used to logically organize possible causes for a specific problem or effect by graphically displaying them in increasing detail. #t helps to identify root causes and ensures common understanding of the causes. #t is also called an #shikawa diagram. Cause and -ffect relationships govern everything that happens and as such are the path to effective problem solving. "y knowing the causes, we can find some that are within our control and then change or modify them to meet our goals and ob9ectives. "y understanding the nature of the cause and effect principle, we can build a diagram to help us solve everyday problems every time. C3arter * document or sheet that clearly scopes and identifies the purpose of a Tuality improvement pro9ect. #tems specified include background case, purpose, team members, scope, timeline.

De)ects Per Milli" O##"rt1 ities 5 DPMO )efects per million opportunities ()!$5) is the average number of defects per unit observed during an average production run divided by the number of opportunities to

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make a defect on the product under study during that run normalized to one million. )efects !er $illion 5pportunities. /ynonymous with !!$. To convert )!7 to )!$5, the calculation step is actually )!7'(opportunities'unit) c 2,BBB,BBB. Demi + C4cle< PDCA The )eming Cycle, or !)C* Cycle (also known as !)/* Cycle), is a continuous ;uality improvement model consisting out of a logical se;uence of four repetitive steps for continuous improvement and learning= !lan, )o, /tudy (Check) and *ct. The !)/* cycle (or !)C*) is also known as the )eming Cycle, the )eming wheel of continuous improvement spiral. #ts origin can be traced back to the eminent statistics e+pert $r. (alter *. /hewart, in the 2@:BUs. 3e introduced the concept of !8*0, )5 and /--. The late Total Tuality $anagement (TT$) guru and renowned statistician -dward (. )eming modified the /3-(*.T cycle as= !8*0, )5, /T7)?, and *CT. *long with the other well-known *merican ;uality guru-Q.$. Quran, )eming went to Qapan as part of the occupation forces of the allies after (orld (ar ##. )eming taught a lot of Tuality #mprovement methods to the Qapanese, including the usage of statistics and the !8*0, )5, /T7)?, *CT cycle. The )eming cycle, or !)/* cycle= PLAN : plan ahead for change. *nalyze and predict the results. DO = e+ecute the plan, taking small steps in controlled circumstances. STUD': check, study the results. ACT : take action to standardize or improve the process. "enefits of the !)/* cycle= - )aily routine management-for the individual and'or the team - !roblem-solving process - !ro9ect management - Continuous development - ,endor development - 3uman resources development - 0ew product development - !rocess trials

DMAIC )efine, $easure, *nalyze, #mprove, Control. #ncremental process improvement using

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/i+ /igma methodology. /ee )$*#C $ethodology !ronounced ()uh-$ay-#ck). )$*#C refers to a data-driven ;uality strategy for improving processes, and is an integral part of the company s /i+ /igma Tuality #nitiative. )$*#C is an acronym for five interconnected phases= )efine, $easure, *nalyze, #mprove, and Control. -ach step in the cyclical )$*#C !rocess is re;uired to ensure the best possible results. The process steps= )efine the Customer, their Critical to Tuality (CTT) issues, and the Core "usiness !rocess involved. ` )efine who customers are, what their re;uirements are for products and services, and what their e+pectations are ` )efine pro9ect boundaries the stop and start of the process ` )efine the process to be improved by mapping the process flow $easure the performance of the Core "usiness !rocess involved. ` )evelop a data collection plan for the process ` Collect data from many sources to determine types of defects and metrics ` Compare to customer survey results to determine shortfall *nalyze the data collected and process map to determine root causes of defects and opportunities for improvement. ` #dentify gaps between current performance and goal performance ` !rioritize opportunities to improve ` #dentify sources of variation #mprove the target process by designing creative solutions to fi+ and prevent problems. ` Create innovate solutions using technology and discipline ` )evelop and deploy implementation plan Control the improvements to keep the process on the new course.

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` !revent reverting back to the Jold wayJ ` .e;uire the development, documentation and implementation of an ongoing monitoring plan ` #nstitutionalize the improvements through the modification of systems and structures (staffing, training, incentives) Ga tt C3art * 1antt chart is a powerful and preferred visual reporting device used for conveying a pro9ect s schedule. * typical 1antt chart graphically displays the work breakdown, total duration needed to complete tasks, as well as Pcompletion. The 1antt chart itself will not display level of effort, and is not an effective planning tool on its own. Today, 1antt Charts may be integrated with other spreadsheet-type reporting devices that convey additional information related to pro9ect planning. &urthermore, 1antt Charts are often enhanced with functionality that includes the identification of relationships between tasks, and the ability to dynamically change task attributes. ISO /777 Series ") Sta $ar$s /eries of standards established in the 2@CBs by countries of (estern -urope as a basis for 9udging the ade;uacy of the ;uality control systems of companies. ISO /77-:E777 #/5 certification standard from the #/5 @BBB series revised in year :BBB. #/5 @BB2=:BBB promotes a process based approach to increase the effectiveness of the T$/ (Tuality $anagement /ystem) in translating customer re;uirements to customer satisfaction. TPM Qapanese management philosphy. /tands for Total !roductive $aintenanace. 7sed to increase time between failure ($T"&) or life of machinery. T"tal ?1alit4 Ma a+eme t Total Tuality $anagement (TT$) is a comprehensive and structured approach to organizational management that seeks to improve the ;uality of products and services through ongoing refinements in response to continuous feedback. TT$ re;uirements may be defined separately for a particular organization or may be in adherence to established standards, such as the #nternational 5rganization for /tandardization s #/5 @BBB series. TT$ can be applied to any type of organization< it originated in the manufacturing sector and has since been adapted for use in almost every type of organization imaginable, including schools, highway maintenance, hotel management,

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and churches. *s a current focus of e-business, TT$ is based on ;uality management from the customer s point of view. TT$ processes are divided into four se;uential categories= plan, do, check, and act (the PDCA cycle). #n the planning phase, people define the problem to be addressed, collect relevant data, and ascertain the problem s root cause< in the doing phase, people develop and implement a solution, and decide upon a measurement to gauge its effectiveness< in the checking phase, people confirm the results through before-andafter data comparison< in the acting phase, people document their results, inform others about process changes, and make recommendations for the problem to be addressed in the ne+t !)C* cycle. T3e Ei+3t Eleme ts O) T?M Total Tuality $anagement is a management approach that originated in the 2@AB s and has steadily become more popular since the early 2@CB s. Total Tuality is a description of the culture, attitude and organization of a company that strives to provide customers with products and services that satisfy their needs. The culture re;uires ;uality in all aspects of the company s operations, with processes being done right the first time and defects and waste eradicated from operations. To be successful implementing TT$, an organization must concentrate on the eight key elements= -thics , Trust , #ntegrity , Training ,

Teamwork , 8eadership , .ecognition , Communication

4ey -lements TT$ has been coined to describe a philosophy that makes ;uality the driving force behind leadership, design, planning, and improvement initiatives. &or this, TT$ re;uires the help of those eight key elements. These elements can be divided into four groups according to their function. The groups are= #. &oundation - #t includes= -thics, #ntegrity and Trust. ##. "uilding "ricks - #t includes= Training, Teamwork and 8eadership. ###. "inding $ortar - #t includes= Communication. #,. .oof - #t includes= .ecognition.

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#. &oundation TT$ is built on a foundation of ethics, integrity and trust. #t fosters openness, fairness and sincerity and allows involvement by everyone. This is the key to unlocking the ultimate potential of TT$. These three elements move together, however, each element offers something different to the TT$ concept. 2. -thics - -thics is the discipline concerned with good and bad in any situation. #t is a two-faceted sub9ect represented by organizational and individual ethics. 5rganizational ethics establish a business code of ethics that outlines guidelines that all employees are to adhere to in the performance of their work. #ndividual ethics include personal rights or wrongs. :. #ntegrity - #ntegrity implies honesty, morals, values, fairness, and adherence to the facts and sincerity. The characteristic is what customers (internal or e+ternal) e+pect and deserve to receive. !eople see the opposite of integrity as duplicity. TT$ will not work in an atmosphere of duplicity. >. Trust - Trust is a by-product of integrity and ethical conduct. (ithout trust, the framework of TT$ cannot be built. Trust fosters full participation of all members. #t allows empowerment that encourages pride ownership and it encourages commitment. #t allows decision making at appropriate levels in the organization, fosters individual risktaking for continuous improvement and helps to ensure that measurements focus on improvement of process and are not used to contend people. Trust is essential to ensure customer satisfaction. /o, trust builds the cooperative environment essential for TT$. ##. "ricks "asing on the strong foundation of trust, ethics and integrity, bricks are placed to reach the roof of recognition. #t includes= H. Training - Training is very important for employees to be highly productive. /upervisors are solely responsible for implementing TT$ within their departments, and teaching their employees the philosophies of TT$. Training that employees re;uire are interpersonal skills, the ability to function within teams, problem solving, decision making, 9ob management performance analysis and improvement, business economics and technical skills. )uring the creation and formation of TT$, employees are trained so that they can become effective employees for the company. A. Teamwork - To become successful in business, teamwork is also a key element of TT$. (ith the use of teams, the business will receive ;uicker and better solutions to problems. Teams also provide more permanent improvements in processes and operations. #n teams, people feel more comfortable bringing up problems that may occur, and can get help from other workers to find a solution and put into place. There are mainly three types of teams that TT$ organizations adopt= *. Tuality #mprovement Teams or -+cellence Teams (T#T/) - These are temporary eams with the purpose of dealing with specific problems that often re-occur. These teams are

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set up for period of three to twelve months. ". !roblem /olving Teams (!/Ts) - These are temporary teams to solve certain problems and also to identify and overcome causes of problems. They generally last from one week to three months. C. 0atural (ork Teams (0(Ts) - These teams consist of small groups of skilled workers who share tasks and responsibilities. These teams use concepts such as employee involvement teams, self-managing teams and ;uality circles. These teams generally work for one to two hours a week. K. 8eadership - #t is possibly the most important element in TT$. #t appears everywhere in organization. 8eadership in TT$ re;uires the manager to provide an inspiring vision, make strategic directions that are understood by all and to instill values that guide subordinates. &or TT$ to be successful in the business, the supervisor must be committed in leading his employees. * supervisor must understand TT$, believe in it and then demonstrate their belief and commitment through their daily practices of TT$. The supervisor makes sure that strategies, philosophies, values and goals are transmitted down through out the organization to provide focus, clarity and direction. * key point is that TT$ has to be introduced and led by top management. Commitment and personal involvement is re;uired from top management in creating and deploying clear ;uality values and goals consistent with the ob9ectives of the company and in creating and deploying well defined systems, methods and performance measures for achieving those goals. ###. "inding $ortar M. Communication - #t binds everything together. /tarting from foundation to roof of the TT$ house, everything is bound by strong mortar of communication. #t acts as a vital link between all elements of TT$. Communication means a common understanding of ideas between the sender and the receiver. The success of TT$ demands communication with and among all the organization members, suppliers and customers. /upervisors must keep open airways where employees can send and receive information about the TT$ process. Communication coupled with the sharing of correct information is vital. &or communication to be credible the message must be clear and receiver must interpret in the way the sender intended. There are different ways of communication such as= *. )ownward communication - This is the dominant form of communication in an organization. !resentations and discussions basically do it. "y this the supervisors are able to make the employees clear about TT$. ". 7pward communication - "y this the lower level of employees are able to provide suggestions to upper management of the affects of TT$. *s employees provide insight and constructive criticism, supervisors must listen effectively to correct the situation that comes about through the use of TT$. This forms a level of trust between supervisors and employees. This is also similar to empowering communication, where supervisors keep open ears and listen to others. C. /ideways communication - This type of communication is important because it breaks

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down barriers between departments. #t also allows dealing with customers and suppliers in a more professional manner. #,. .oof C. .ecognition - .ecognition is the last and final element in the entire system. #t should be provided for both suggestions and achievements for teams as well as individuals. -mployees strive to receive recognition for themselves and their teams. )etecting and recognizing contributors is the most important 9ob of a supervisor. *s people are recognized, there can be huge changes in self-esteem, productivity, ;uality and the amount of effort e+horted to the task at hand. .ecognition comes in its best form when it is immediately following an action that an employee has performed. .ecognition comes in different ways, places and time such as, ` (ays - #t can be by way of personal letter from top management. *lso by award ban;uets, pla;ues, trophies etc. ` !laces - 1ood performers can be recognized in front of departments, on performance boards and also in front of top management. ` Time - .ecognition can given at any time like in staff meeting, annual award ban;uets, etc. T*17C3# / 85// &70CT#50 (e have seen that Taguchi s ;uality philosophy strongly emphasizes losses or costs. (. 3. $oore asserted that this is an Jenlightened approachJ that embodies Jthree important premises= for every product ;uality characteristic there is a target value which results in the smallest loss< deviations from target value always results in increased loss to society< RandS loss should be measured in monetary units (dollars, pesos, francs, etc.).J &igure # depicts Taguchi s typically loss function. The figure also contrasts Taguchi s function with the traditional view that states there are no losses if specifications are met.

&igure 2 Taguchi s 8oss &unction

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#t can be seen that small deviations from the target value result in small losses. These losses, however, increase in a nonlinear fashion as deviations from the target value increase. The function shown above is a simple ;uadratic e;uation that compares the measured value of a unit of output Y to the target T.: where !Y" is the e+pected loss associated with the specific value of Y. -ssentially, this e;uation states that the loss is proportional to the s;uare of the deviation of the measured value, Y, from the target value, T. This implies that any deviation from the target (based on customers desires and needs) will diminish customer satisfaction. This is in contrast to the traditional definition of ;uality that states that ;uality is conformance to specifications. #t should be recognized that the constant k can be determined if the value of !Y" associated with some Y value are both known. 5f course, under many circumstances a ;uadratic function is only an appro+imation. /ince Taguchi s loss function is presented in monetary terms, it provides a common language for all the departments or components within a company. &inally, the loss function can be used to define performance measures of a ;uality characteristic of a product or service. This property of Taguchi s loss function will be taken up in the ne+t section. "ut to anticipate the discussion of this property, Taguchi s ;uadratic function can be converted to= This can be accomplished by assuming Y has some probability distribution with mean, a and variance o.# This second mathematical e+pression states that average or e+pected loss is due either to process variation or to being off target (called JbiasJ), or both. )efinition /imply put, the Taguchi loss function is a way to show how each non-perfect part produced, results in a loss for the company. )eming states that it shows Ja minimal loss at the nominal value, and an ever-increasing loss with departure either way from the nominal value.J - (. -dwards )eming 5ut of the Crisis * technical definition is * parabolic representation that estimates the ;uality loss, e+pressed monetarily, that results when ;uality characteristics deviate from the target values. The cost of this deviation increases ;uadratically as the characteristic moves farther from the target value. - )ucan, (illiam Total Tuality 4ey Terms.

#nterpreting the chart

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This standard representation of the loss function demonstrates a few of the key attributes of loss. &or e+ample, the target value and the bottom of the parabolic function intersect, implying that as parts are produced at the nominal value, little or no loss occurs. *lso, the curve flattens as it approaches and departs from the target value. (This shows that as products approach the nominal value, the loss incurred is less than when it departs from the target.) *ny departure from the nominal value results in a loss% 8oss can be measured per part. $easuring loss encourages a focus on achieving less variation. *s we understand how even a little variation from the nominal results in a loss, the tendency would be to try and keep product and process as close to the nominal value as possible. This is what is so beneficial about the Taguchi loss. #t always keeps our focus on the need to continually improve. * business that misuses what it has will continue to misuse what it can get. The point is-cure the misuse. - &ord and Crowther *pplication * company that manufactures parts that re;uire a large amount of machining grew tired of the high costs of tooling. To avoid premature replacement of these e+pensive tools, the manager suggested that operators set the machine to run at the high-end of the specification limits. *s the tool would wear down, the products would end up measuring on the low-end of the specification limits. /o, the machine would start by producing parts on the high-end and after a period of time, the machine would produce parts that fell 9ust inside of the specs. The variation of parts produced on this machine was much greater than it should be, since the strategy was to use the entire spec width allowed rather than produce the highest ;uality part possible. !roducts may fall within spec, but will not produce close to the nominal. /everal of these Jgood partsJ may not assemble well, may re;uire recall, or may come back under warranty. The Taguchi loss would be very high. (e should consider these vital ;uestions= c #s the savings of tool life worth the cost of poor productsX c (ould it be better to replace the tool twice as often, reduce variation, or look at incoming part ;ualityX Calculations &ormulas= 8oss at a point= 8(+) F kc(+-t)d: where, k F loss coefficient

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+ F measured value t F target value *verage 8oss of a sample set= 8 F kc(sd: G (pm - t)d:) where, s F standard deviation of sample pm F process mean Total 8oss F *vg. 8oss c number of samples &or e+ample= * medical company produces a part that has a hole measuring B.AJ G B.BABJ. The tooling used to make the hole is worn and needs replacing, but management doesn t feel it necessary since it still makes Jgood partsJ. *ll parts pass TC, but several parts have been re9ected by assembly. &ailure costs per part is EB.HA. 7sing the loss function, e+plain why it may be to the benefit of the company and customer to replace or sharpen the tool more fre;uently. 7se the data below= measured value B.HA@ \ B.HMC \ B.H@A \ B.AB2 \ B.A22 \ B.A:M B.HK: \ B.HC> \ B.H@A \ B.AB2 \ B.A2K \ B.A>: B.HKM \ B.HC@ \ B.H@A \ B.AB: \ B.A:2 \ B.A>: B.HMH \ B.H@2 \ B.H@C \ B.ABA \ B.A:H \ B.A>> B.HMK \ B.H@: \ B.ABB \ B.AB@ \ B.A:M \ B.A>K /olution= The average of the points is B.AB2 and the standard deviation is about B.B::. find k, using 8(+) F k c (+-t)d: EB.HA F k c (B.ABA - B.ABB)d: k F 2CBBB ne+t, using the *verage loss e;uation= 8Fk c (sd: G (pm - t)d:) 8 F 2CBBB c (.B::d: G (.AB2 - .ABB)d:) F C.M> /o the average loss per part in this set is EC.M>. &or the loss of the total >B parts produced, F 8 c number of samples F EC.M> c >B F E:K2.@B

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&rom the calculations above, one can determine that at B.ABBJ, no loss is e+perienced. *t a measured value of B.AB2J, the loss is EB.B2C, and with a value of B.A>KJ, the loss would be as much as E:>.BB. -ven though all measurements were within specification limits and the average hole size was B.AB2J, the Taguchi loss shows that the company lost about E:K2.@B per >B parts being made. #f the batch size was increased to 2BBB parts, then the loss would be ECM>B per batch. )ue to variation being caused by the old tooling, the department is losing a significant amount of money. &rom the chart, we can see that deviation from the nominal, could cost as much as EB.>B per part. #n addition we would want to investigate whether this kind of deviation would compromise the integrity of the final product after assembly to the point of product failure. A/ A/ is the Qapanese concept for 3ouse 4eeping. 2.) /ort (/eiri) :.) /traighten (/eiton) >.) /hine (/eiso) H.) /tandardize (/eiketsu) A.) /ustain (/hitsuke) # think the concept of A/ has been twisted and its real meaning and intention has been lost due to attempts to keep each element in -nglish word to start with letter / , like the real 0ippongo words (seiri, seiton, seiso, seiketsu, and shitsuke). (ell, whoever deviced those e;uivalent -nglish words did a good 9ob,they re close, but the real interpretation is not e+actly the correct one. &or the benefit of the readers who would like to develop and establish their own understanding and applications, the following are the real meaning of each element in -nglish= Qapanese - -nglish Translations -------- -------------------/eiri - !ut things in order (remove what is not needed and keep what is needed) /eiton - !roper *rrangement (!lace things in such a way that they can be easily reached whenever they are needed) /eiso - Clean (4eep things clean and polished< no trash or dirt in the workplace) /eiketsu - !urity ($aintain cleanliness after cleaning - perpetual cleaning) /hitsuke - Commitment (*ctually this is not a part of H/ , but a typical teaching and attitude towards any undertaking to inspire pride and adherence to standards established for the four components)
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Define opportunities Measure performance Analyze opportunity Improve performance Control performance

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-nterprise resource planning, a business management system that integrates all facets of the business, including planning, manufacturing, sales, and marketing. *s the -.! methodology has become more popular, software applications have emerged to help business managers implement -.! in business activities such as inventory control, order tracking, customer service, finance and human resources.

* collection of programs that enables you to store, modify, and e+tract information from a database. There are many different types of )"$/s, ranging from small systems that run on personal computers to huge systems that run on mainframes. The following are e+amples of database applications= ` computerized library systems automated teller machines

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` flight reservation systems computerized parts inventory systems

$anagement tool through which a plan for evaluation, measurement, and improvement is implemented. The insurance entity can use this tool to analyze market trends, measure sales performance, measure market penetration, and measure product performance.reverse engineering (rievfrs een]9fenir]ig) (engineering) The analysis of a completed system in order to isolate and identify its individual components or building blocks. .everse engineering (.-) is the process of discovering the technological principles of a mechanical application through analysis of its structure, function and operation. That involves sometimes taking something (a mechanical device, an electrical component, a software program, etc.) apart and analyzing its workings in detail, usually with the intention to construct a new device or program that does the same thing without actually copying anything from the original. The verb form is to reverse-engineer, spelled with a hyphen. I $1strial es#i" a+e *c;uisition of trade secrets from business competitors. #ndustrial spying is a reaction to the efforts of many businesses to keep secret their designs, formulas, manufacturing processes, research, and future plans. Trade secrets may find their way into the open market through disloyal employees or through various other means. !enalties against those found guilty range from an in9unction against further use of the knowledge to substantial damages. Ce trali=ati" : The act or process of centralizing, or the state of being centralized< the act or process of combining or reducing several parts into a whole< as, the centrali$ation of power in the general government< the centrali$ation of commerce in a city.

Centralization /ituation in which decision-making power is at the top of an organization and there is little delegation of authority. #t is the opposite of )ecentralization. Centralization and decentralization are really a matter of degree. &ull centralization means minimum autonomy and ma+imum restrictions on operations of subunits of the organization. *s an

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organization grows in size and comple+ity, decentralization is generally considered to be effective and efficient.

C"r#"rate +"*er a ce is the set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the goals for which the corporation is governed. The principal players are the shareholders, management and the board of directors. 5ther stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large. Corporate governance is a multi-faceted sub9ect. *n important part of corporate governance deals with accountability, fiduciary duty and mechanisms of auditing and control. #n this sense, corporate governance players should comply with codes to the overall good of all constituents. *nother important focus is economic efficiency, both within the corporation (such as the best practice guidelines) as well as e+ternally (national institutional frameworks). #n this Jeconomic viewJ, the corporate governance system should be designed in such a way as to optimize results. /ome argue that the firm should act not only in the interest of shareholders, but also of all the other stakeholders. .ecently there has been considerable interest in the corporate governance practices of modern corporations, particularly since the high-profile collapses of firms such as -nron Corporation. De)i iti" The term corporate governance has come to mean many things. #t may describe= the processes by which companies are directed and controlled encouragement of companies compliance with codes (as in corporate governance guidelines) investment techni;ue based on active ownership (as in corporate governance funds)a field in economics, which studies the many issues arising from the separation of ownership and control )elegation of decision-making to the subunits of an organization. #t is a matter of degree. The lower the level where decisions are made, the greater is the decentralization. )ecentralization is most effective in organizations where subunits are autonomous and costs and profits can be independently measured. The benefits of decentralization include= (2) decisions are made by those who have the most knowledge about local conditions< (:) greater managerial input in decision-making has a desirable motivational effect< and (>) managers have more control over results. The costs of decentralization include= (2) managers have a tendency to look at their division and lose sight of overall company goals< (:) there can be costly duplication of services< and (>) costs of obtaining sufficient information increase.

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$eaning D2= the social process in which population and industry moves from urban centers to outlying districts /ynonym= decentalisation $eaning D:= the spread of power away from the center to local branches or governments @1st5i 5time (industrial engineering) * systems approach to developing and operating a manufacturing system so that the least amount of resources is e+pended in producing the final products. *bbreviated Q#T. Ma a+eme t B4 O!@ecti*e ,MBO0 /ystem of performance appraisal having the following characteristics= (2) each manager is re;uired to take certain prescribed actions and to complete certain written documents< and (:) the manager and subordinates discuss the subordinate s 9ob description, agree to short-term performance targets, discuss the progress made towards meeting these targets, and periodically evaluate the performance and provide the feedback.

T4#e &ounded 8ocation

!ublic (0?/-= &) 2@B> )earborn, $ichigan 8ist of &ord factories

(illiam &ord, Qr. !resident, Chairman of the "oard, and C-5 Qoseph 3inrichs ,ice !resident %&ecuti'e operating committee: 4ey people $ark /chulz *nne /tevens 8ewis "ooth )on 8eclair $ark &ields

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*utomotive *ston $artin ("r$ Qaguar )aimler (div. of Qaguar) 8and .over 8incoln $azda (controls >>.HP) $ercury ,olvo (cars only) E2MC.2 billion 7/) (:BBA) R2S

Pr"$1cts

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Em#l"4ees >:M,A>2 :e!site www.ford.com

The &ord $otor Company (usually called &ord< sometimes called &o$oCo), (0?/-= () is a multinational corporation that manufactures automobiles. The automaker was founded by 3enry &ord in )earborn, $ichigan, 7nited /tates (where the company is currently head;uartered), and incorporated in 2@B>. #n its twentieth century heyday, &ord, along with 1eneral $otors and Chrysler, were known as )etroit s J"ig ThreeJ automakers, companies that dominated the *merican auto market. Toyota surpassed &ord in revenue starting in :BBH. &ord remains one of the world s ten largest corporations by revenue. &ord introduced methods for large-scale manufacturing of cars, and large-scale management of an industrial workforce, especially elaborately engineered manufacturing se;uences typified by the moving assembly lines. 3enry &ord s combination of highly efficient factories, highly paid workers, and low prices revolutionized manufacturing and came to be known around the world as &ordism by 2@2H. -arly history

3enry &ord (ca. 2@2@)

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&ord assembly line (2@2>) /trike 5rganized work stoppage by labor for the purpose of e+erting pressure on management with regard to agreeing on better contract terms or working conditions, correcting an unsettled grievance, or recognizing a union as a "argaining *gent. /trike is the ultimate labor weapon. !ublic sector strikes are usually illegal.

!epsiCo, #nc.

T4#e &ounded 8ocation 4ey people I $1str4 Pr"$1cts

!ublic (0?/-= !-!) !urchase, 0ew ?ork, 7/* (2@KA) !urchase, 0ew ?ork, 7/* /teven .einemund, Chairman I C-5 &ood and beverage !epsi

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/unny )elight 1atorade 8ay s )oritos &rappuccino (for /tarbucks) Re*e 1e Em#l"4ees :e!site E>:.K billion 7/) (:BBA) 2A>,BBB (:BBA) www.pepsico.com

!epsiCo, #nc. 0?/-= PEP is a global beverage and

(al-$art

(al-$art /tores, #nc.

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T4#e &ounded 8ocation

)iscount store'!ublic (0?/-= :MT) .ogers, *rkansas, 2@K: "entonville, *rkansas, 7/* /am (alton (2@2CY2@@:), &ounder 3. 8ee /cott, C-5 /. .obson (alton, Chairman .etail (al-$art )iscount /tores (al-$art /upercenter /am s Club 0eighborhood $arkets */)* E>2A.KAH "illion 7/) (:BBK) E22.:>2 "illion 7/) (:BBK) : $illion (:BBK) http=''www.walmartstores.com'

4ey people

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Re*e 1e Net I c"me Em#l"4ees :e!site

(al-$art /tores, #nc. (0?/-= :MT) was founded by /am (alton in 2@K:. #t is the largest retailer in the world and was formerly the largest corporation in the world based on revenue for :BBH (see &ortune 1lobal ABB). #n :BBK it was overtaken by three of the global oil ma9ors. (al-$art s impact is hotly debated. /pecific areas of controversy include the company s product origins, treatment of employees and suppliers, environmental policies, e+traction of public subsidies (corporate welfare), availability of prescription contraceptives at (al$art pharmacy counters, and store impacts on local communities and businesses. R2SR:S The controversy is covered in more detail in the Criticism of (al-)art article.

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The e+terior of a (al-$art /upercenter, located in $adison 3eights, ,irginia.

The e+terior of a (al-$art 0eighborhood $arket, located in Center !oint, *labama. (al-$art operates retail department stores T,/, #ndia

#t has been suggested that T*+ +u$uki be merged into this article or section. ()iscuss) T, /undram #yengar and /ons 8imited (T,/) is the holding company for the T,/ 1roup of companies engaged in the manufacturing of almost all kinds of automotive components, two wheelers and a few other industrial products. They are also into the financial services sector. The turnover of the entire group was close to E: billion in :BB>.

CA

T,/ was founded by the T.,. /undaram #yengar back in 2@22.

T,/ Champ motorcyle in Chennai #t is the only automotive manufacture in the world to get the prestigious )eming award. #ts group company /undaram Clayton was the first company in #ndia to receive the )eming award. #t went on to be awarded the Qapan Tuality $edal. This medal is only awarded to companies for continuous improvement in ;uality practice after they have received the )eming award. T?M (Total Tuality $anagement) *n organizational undertaking to improve the ;uality of manufacturing and service. #t focuses on obtaining continuous feedback for making improvements and refining e+isting processes over the long term.

ISO/777 * family of standards and guidelines for ;uality in the manufacturing and service industries from the #nternational 5rganization for /tandardization (#/5). #/5 @BBB defines the criteria for what should be measured. #/5 @BB2 covers design and development. #/5 @BB: covers production, installation and service, and #/5 @BB> covers final testing and inspection. #/5 @BBB certification does not guarantee product ;uality. #t ensures that the processes that develop the product are documented and performed in a ;uality manner. #nitially popular in -urope, #/5 @BBB certification began to increase in the 7./. in the early 2@@Bs. Certification re;uires e+acting documentation and demonstrations in practice over time. The process, which can take up to a year, involves two ma9or players in addition to the company being certified. * consultant provides (and may help implement) a plan for documenting the company s #/5 system. 5nce documented, a registrar interviews the company s management and line staff to make sure that the new system, as documented, has been effectively implemented. 5nly a few dozen companies worldwide are authorized to conduct such audits for the issuance of #/5 @BBB certificates.

CK

ISO (#nternational 5rganization for /tandardization, 1eneva, www.iso.ch) *n organization that sets international standards, founded in 2@HK. The 7./. member body is *0/#. #/5 deals with all fields e+cept electrical and electronics, which is governed by the older #nternational -lectrotechnical Commission (#-C). (ith regard to information processing, #/5 and #-C created QTC2, the Qoint Technical Committee for#T. #t carries out its work through more than 2CA technical committees and :,MBB subcommittees and working groups, and is made up of standards organizations from more than @A countries, some of them serving as secretariats for these technical bodies.

APL (* !rogramming 8anguage) * high-level mathematical programming language noted for its brevity and matri+ generation capabilities. )eveloped by 4enneth #verson in the mid2@KBs, it runs on micros to mainframes and is often used to develop mathematical models. #t is primarily an interpreted language, but compilers are available. *!8 uses uni;ue character symbols and, before today s graphical interfaces, re;uired special software or .5$ chips to enable the computer to display and print them. *!8 is popular in -urope.

a!ac1s 5ne of the earliest counting instruments. /imilar devices predate the 1reek and .oman days. #t uses sliding beads in columns that are divided in two by a center bar. The top is Jheaven,J where each of two beads is worth A when moved to the center bar. The bottom is Jearth,J where each of five beads is worth 2 when moved toward the center.

Tra$emar9s * trademark is a brand identification for a product or service, the latter technically called a Jservice mark.J The mark can be written te+t, te+t in a particular stylized form or a graphic symbol. Company names and products are often registered with the 7./. !atent I Trademark 5rganization (7/!T5) to help ensure their legal usage. &or more information, visit www.uspto.gov.

CM

(e *re 0ot a /ource of Trademark .egistrations The purpose of this -ncyclopedia is to provide a meaningful definition of computer science, telecommunications, semiconductor and electronics terms and related products, but it is not meant to be a source of trademark registration information. (hen we know of an origin of a term, we state it. There are thousands of terms in this database that do not include a lineage, because we either did not know of it at the time of writing or felt it was not pertinent. (e "elieve -verything #s a Trademark (e believe that every name of a product is a trademark of its respective organization. #f a company creates a name for its product and continues to use it, it is a de facto trademark whether or not it is registered. *mong other legal reasons, registration serves to officially document how long a name has been in use. Contact the Company #f a particular technology in this database is attributed to an organization, we do not know if it is a de facto or de 9ure trademark of that organization. To find out trademark information about a product in this publication, please contact the legal counsel of the organization that is mentioned as its creator.

C"#4ri+3t The legal ownership of a Jwork,J which can take any of the following forms= written te+t, program source code, graphics images, sculpture, music, sound recording, motion picture, pantomime, choreograph and architecture. "efore Qanuary 2, 2@MC, a work had to be published to be copyrighted. *fter that date, any work e+pressed in paper or electronic form is automatically copyrighted for the life of the author plus MB years. .egistration with the Copyright 5ffice is not re;uired, although it is beneficial if there are disputes later on. #n the 7./., a copyright symbol is not mandatory, but recommended. &or works by an anonymous author or an author who uses a fictitious name (pseudonymous) as well as works Jmade for hire,J such as a publication written by an employee of a company, the copyright lasts 2:B years from date of creation or @A years from date of publication, whichever is shorter.

Tec3 "l"+4 *pplying a systematic techni;ue, method or approach to solve a problem. $uch of today s technology implies the use of computers.

CC

)efinition of= technology gap (2) The difference in technologies used and'or developed in two companies, countries, ethnic groups, etc., where one is more advanced than the other. (:) The difference between those who have computers and high-tech devices in general and those who do not. *lso known as the Jdigital divide.J (>) The difference between current-day products and the technology on the drawing boards.

2-/ample /ign Test Test the probability of a sample median being e;ual to hypothesized value. 3B= m2Fm:Fm>FmH (null hypothesis) 3a= *t least one is different (alternate hypothesis)

:-/ample t Test : - /ample t Test = The two sample t-Test is used for testing hypothesis about the location two sample means being e;ual. 2 - /ample t Test = The one sample t-Test is used for testing hypothesis about the location of the sample mean and a target mean being e;ual.

>! * >) model of TT$, having !eople, !roduct and !rocess as the > a+is. &or #mplementing TT$, all the > parameters should be improved. 2. !eople= /atisfaction of both #nternal and -+ternal customer. :. !roduct= Conforming to the re;uirements specified. >. !rocess= Continuous #mprovement of all the operations and activities is at the heart of TT$.

C@

A 8aws of 8ean /i+ /igma A 8aws of 8ean /i+ /igma have been formulated to provide direction to improvement efforts. The laws are a conglomeration of 4ey #deas of /i+ /igma and 8ean. 8aw B= The 8aw of the $arket - Customer Critical to Tuality defines ;uality and is the highest priority for improvement, followed by .5#C (.eturn 5n #nvested Capital) and 0et !resent value. #t is called the _eroth law as it is the base on which others are built. 8aw 2= The 8aw of &le+ibility - The velocity of any process is proportional to the fle+ibility of the process. 8aw := The 8aw of &ocus - :BP of the activities in a process cause CBP of the delay. (.elated to !areto !rinciple) 8aw >=The 8aw of ,elocity - The velocity of any process is inversely proportional to the amount of (#!. This is also called J8ittle s 8awJ. 8aw H= The comple+ity of the service or product offering adds more non-value, costs and (#! than either poor ;uality (low /igma) or slow speed (un-8ean) process problems.

A (hy s The A why s typically refers to the practice of asking, five times, why the failure has occurred in order to get to the root cause'causes of the problem. There can be more than one cause to a problem as well. #n an organizational conte+t, generally root cause analysis is carried out by a team of persons related to the problem. 0o special techni;ue is re;uired. *n e+ample is in order= ?ou are on your way home from work and your car stops= ` (hy did your car stopX "ecause it ran out of gas. ` (hy did it run out of gasX "ecause # didn t buy any gas on my way to work. ` (hy didn t you buy any gas this morningX "ecause # didn t have any money. ` (hy didn t you have any moneyX "ecause # lost it all last night in a poker game. # hope you don t mind the silly e+ample but it should illustrate the importance of digging down beneath the most pro+imate cause of the problem. &ailure to determine the root

@B

cause assures that you will be treating the symptoms of the problem instead of its cause, in which case, the disease will return, that is, you will continue to have the same problems over and over again. *lso note that the actual numbers of why s is not important as long as you get to the root cause. 5ne might well ask why did you lose all your money in the poker game last nightX aaaaa 3ere s another e+ample. # learned the e+ample using the (ashington $onument used when demonstrating the use of the A (hys. The (ashington $onument was disintegrating (hyX 7se of harsh chemicals (hyX To clean pigeon poop (hy so many pigeonsX They eat spiders and there are a lot of spiders at monument (hy so many spidersX They eat gnats and lots of gnats at monument (hy so many gnatsX They are attracted to the light at dusk. /olution= Turn on the lights at a later time.

AC AC ia a A step techni;ue very similar to A/ to stabilise, maintain and improve the safest, best working enviroment to support sustainable Tyality, Cost and )elivery. (hat are the ACsX Clear 5ut= /eparate the essential from the non essential Configure= * place for everything and everything in its place. Clean and Check= $anualy clean to spot abnormal conditions. Conformity= -nsures that the standard is maintained and improved. Custom and !rctice= -veryone follows the rules, understands the benefits and contributes to the improvement.

A/ A/ is the Qapanese concept for 3ouse 4eeping. 2.) /ort (/eiri)

@2

:.) /traighten (/eiton) >.) /hine (/eiso) H.) /tandardize (/eiketsu) A.) /ustain (/hitsuke) Qapanese - -nglish Translations -------- -------------------/eiri - !ut things in order (remove what is not needed and keep what is needed) /eiton - !roper *rrangement (!lace things in such a way that they can be easily reached whenever they are needed) /eiso - Clean (4eep things clean and polished< no trash or dirt in the workplace) /eiketsu - !urity ($aintain cleanliness after cleaning - perpetual cleaning) /hitsuke - Commitment (*ctually this is not a part of H/ , but a typical teaching and attitude towards any undertaking to inspire pride and adherence to standards established for the four components)

A_ This standard defines the procedure of VA_ *ccreditationW which is the scheme to promote, evaluate, maintain and improve process control using the 1enba 4anri principles. VA_W is a general term for the following five actions ending with V_7Wbmeaning V)onUtW in Qapanese. -74-T5.*_7 ()onUt accept defects) -T/747.*_7 ()onUt make defects) -"*.*T/74*/*_7 ()onUt create variation) -47.#4*-/*_7 ()onUt repeat mistakes) -0*1*/*_7 ()onUt supply defects)

K $s The traditional K$s are= c $achines c $ethods c $aterials @:

c $easurements c $other 0ature (-nvironment) c $anpower (!eople) K( ?our pro9ect planning should answer following ;uestion= (3*T = (hat will you make'do thisX (3? = (hy will you make'do thisX (3-.- = (here will you make'do thisX (35 = (ho will make'do thisX (3-0 = (hen will you start'stop this (time scheduling)X (3#C3 = (hich will you make'do this (process, tooling, material sources etcb)X

M TC Tools 3istograms Cause and -ffect )iagram Check /heets !areto )iagrams 1raphs Control Charts /catter )iagrams

M (astes 5f 8ean The M wastes are at the root of all unprofitable activity within your organization. The M wastes consist of= 2. )efects :. 5verproduction >. Transportation H. (aiting A. #nventory K. $otion M. !rocessing

@>

7se the acronym )5T(#$! to remember the M (astes of 8ean. The worst of all the M wastes is overproduction because it includes in essence all others and was the main driving force for the Toyota Q#T system, they were smart enough to tackle this one to eliminate the rest.

C ) !rocess The C) !rocess is a problem solving method for product and process improvement. #t is structured into C steps (the ) s) and emphasizes team. This is often re;uired in automotive industries. The C basic steps are= )efine the problem and prepare for process improvement, establish a team, describe the problem, develop interim containment, define I verify root cause, choose permanent corrective action, implement corrective action, prevent recurrence, recognize and reward the contributors. 5f course, different companies have their different twists on what they call the steps, etc...but that is the basics. C ) is short for -ight )isciplines which o5riginated from the &ord T5!/ (Team 5riented !roblem /olving) program. (&irst published appro+imately 2@CM) )D2 - -stablish the Team )D: - )escribe the problem. )D> - )evelop an #nterim Containment *ction )DH - )efine ' ,erify .oot Cause )DA - Choose ' ,erify !ermanent Corrective *ction )DK - #mplement ' ,alidate !ermanent Corrective *ction )DM - !revent .ecurrence )DC - .ecognize the Team

C (astes of 8ean *n easy way # learned at a seminar to remember the wastes, they spell T#$ (55)/ T - Transport - $oving people, products I information # - #nventory - /toring parts, pieces, documentation ahead of re;uirements $ - $otion - "ending, turning, reaching, lifting ( - (aiting - &or parts, information, instructions, e;uipment 5 - 5ver production - $aking more than is #$$-)#*T-8? re;uired 5 - 5ver processing - Tighter tolerances or higher grade materials than are necessary

@H

) - )efects - .ework, scrap, incorrect documentation / - /kills - 7nder utilizing capabilities, delegating tasks with inade;uate training

*T8 *cceptable Tuality 8evel. *lso referred to as *ssured Tuality 8evel. The largest ;uantity of defectives in a certain sample size that can make the lot definitely acceptable< Customer will definitely prefer the zero defect products or services and will ultimately establish the acceptable level of ;uality. Competition however, will educate the customer and establish the customer s values. There is only one ideal acceptable ;uality level - zero defects - all others are compromises based upon acceptable business, financial and safety levels.

*ccessory !lanning The planned utilization of remnant material for value-added purposes.

*ccuracy 2) *ccuracy refers to clustering of data about a known target. #t is the difference between a physical ;uantity s average measurements and that of a known standard, accepted truth, vs. benchmark. -nvision a target with many arrows circling the bullseye, however, none of them are near each other. :) !recision refers to the tightness of the cluster of data. -nvision a target with a cluster of arrows all touching one another but located slightly up and to the right of the bullseye. #n practice it is easier to correct a process which has good precision than it is to correct a process which is accurate. This is due to the increased amount of variation associated with accurate but not precise process. *ctive )ata *ctively and purposefully make changes in our data to monitor the corresponding impact and results on the 6s and ?s.

*nalysis 5f ,ariance (*05,*)

@A

*nalysis of variance is a statistical techni;ue for analyzing data that tests for a difference between two or more means by comparing the variances cwithinc groups and variances cbetweenc groups. /ee the tool 2-(ay *05,*.

*lpha .isk *lpha risk is defined as the risk of re9ecting the 0ull hypothesis when in fact it is true. /ynonymous with= Type # error, !roducers .isk #n other words, stating a difference e+ists where actually there is none. *lpha risk is stated in terms of probability (such as B.BA or AP). The value (2-alpha) corresponds to the confidence level of a statistical test, so a level of significance alpha F B.BA corresponds to a @AP confidence level.

*ffinity )iagram * tool used to organize and present large amounts of data (ideas, issues, solutions, problems) into logical categories based on user perceived relationships and conceptual frameworking. 5ften used in form of Jsticky notesJ send up to front of room in brainstorming e+ercises, then grouped by facilitator and workers. &inal diagram shows relationship between the issue and the category. Then categories are ranked, and duplicate issues are combined to make a simpler overview.

*05,* *0alysis 5f ,*riance (*05,*), a calculation procedure to allocate the amount of variation in a process and determine if it is significant or is caused by random noise. * balanced *05,* has e;ual numbers of measurements in each group'column. * stacked *05,*= each factor has data in one column only and so does the response.

*!T!

@K

*dvanced !roduct Tuality !lanning !hase 2 !lan I )efine !rogramme - determining customer needs, re;uirements I e+pectations using tools such as T&) review the entire ;uality planning process to enable the implementation of a ;uality programme how to define I set the inputs I the outputs. !hase : !roduct )esign I )evelopment - review the inputs I e+ecute the outputs, which include &$-*, )&$*, design verification, design reviews, material I engineering specifications. !hase > !rocess )esign I )evelopment - addressing features for developing manufacturing systems I related control plans, these tasks are dependent on the successful completion of phases 2 I : e+ecute the outputs. !hase H !roduct I !rocess ,alidation - validation of the selected manufacturing process I its control mechanisms through production run evaluation outlining mandatory production conditions I re;uirements identifying the re;uired outputs. !hase A 8aunch, &eedback, *ssessment I Corrective *ction - focuses on reduced variation I continuous improvement identifying outputs I links to customer e+pectations I future product programmes. Control !lan $ethodology discusses use of control plan I relevant data re;uired to construct I determine control plan parameters stresses the importance of the control plan in the continuous improvement cycle.

"ack-)ate The start and due dates for each operation in the manufacturing process are calculated back from the ship date. (/ee also /hip )ate).

"alanced -+periment *n e+periment is balanced when all factor levels (or treatment groups) have the same number of e+perimental units (or items receiving a treatment). 7nbalanced e+periments

@M

add comple+ity to the analysis of the data but hopefully for good reason. &or e+ample, some levels are of less interest to the researcher than others. /ome levels are e+pected to produce greater variation than others and so more units are assigned to those levels. "alance is nonessential but desirable if e;ual accuracy, power, or confidence interval width for treatment comparisons is important. /evere imbalance can induce factor confounding (correlated factors or non-independent treatment levels).

"ar Chart * bar chart is a graphical comparison of several ;uantities in which the lengths of the horizontal or vertical bars represent the relative magnitude of the values

"artlett Test This test is used to determine if there is a difference in variance between > or more samples'groups. #t is usefull for testing the assumption of e;ual variances, which is re;uired for one-way *05,*.

"aseline * snapshot of the state of inputs'outputs frozen at a point in time for a particular process. * baseline should be recordered to establish a starting point to measure the changes achieved with any process improvement.

"enchmarking The concept of discovering what is the best performance being achieved, whether in your company, by a competitor, or by an entirely different industry. "enchmarking is an improvement tool whereby a company measures its performance or process against other companies best practices, determines how those companies achieved their performance levels, and uses the information to improve its own performance. "enchmarking is a continuous process whereby an enterprise measures and compares all its functions, systems and practices against strong competitors, identifying ;uality gaps in the organization, and striving to achieve competitive advantage locally and globally.

@C

"eta .isk "eta risk is defined as the risk of accepting the null hypothesis when, in fact, it is false. Consumer .isk or Type ## .isk. "eta risk is defined as the risk of accepting the null hypothesis when, in fact, the alternate hypothesis is true. #n other words, stating no difference e+ists when there is an actual difference. * statistical test should be capable of detecting differences that are important to you, and beta risk is the probability (such as B.2B or 2BP) that it will not. "eta risk is determined by an organization or individual and is based on the nature of the decision being made. "eta risk depends on the magnitude of the difference between sample means and is managed by increasing test sample size. #n general, a beta risk of 2BP is considered acceptable in decision making. The value (2-beta) is known as the JpowerJ of a statistical test. The power is defined as the probability of re9ecting the null hypothesis, given that the null hypothesis is indeed false.

"rainstorming * method to generate ideas. 1roundrules such as -no idea is a bad idea- are typical. "enefit of brainstorming is the power of the group in building ideas of each others ideas. * problem solving approach'techni;ue whereby working members in a group are conducting a deductive methodology for identifying possible causes of any problem, in order to surmount poor performance in any process or activity pursued by the group members and facilitator.

"lack "elt /i+ /igma team leaders responsible for implementing process improvement pro9ects ()$*#C or )&//) within the business -- to increase customer satisfaction levels and business productivity. "lack "elts are knowledgeable and skilled in the use of the /i+ /igma methodology and tools. "lack "elts have typically completed four weeks of /i+ /igma training, and have demonstrated mastery of the sub9ect matter through the completion of pro9ect(s) and an e+am.

@@

"lack "elts coach 1reen "elts and receive coaching and support from $aster "lack "elts.

"lack 0oise /ources of variation which are non-random

"usiness !rocess Tuality $anagement *lso called !rocess $anagement or .eengineering. The concept of defining macro and micro processes, assigning ownership, and creating responsibilities of the owners.

Ca1se a $ E))ect Dia+ram * cause and effect diagram is a visual tool used to logically organize possible causes for a specific problem or effect by graphically displaying them in increasing detail. #t helps to identify root causes and ensures common understanding of the causes. #t is also called an #shikawa diagram. Cause and -ffect relationships govern everything that happens and as such are the path to effective problem solving. "y knowing the causes, we can find some that are within our control and then change or modify them to meet our goals and ob9ectives. "y understanding the nature of the cause and effect principle, we can build a diagram to help us solve everyday problems every time. C3arter * document or sheet that clearly scopes and identifies the purpose of a Tuality improvement pro9ect. #tems specified include background case, purpose, team members, scope, timeline. De)ects Per Milli" O##"rt1 ities 5 DPMO )efects per million opportunities ()!$5) is the average number of defects per unit observed during an average production run divided by the number of opportunities to make a defect on the product under study during that run normalized to one million. )efects !er $illion 5pportunities. /ynonymous with !!$.

2BB

To convert )!7 to )!$5, the calculation step is actually )!7'(opportunities'unit) c 2,BBB,BBB.

)eming Cycle, !)C* The )eming Cycle, or !)C* Cycle (also known as !)/* Cycle), is a continuous ;uality improvement model consisting out of a logical se;uence of four repetitive steps for continuous improvement and learning= !lan, )o, /tudy (Check) and *ct. The !)/* cycle (or !)C*) is also known as the )eming Cycle, the )eming wheel of continuous improvement spiral. #ts origin can be traced back to the eminent statistics e+pert $r. (alter *. /hewart, in the 2@:BUs. 3e introduced the concept of !8*0, )5 and /--. The late Total Tuality $anagement (TT$) guru and renowned statistician -dward (. )eming modified the /3-(*.T cycle as= !8*0, )5, /T7)?, and *CT. *long with the other well-known *merican ;uality guru-Q.$. Quran, )eming went to Qapan as part of the occupation forces of the allies after (orld (ar ##. )eming taught a lot of Tuality #mprovement methods to the Qapanese, including the usage of statistics and the !8*0, )5, /T7)?, *CT cycle. The )eming cycle, or !)/* cycle= !8*0= plan ahead for change. *nalyze and predict the results. )5= e+ecute the plan, taking small steps in controlled circumstances. /T7)?= check, study the results. *CT= take action to standardize or improve the process. "enefits of the !)/* cycle= - )aily routine management-for the individual and'or the team - !roblem-solving process - !ro9ect management - Continuous development - ,endor development - 3uman resources development - 0ew product development - !rocess trials

)$*#C )efine, $easure, *nalyze, #mprove, Control. #ncremental process improvement using /i+ /igma methodology. /ee )$*#C $ethodology

2B2

!ronounced ()uh-$ay-#ck). )$*#C refers to a data-driven ;uality strategy for improving processes, and is an integral part of the company s /i+ /igma Tuality #nitiative. )$*#C is an acronym for five interconnected phases= )efine, $easure, *nalyze, #mprove, and Control. -ach step in the cyclical )$*#C !rocess is re;uired to ensure the best possible results. The process steps= )efine the Customer, their Critical to Tuality (CTT) issues, and the Core "usiness !rocess involved. ` )efine who customers are, what their re;uirements are for products and services, and what their e+pectations are ` )efine pro9ect boundaries the stop and start of the process ` )efine the process to be improved by mapping the process flow $easure the performance of the Core "usiness !rocess involved. ` )evelop a data collection plan for the process ` Collect data from many sources to determine types of defects and metrics ` Compare to customer survey results to determine shortfall *nalyze the data collected and process map to determine root causes of defects and opportunities for improvement. ` #dentify gaps between current performance and goal performance ` !rioritize opportunities to improve ` #dentify sources of variation #mprove the target process by designing creative solutions to fi+ and prevent problems. ` Create innovate solutions using technology and discipline ` )evelop and deploy implementation plan Control the improvements to keep the process on the new course. ` !revent reverting back to the Jold wayJ

2B:

` .e;uire the development, documentation and implementation of an ongoing monitoring plan ` #nstitutionalize the improvements through the modification of systems and structures (staffing, training, incentives)

Ga tt C3art * 1antt chart is a powerful and preferred visual reporting device used for conveying a pro9ect s schedule. * typical 1antt chart graphically displays the work breakdown, total duration needed to complete tasks, as well as Pcompletion. The 1antt chart itself will not display level of effort, and is not an effective planning tool on its own. Today, 1antt Charts may be integrated with other spreadsheet-type reporting devices that convey additional information related to pro9ect planning. &urthermore, 1antt Charts are often enhanced with functionality that includes the identification of relationships between tasks, and the ability to dynamically change task attributes.

ISO/777ISeries")Sta $ar$s: /eries of standards established in the 2@CBs by countries of (estern -urope as a basis for 9udging the ade;uacy of the ;uality control systems of companies. ISO/77-:E777 #/5 certification standard from the #/5 @BBB series revised in year :BBB. #/5 @BB2=:BBB promotes a process based approach to increase the effectiveness of the T$/ (Tuality $anagement /ystem) in translating customer re;uirements to customer satisfaction. TPM Qapanese management philosphy. /tands for Total !roductive $aintenanace. 7sed to increase time between failure ($T"&) or life of machinery. C" )lict Two or more parties having differing interests or perspectives that re;uire resolution to achieve pro9ect goals. The state that e+ists when two groups have goals that will affect C" )lict Ma a+eme t

2B>

3andling of conflicts between pro9ect participants or groups in order to create optimal pro9ect results. The ability to manage conflict effectively. The process by which the pro9ect manager uses appropriate managerial techni;ues to deal with the inevitable disagreements, both technical and personal in nature, that develop among those working toward pro9ect accomplishment.

C" s1lta t 5ne who provides some specialized service based on their special ;ualifications, education or e+perience. C" )r" tati" (here two parties work together toward a solution of the problem C" )lict Res"l1ti" To seek a solution to a problem, five methods in particular have been proven through confrontation, compromise, smoothing, forcing and withdrawal. :a+e M" e4 #ai$ as c"m#e sati" )"r la!"r or services usually according to contract and " a 3"1rl4< $ail4< "r #iece>"r9 !asis. :ai*er * document stating a cancellation or reduction of a re;uirement. "uyer action that grants contract relief from achieving specified performance. 7sually applied when the re;uired performance is not worth the cost and'or schedule to achieve full compliance. :3at5I) A al4sis The process of evaluating alternative strategies. :3at5i) Sim1lati"

2BH

Changing the value of the parameters of the pro9ect network to study its behavior under various conditions of its operation. :"r9 Brea9$"> * techni;ue for representing all the components, software, services and data contained in the pro9ect scope statement. #t establishes a hierarchical structure or product oriented Jfamily treeJ of elements. #t is used to organize, define and graphically display all the work items or work packages to be done to accomplish the pro9ect s ob9ectives. * structure for breaking a large pro9ect into smaller work components. * task-oriented Jfamily treeJ of activities which organizes, defines and graphically displays the total work to be accomplished in order to achieve the final ob9ectives of the pro9ect. COLLECTIVE BARGAINING 0egotiations between trade unions and employers on wages and working conditions GATT was an international organisation established in 2@HM which aimed to reduce, by agreement, the levels of tariffs and other protectionist tools and thereby ensure free trade in the world. There were 22 ma9or rounds of negotiations and the last one was the J7ruguay .oundJ. 1*TT has now been superseded by the (orld Trade 5rganisation. BACK:ARD INTEGRATION: 5ccurs when a company 9oins with a firm that is involved at an earlier stage of the production chain. *n e+ample might be a brewery taking over a hop or barley farm. BARRIERS5TO5ENTR': 5bstacles to the entry of new firms into a market. "arriers to entry may take various forms. They may be technical barriers, legal barriers or barriers that arise from strong branding of the product BU'ER;S MARKET= The ;uantity of goods for sale e+ceeds the amount consumers are willing and able to buy at the current market price. Characterised by low prices BUSINESS C'CLE: The tendency of economies to move, over time, through periods of boom and slump and occurs when real 1)! moves away from its trend path. The business cycle is the fluctuations in the rate of economic growth that take place in the economy. These fluctuations appear to occur around every five years and have probably occurred ever since economies have occurred% #t is the aim of all governments to try to dampen the effects of the business cycle and get more balanced long-term growth, but so far they have had limited success. The peak of the business cycle is usually referred to as a boom, and the trough as a recession or depression.

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BLACK MARKETS: Created when buyers and sellers meet to negotiate the e+change of a prohibited or illegal good. $ore generally any unofficial market in which prices are inordinately high.

BIAS: "ias is a term which refers to how far the average statistic lies from the parameter it is estimating, that is, the error which arises when estimating a ;uantity. -rrors from chance will cancel each other out in the long run, those from bias will not. BARTER: The direct e+change of goods and services without the use of money. COST5BENE(IT5ANAL'SIS: * method of assessing the social costs and benefits of an investment pro9ect CONTRIBUTION: The difference between the price charged and the variable costs involved in producing a good. TARI((S: Ta+es generally on goods imported into a country Kai=e ( Qapanese for Jchange for the betterJ or JimprovementJ, the -nglish translation is Jcontinuous improvementJ, or Jcontinual improvement.J) is an approach to productivity improvement originating in applications of the work of *merican e+perts such as &rederick (inslow Taylor, &rank "unker 1ilbreth, (alter /hewhart, and of the (ar )epartment s Training (ithin #ndustry program by Qapanese manufacturers after (orld (ar ##. The development of 4aizen went hand-in-hand with that of ;uality control circles, but it was not limited to ;uality assurance. The goals of kaizen include the elimination of waste (defined as Jactivities that add cost but do not add valueJ), 9ust-in-time delivery, production load leveling of amount and types, standardized work, paced moving lines, right-sized e;uipment, etc. * closer definition of the Qapanese usage of 4aizen is Jto take it apart and put back together in a better way.J (hat is taken apart is usually a process, system, product, or service. 4aizen is a daily activity whose purpose goes beyond improvement. #t is also a process that, when done correctly, humanizes the workplace, eliminates hard work (both mental and physical), and teaches people how to do rapid e+periments using the scientific method and how to learn to see and eliminate waste in business processes. J4aizenJ is the correct usage. J4aizen eventJ or Jkaizen blitzJ are incorrect usage. 4aizen is often misunderstood and applied incorrectly, resulting in bad outcomes including, for e+ample, layoffs. This is called JkaiakuJ - literally, Jchange for the worse.J 8ayoffs are not the intent of kaizen. #nstead, kaizen must be practiced in tandem with the J.espect for !eopleJ principle. (ithout J.espect for !eople,J there can be no continuous improvement. #nstead, the usual result is one-time gains that ;uickly fade.

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#mportantly, kaizen must operate with three principles in place= process and results (not results-only)< systemic thinking (i.e. big picture, not solely the narrow view)< and non9udgmental, non-blaming (because blaming is wasteful). -veryone participates in kaizen< people of all levels in an organization, from the C-5 on down, as well as e+ternal stakeholders if needed. The format for kaizen can be individual, suggestion system, small group, or large group. The only way to truly understand the intent, meaning, and power of kaizen is through direct participation, many, many times.

Translation
The original kan9i characters for this word are= #n Qapanese this is pronounced kaizen . ( kai ) means change and ( zen ) means good . #n Chinese this is pronounced gai shan = ( gai shan ) means change for the better or improve . ( gai ) means change or the action to correct . ( shan ) means good or benefit . "enefit is more related to the Taoist or "uddhist philosophy, which gives the definition as the action that benefits the society but not one particular individual (i.e. multilateral improvement). #n other words, one cannot benefit at another s e+pense. The ;uality of benefit that is involved here should be sustained forever, in other words the shan is an act that truly benefits others. ReditS

History
*fter (orld (ar ##, the occupational forces brought in *merican e+perts who were familiar with statistical control methods and with the (ar )epartment s Training (ithin #ndustry (T(#) training programs to restore a war-torn nation. T(# programs included Qob #nstruction (standard work) and Qob $ethods (process improvement). #n con9unction with the /hewhart cycle taught by (. -dwards )eming, and other statistics-based methods taught by Qoseph $. Quran, these became the basis of the kaizen revolution in Qapan that took place in the 2@ABs.

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Applications
The Toyota !roduction /ystem is known for kaizen, where all line personnel are e+pected to stop their moving production line in the case of any abnormality, and suggestions for improvement are rewarded. 4aizen often takes place one small step at a time, hence the -nglish translation= Jcontinuous improvementJ, or Jcontinual improvement.J ?et radical changes for the sake of goals, such as 9ust in time and moving lines, also gain the full support of upper level management. 1oals for kaizen workshops are intentionally set very high because there are countless e+amples of drastic reductions in process lead time to serve as proof of their practicality. The cycle of kaizen activity can be defined as= standardize an operation -L measure the standardized operation (find cycle time and amount of in-process inventory) -L gauge measurements against re;uirements -L innovate to meet re;uirements and increase productivity -L standardize the new, improved operations -L continue cycle ad infinitum. This is also known as the /hewhart cycle, )eming cycle, or !)C*. The JzenJ in 4aizen emphasizes the learn-by-doing aspect of improving production. This philosophy is focused in a different direction from the Jcommand-and-controlJ improvement programs of the mid-:Bth century. 4aizen methodology includes making changes and looking at the results, then ad9usting. 8arge-scale preplanning and e+tensive pro9ect scheduling are replaced by smaller e+periments in improvement, which can be rapidly adapted as new improvements are suggested. $asaaki #mai made the term famous in his book, ,ai$en: The ,ey to -apan.s Competiti'e +uccess. *n appendi+ to that book includes a reference to the A/ strategy of disciplined cleanup.

Lea ma 1)act1ri + is a management philosophy focusing on reduction of the seven wastes

5ver-production (aiting time Transportation !rocessing #nventory $otion /crap in manufactured products or any type of business.

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"y eliminating waste (muda), ;uality is improved, production time is reduced and cost is reduced. 8ean JtoolsJ include constant process analysis (kaizen), JpullJ production (by means of kanban) and mistake-proofing (poka-yoke). 8ean, as a management philosophy, is also very focused on creating a better workplace through the Toyota principle of Jrespect for humanity.J (hile some believe that 8ean $anufacturing is a set of problem solving tools, most e+perts now agree that 8ean $anufacturing is a holistic, comprehensive, enterprise-wide program designed to be integrated into the organization s core strategy. #n addition, e+perts in this field believe that philosophy-based 8ean $anufacturing strategy is the most effective way to launch and sustain lean activities. The so called JToyota (ay,J popularized by )r. Qefferey 8iker s book of the same name, emphasizes the creation of the right kind of environment in which to grow and support 8ean Thinking. 4ey lean manufacturing principles include=

!erfect first-time ;uality - ;uest for zero defects, revealing I solving problems at the source (aste minimization Y eliminating all activities that do not add value I safety nets, ma+imize use of scarce resources (capital, people and land) Continuous improvement Y reducing costs, improving ;uality, increasing productivity and information sharing !ull processing= products are pulled from the consumer end, not pushed from the production end &le+ibility Y producing different mi+es or greater diversity of products ;uickly, without sacrificing efficiency at lower volumes of production "uilding and maintaining a long term relationship with suppliers through collaborative risk sharing, cost sharing and information sharing arrangements.

8ean is basically all about getting the right things, to the right place, at the right time, in the right ;uantity while minimizing waste and being fle+ible and open to change. 8ean thinking got its name from a 2@@BUs best seller called JThe $achine That Changed the (orld = The /tory of 8ean !roductionJ. The book chronicles the transitions of automobile manufacturing from craft production to mass production to lean production. The seminal book J8ean ThinkingJ by (omack and Qones, introduced five core concepts= 2. :. >. H. A. /pecify value in the eyes of the customer #dentify the value stream and eliminate waste $ake value flow at the pull of the customer #nvolve and empower employees Continuously improve in the pursuit of perfection.

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&inally, there is an understanding that Toyota s mentoring process (loosely called /enpai and 4ohai relationship) so strongly supported in Qapan is one of the ways to foster 8ean Thinking up and down the organizational strucuture. The closest e;uivalent to Toyota s mentoring process is the concept of 8ean /ensei, which encourages companies, organizations, and teams to seek out outside, third-party J/enseiJ that can provide unbiased advice and coaching, as indicated in Qim (omack s 8ean Thinking book

P"9a54"9e
P"9a54"9e (- pronounced J!53-kah ?53-kehJ means Jfail-safingJ or JmistakeproofingJ h avoiding (yokeru) inadvertent errors (poka)) is a behavior-shaping constraint, or a method of preventing errors by putting limits on how an operation can be performed in order to force the correct completion of the operation. The concept was originated by /higeo /hingo as part of the Toyota !roduction /ystem. 5riginally described as /aka-yoke, but as this means Jidiot-proofingJ the name was changed to the milder Poka-yoke. 5ne e+ample is the inability to remove a car key from the ignition switch of an automobile if the automatic transmission is not first put in the J!arkJ position, so that the driver cannot leave the car in an unsafe parking condition where the wheels are not locked against movement. *nother e+ample can be found in a normal >.AJ floppy disk= the top-right corner is shaped in a certain way so that the disk cannot be inserted upside-down.

Ta+1c3i met3"$s
Ta+1c3i met3"$s are statistical methods developed by 1enichi Taguchi to improve the ;uality of manufactured goods. Taguchi methods are controversial among many conventional (estern statisticians unfamiliar with the Taguchi methodology . Taguchi s principle contributions to statistics are= 2. Taguchi loss-function< :. The philosophy of off-line 0uality control< and >. #nnovations in the design of e+periments. Qust #n Time (BIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs. The process is driven by a series of signals, or 4anban (Qp. also ), that tell production processes to make the ne+t part. 4anban are usually simple visual signals, such as the presence or absence of a part on a shelf. Q#T can lead to dramatic improvements in a manufacturing organization s return on investment, ;uality, and efficiency when implemented correctly. 0ew stock is ordered when stock reaches the re-order level. This saves warehouse space and costs. 3owever, one drawback of the Q#T system is that the re-order level is determined by historical demand. #f demand rises above the historical average planning duration demand, the firm could deplete inventory and cause customer service issues. To 22B

meet a @AP service rate a firm must carry about : standard deviations of demand in safety stock. &orecasted shifts in demand should be planned for around the 4anban until trends can be established to reset the appropriate 4anban level. #n recent years manufacturers have touted a trailing 2> week average is a better predictor than most forecastors could provide.

History
The techni;ue was first used by the &ord $otor Company as described e+plicitly by 3enry &ord s )y ife and (ork (2@::)= J(e have found in buying materials that it is not worth while to buy for other than immediate needs. (e buy only enough to fit into the plan of production, taking into consideration the state of transportation at the time. #f transportation were perfect and an even flow of materials could be assured, it would not be necessary to carry any stock whatsoever. The carloads of raw materials would arrive on schedule and in the planned order and amounts, and go from the railway cars into production. That would save a great deal of money, for it would give a very rapid turnover and thus decrease the amount of money tied up in materials. (ith bad transportation one has to carry larger stocks.J This statement also describes the concept of Jdock to factory floorJ in which incoming materials are not even stored or warehoused before going into production. This paragraph also shows the need for an effective freight management system (&$/) and &ord s Today and Tomorro1 (2@:K) describes one. The techni;ue was subse;uently adopted and publicised by Toyota $otor Corporation of Qapan as part of its Toyota !roduction /ystem (T!/). Qapanese corporations cannot afford large amounts of land to warehouse finished products and parts. "efore the 2@ABs, this was thought to be a disadvantage because it reduced the economic lot size. (*n economic lot size is the number of identical products that should be produced, given the cost of changing the production process over to another product.) The undesirable result was poor return on investment for a factory. The chief engineer at Toyota in the 2@ABs, Taiichi 5hno e+amined accounting assumptions and realized that another method was possible. The factory could be made more fle+ible, reducing the overhead costs of retooling and reducing the economic lot size to the available warehouse space. 5ver a period of several years, Toyota engineers redesigned car models for commonality of tooling for such production processes as paint-spraying and welding. Toyota was one of the first to apply fle+ible robotic systems for these tasks. /ome of the changes were as simple as standardizing the hole sizes used to hang parts on hooks. The number and types of fasteners were reduced in order to standardize assembly steps and tools. #n some cases, identical subassemblies could be used in several models. Toyota engineers then determined that the remaining critical bottleneck in the retooling process was the time re;uired to change the stamping dies used for body parts. These were ad9usted by hand, using crowbars and wrenches. #t sometimes took as long as

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several days to install a large (multiton) die set and ad9ust it for acceptable ;uality. &urther, these were usually installed one at a time by a team of e+perts, so that the line was down for several weeks. Toyota implemented a strategy called /ingle $inute -+change of )ie (/$-)), developed by /higeo /hingo. (ith very simple fi+tures, measurements were substituted for ad9ustments. *lmost immediately, die change times fell to about half an hour. *t the same time, ;uality of the stampings became controlled by a written recipe, reducing the skill re;uired for the change. *nalysis showed that the remaining time was used to search for hand tools and move dies. !rocedural changes (such as moving the new die in place with the line in operation) and dedicated tool-racks reduced the die-change times to as little as HB seconds. )ies were changed in a ripple through the factory as a new product began flowing. *fter /$-), economic lot sizes fell to as little as one vehicle in some Toyota plants. Carrying the process into parts-storage made it possible to store as little as one part in each assembly station. (hen a part disappeared, that was used as a signal to produce or order a replacement. ReditS

Philosophy
Qust-in-time (Q#T) inventory systems are not 9ust a simple method that a company has to buy in to< it has a whole philosophy that the company must follow. The ideas in this philosophy come from many different disciplines including< statistics, industrial engineering, production management and behavioural science. #n the Q#T inventory philosophy there are views with respect to how inventory is looked upon, what it says about the management within the company, and the main principle behind Q#T. &irstly, inventory is seen as incurring costs instead of adding value, contrary to traditional thinking. 7nder the philosophy, businesses are encouraged to eliminate inventory that doesnUt add value to the product. /econdly, it sees inventory as a sign of sub par management as it is simply there to hide problems within the production system. These problems include backups at work centres, lack of fle+ibility for employees and e;uipment, and inade;uate capacity among other things. #n short, the 9ust-in-time inventory system is all about having Vthe right material, at the right time, at the right place, and in the e+act amount.W

Effects

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/ome of the results were une+pected. * huge amount of cash appeared, apparently from nowhere, as in-process inventory was built out and sold. This by itself generated tremendous enthusiasm in upper management. *nother surprising effect was that the response time of the factory fell to about a day. This improved customer satisfaction by providing vehicles usually within a day or two of the minimum economic shipping delay. *lso, many vehicles began to be built to order, completely eliminating the risk they would not be sold. This dramatically improved the company s return on e;uity by eliminating a ma9or source of risk. /ince assemblers no longer had a choice of which part to use, every part had to fit perfectly. The result was a severe ;uality assurance crisis, and a dramatic improvement in product ;uality. -ventually, Toyota redesigned every part of its vehicles to eliminate or widen tolerances, while simultaneously implementing careful statistical controls. (/ee Total Tuality $anagement). Toyota had to test and train suppliers of parts in order to assure ;uality and delivery. #n some cases, the company eliminated multiple suppliers. (hen a process problem or bad parts surfaced on the production line, the entire production line had to be slowed or even stopped. 0o inventory meant that a line could not operate from in-process inventory while a production problem was fi+ed. $any people in Toyota confidently predicted that the initiative would be abandoned for this reason. #n the first week, line stops occurred almost hourly. "ut by the end of the first month, the rate had fallen to a few line stops per day. *fter si+ months, line stops had so little economic effect that Toyota installed an overhead pull-line, similar to a bus bellpull, that permitted any worker on the production line to order a line stop for a process or ;uality problem. -ven with this, line stops fell to a few per week. The result was a factory that became the envy of the industrialized world, and has since been widely emulated. The B1st i Time philosophy was also applied to other segments of the supply chain in several types of industries. #n the commercial sector, it meant eliminating one or all of the warehouses in the link between a factory and a retail establishment. ReditS

Benefits
*s most companies use an inventory system best suited for their company, the Qust-#nTime #nventory /ystem (Q#T) can have many benefits resulting from it. The main benefits of Q#T are listed below. 2. Set 1# times are si+ i)ica tl4 re$1ce$ i t3e >are3"1seD Cutting down the set up time to be more productive will allow the company to improve their bottom

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:.

>.

H.

A.

K.

line to look more efficient and focus time spend on other areas that may need improvement. T3e )l">s ") +""$s )r"m >are3"1se t" s3el*es are im#r"*e$ . 3aving employees focused on specific areas of the system will allow them to process goods faster instead of having them vulnerable to fatigue from doing too many 9obs at once and simplifies the tasks at hand. Em#l"4ees >3" #"ssess m1lti5s9ills are 1tili=e$ m"re e))icie tl4 . 3aving employees trained to work on different parts of the inventory cycle system will allow companies to use workers in situations where they are needed when there is a shortage of workers and a high demand for a particular product. Better c" siste c4 ") sc3e$1li + a $ c" siste c4 ") em#l"4ee >"r9 3"1rsD #f there is no demand for a product at the time, workers donUt have to be working. This can save the company money by not having to pay workers for a 9ob not completed or could have them focus on other 9obs around the warehouse that would not necessarily be done on a normal day. I crease$ em#3asis " s1##lier relati" s3i#s. 0o company wants a break in their inventory system that would create a shortage of supplies while not having inventory sit on shelves. 3aving a trusting supplier relationship means that you can rely on goods being there when you need them in order to satisfy the company and keep the company name in good standing with the public. /upplies continue around the clock keeping workers productive and businesses focused on turnover. 3aving management focused on meeting deadlines will make employees work hard to meet the company goals to see benefits in terms of 9ob satisfaction, promotion or even higher pay.

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Problems
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:it3i a BIT S4stem

The ma9or problem with Qust #n Time operation is that it leaves the supplier and downstream consumers open to supply shocks. #n part, this was seen as a feature rather than a bug by 5hno, who used the analogy of lowering the level of a river in order to e+pose the rocks to e+plain how removing inventory showed where flow of production was interrupted. 5nce the barriers were e+posed, they could be removed< since one of the main barriers was rework, lowering inventory forced each shop to improve its own ;uality or cause a holdup in the ne+t downstream area. Qust #n Time is a means to improving performance of the system, not an end. (ith shipments coming in sometimes several times per day, Toyota is especially susceptible to an interruption in the flow. &or that reason, Toyota is careful to use two suppliers for most assemblies. *s noted in 8iker (:BB>), there was an e+ception to this rule that put the entire company at risk by the 2@@M *isin fire. 3owever, since Toyota 22H

also makes a point of maintaining high ;uality relations with its entire supplier network, several suppliers immediately took up production of the *isin-built parts by using e+isting capability and documentation. Thus, a strong, long-term relationship with a few suppliers is preferred to short-term, price-based relationships with competing suppliers. ReditS

:it3i a ra> material stream

*s noted by 8iker (:BB>) and (omack and Qones (:BB>), it would ultimately be desirable to introduce flow and Q#T all the way back through the supply stream. 3owever, none of them followed this logically all the way back through the processes to the raw materials. (ith present technology, for e+ample, an ear of corn cannot be grown and delivered to order R2S. The same is true of most raw materials, which must be discovered and'or grown through natural processes that re;uire time and must account for natural variability in weather and discovery. ReditS

Oil
#t has been fre;uently charged that the oil industry has been influenced by Q#T (see here (:BBH), here (2@@K), and here (2@@K)). The argument is presented as follows= The number of refineries in the 7nited /tates has fallen from :M@ in 2@MA to :BA in 2@@B and further to 2H@ in :BBH. *s a result, the industry is susceptible to supply shocks, which cause spikes in prices and subse;uently reduction in domestic manufacturing output. The effects of hurricanes 4atrina and .ita are given as an e+ample= in :BBA, 4atrina caused the shutdown of @ refineries in 8ouisiana and K more in $ississippi, and a large number of oil production and transfer facilities, resulting in the loss of :BP of the 7/ domestic refinery output. .ita subse;uently shut down refineries in Te+as, further reducing output. The 1)! figures for the third and fourth ;uarters showed a slowdown from >.AP to 2.:P growth. /imilar arguments were made in earlier crises. "eside the obvious point that prices went up because of the reduction in supply and not for anything to do with the practice of Q#T, Q#T students and even oil I gas industry analysts ;uestion whether Q#T as it has been developed by 5hno, 1oldratt, and others is used by the petroleum industry. Companies routinely shut down facilities for reasons other than the application of Q#T. 5ne of those reasons may be economic rationalization= when the benefits of operating no longer outweigh the costs, including opportunity costs, the plant may be economically inefficient. Q#T has never subscribed to such considerations directly< following (addel and "odek (:BBA), this .5#-based thinking conforms more to "rown-style accounting and /loan management. &urther, and more significantly, Q#T calls for a reduction in inventory capacity, not production capacity. &rom 2@MA to 2@@B to :BBA, the annual average stocks of gasoline have fallen by only

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C.AP from ::C,>>2 to :::,@B> bbls to :BC,@CK (-nergy #nformation *dministration data). /tocks fluctuate seasonally by as much as :B,BBB bbls. )uring the :BBA hurricane season, stocks never fell below 2@H,BBB thousand bbls, while the low for the period 2@@B to :BBK was 2CM,B2M thousand bbls in 2@@M. This shows that while industry storage capacity has decreased in the last >B years, it hasn t been drastically reduced as Q#T practitioners would prefer. &inally, as shown in a pair of articles in the 5il I 1as Qournal, Q#T does not seem to have been a goal of the industry. #n (aguespack and Cantor (2@@K), the authors point out that Q#T would re;uire a significant change in the supplier'refiner relationship, but the changes in inventories in the oil industry e+hibit none of those tendencies. /pecifically, the relationships remain cost-driven among many competing suppliers rather than ;uality-based among a select few long-term relationships. They find that a large part of the shift came about because of the availability of short-haul crudes from 8atin *merica. #n the follow-up editorial, the 5il I 1as Qournal claimed that Jcasually adopting popular business terminology that doesn t applyJ had provided a Jrhetorical bogeyJ to industry critics. Confessing that they had been as guilty as other media sources, they confirmed that J#t also happens not to be accurate.J ReditS

Theory
Consider a (highly) simplified mathematical model of the ordering process. 8et= , F the incremental cost of placing an order kc F the annual cost of carrying one unit of inventory D F annual demand in units 2 F optimal order size in units TC F total cost over the year (e want to know 2. (e assume that demand is constant and that the company runs down the stock to zero and then places an order, which arrives instantly. 3ence the average stock held (the average of zero and 2, assuming constant usage) is 2 ' :. *lso, the annual number of orders placed is D ' 2. TC consists of two components. The first is the cost of carrying inventory, which is given by 2 c kc ' :, i.e. the average inventory times the carrying cost per unit. The second cost is the cost of placing orders, given by D c , ' 2, the annual number of orders, D ' 2. times the cost per order, ,. Thus total annual cost is

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. (e differentiate TC with respect to 2 and set it e;ual to B to find the 2 for minimum total cost, giving

which is known as the -conomic 5rder Tuantity or -5T formula. The key Qapanese breakthrough was to reduce , to a very low level and to resupply fre;uently instead of holding e+cess stocks. #n practice Q#T works well for many businesses, but it is not appropriate if , is not small. The theory above can be fairly easily adapted to take into account realistic features such as delays in delivery times and fluctuations in demand. "oth of these are usually modelled by normal distributions. The delay in delivery, in particular, means that additional safety stocks need to be held if a stockout is to be rendered very unlikely. Access"r4 G""$s - products re;uired by commercial operations to conduct business, such as= office copiers, automobile wheel balancers, au+iliary power supplies, air compressors, etc. Acc"1 ts Pa4a!le - short term debts incurred as the result of day-to-day operations. Acc"1 ts Recei*a!le - monies due your enterprise as the result of day-to-day operations. Accr1al Base$ Acc"1 ti + - an accounting method that enters income and e+penses into the books at the time of contract versus when payment is received or e+penses incurred. Assets - all real or intellectual property owned by the enterprise that has a positive financial value. Bala ce S3eet - a statement of assets and liabilities.

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Barriers t" E tr4 - conditions that create difficulty for competitors to enter the market. &or e+ample, copyrights, trademarks, patents, dedicated distribution channels and high initial investment re;uirements. Brea95E*e P"i t - the point at which revenues are e;ual to e+penses. B1si ess Ser*ices - services offered to commercial enterprises, such as= e;uipment maintenance, supplying of part time personnel, engineering, design and management consulting, etc. Ca#ital - the financial investment re;uired to initiate and'or operate an enterprise. Cas3 Base$ Acc"1 ti + - an accounting method that enters income and e+penses into the books at the time when payment is received or e+penses incurred. Cas3 (l"> - the transfer of monies into and out of an enterprise. C"llateral - assets that can be pledged to guarantee a loan. C" *e ie ce G""$s - goods often used by the consumer, but the consumer is unwilling to spend Jshopping timeJ to ac;uire them. This covers a broad spectrum of products including candy, cigarettes, drugs, newspapers, magazines and most grocery products. C"r#"rate Ima+e A$*ertisi + - a Jcorporate imageJ ad is designed to primarily promote the enterprise and secondarily promote the products or services of the enterprise. C"st ") G""$s - the direct costs involved in producing a product or service which usually includes labor and materials. C"st ") Sales - the cost of goods plus the e+penses involved in selling and delivering the product or service. C1rre t Assets - *ssets that can be converted ;uickly to cash. C1rre t Lia!ilities - *ll debts incurred in the normal day-to-day business and due within one calendar year. De!t Ser*ice - the regular payments re;uired to keep a loan current. De#reciati" - The gradual erosion of the usability and value (possibly due to obsolescence) of an enterprise s fi+ed assets. #n some cases depreciation can be declared as a ta+ deduction. Direct Sales Met3"$ - selling direct to the end user with promotional efforts using advertising, direct mail or telephone sales.

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Distri!1t"r - an enterprise that purchases your products for resale to their customers who are usually retail outlets. The distributor e+pects to receive a significant price discount for providing the distribution service. Distri!1ti" C3a el - the path your product follows to be delivered to the end user. This may be through distributors, retail outlets, self service outlets, vending machines, telephone sales, direct mail sales, etc. EA1it4 - a percentage ownership of an enterprise, usually in the form of stock. (as3i" G""$s - goods where style is important and price is secondary. These products could include clothing, 9ewelry, furniture, draperies, and dishes, but can sometimes be stretched into other areas such as umbrellas, walking canes, cigarette holders, etc. (i2e$ Assets - (sometimes called long term assets) these are usually non-li;uid assets that are integral to the enterprise s day-to-day business operations such as plants, e;uipment, furniture and real estate. (i2e$ C"sts - The day-to-day cost of doing business that is pre-committed, such as salaries, insurance, lease e+penses, utilities, etc. (1ll Ser*ice Retail Sales Met3"$ - selling from a sales outlet directly to the end user at retail prices with sales personnel who can e+plain the purpose and value of the product or service. Gr"ss Pr")it - revenues less cost of sales. Im#ers" al Ser*ice at C1st"merFs Site - this service usually involves working with the customer s property and seldom deals with factors that the customer deems confidential. -+amples of this type of service would be= lawn service, typewriter repair, office cleaning, trucking service, etc. Im#ers" al Ser*ice at Ser*icerFs Site - this service usually involves working with the customer s property and seldom deals with factors that the customer deems confidential. The service is traditionally provided at the servicer s enterprise. -+amples of this type of service would be= auto mechanic, T, repair, etc. Im#ers" al Ser*ice< V"l1me - this type of service is usually designed such that the same service will satisfy the needs of all customers. #t is often the case that the servicer and the customer never meet. -+amples of this type of service would be= classified ads, storage lockers, money changers, etc. I c"me Stateme t - (sometimes called !rofit I 8oss statement) a statement of revenues and e+penses.

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I stallati" G""$s - products re;uiring large and e+pensive capital investments that will have a long life. This could include homes, office buildings, manufacturing facilities, and other types of commercial facilities or e;uipment such as tractors, printing presses, cranes and robotic assembly line processors. I ta +i!le Assets - non-physical assets such as patents, trademarks, a customer base, brand recognition of your products, etc. This is sometimes called goodwill. I *e t"r4 T1r "*er - a ratio for evaluating sales effectiveness. &or a given accounting period divide total revenue for the product by the average retail value of the product inventory. Lice si + a+reeme t - an agreement between two enterprises allowing one to sell the other s products or services and to use their name, sales literature, trademarks, copyrights, etc. in a limited manner. LiA1i$it4 - the percentage of an enterprise s assets that can be ;uickly converted into cash. L" + Term Assets - (sometimes called fi+ed assets) these are usually non-li;uid assets that are integral to the enterprise s day to day business operations such as plants, e;uipment, furniture and real estate. L" + Term Lia!ilities - all debts that are not current liabilities, that is, debts that are not due until at least one calendar year in the future. Mar9et Li)e C4cle - the period of time that a substantial segment of the buying public is interested in purchasing a given product or service form. Mar9et Pe etrati" Prici + Strate+4 - if near term income is not critical and rapid market penetration for eventual market control is desired, then you set your prices very low. Mar9et S3are - the percentage of the total sales (from all sources) of a service or product represented by the sales made by your enterprise. i.e. your sales divided by total sales Material G""$s - normally raw or processed materials such as coal or steel that will become part of the purchaser s end product. Net Pr")it - total revenues less total e+penses. Net :"rt3 - assets minus liabilities. O 5Site Sales Met3"$ - selling directly to the end user using a sales force that calls on the prospect at their home or place of business.

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Part ers3i# - a legal relationship between two or more individuals to conduct a specifically defined business. Parts&S1! Assem!l4 G""$s - products that will normally become a part of the purchaser s end product. -+amples are screws, bolts, transistors, printed circuits, electric motors, forgings, castings, etc. Pers" al Ser*ice at C1st"merFs Site - this service can be a one-to-one or one-to-many relationship between the servicer and customer, sometimes dealing with factors that the customer deems confidential. The service is traditionally provided at the customer s enterprise. -+amples of this type of service would be= tutoring, consulting, etc. Pers" al Ser*ice at Ser*icerFs Site - this service is usually a one-on-one relationship between the customer and servicer, often dealing with factors the customer deems confidential. The service is traditionally provided at the servicer s enterprise. -+amples of this type of service would be= doctor, lawyer, accountant, educational institution, etc. Pers" al Ser*ice< V"l1me - some services deal with very high volumes but still re;uire the Jpersonal touchJ. -+amples are airline services or a parcel delivery service like &ederal -+press. Pr" )"rma - financial forms (invoices, !I8 statements, balance sheets, etc.) based on future e+pectations. Pr"$1ct Be e)its A$*ertisi + - a Jproduct benefitsJ ad is designed to ac;uaint the prospect with the strengths of the product or service and the benefits resulting from those strengths. Pr"$1ct C"m#aris" A$*ertisi + - a Jproduct comparisonJ ad compares the features of your product or service with those of one or more competitive products or services with the intent of showing yours to be more feature rich than the competition. Pr"$1ct (amil4 A$*ertisi + - a Jproduct familyJ ad is designed to convince the prospect that they have a wide range of functionality to choose from today and after they buy they will not be locked into a single product or service environment in the future. Pr"$1cti" Ca#acit4 - the volume of products or services that can be produced by an enterprise using current resources. Pr")it Mar+i - total revenues less total e+penses Pr"#rietar4 Tec3 "l"+4 - technology that is uni;ue and legally owned by an enterprise. The technology may be integral to the product or service being offered or it may be used in the production of the product or service.

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P1ll Pr"m"ti" al Strate+4 - a process that re;uires direct interface with the end user of the product or service. 7se of channels of distribution is minimized during the first stages of promotion and a ma9or commitment to advertising is re;uired. The ob9ective is to JpullJ the prospects into the various channel outlets creating a demand the channels cannot ignore. P1s3 Pr"m"ti" al Strate+4 - a process of ma+imizing the use of all available channels of distribution to JpushJ the product or service into the marketplace. This usually re;uires generous discounts to achieve the ob9ective of giving the channels incentive to promote the product or service, thus minimizing your need for advertising. Retai e$ Ear i +s - profits retained by the enterprise rather than disbursing to the shareholders. .etained earnings are used to improve the value of the enterprise through development and 'or promotional programs. ROI - (.eturn on #nvestment) 0et !rofit divided by 0et (orth. * financial ratio indicating the degree of profitability. Ser*ice&Pr"$1ct Mi2 - this business, while involving both service and product, is distinct in that the ;uality of the service is often more important than the product received. -+amples of this type of service would be= fast food, catering, telephone, etc. Sel)5Ser*ice Retail Sales Met3"$ - selling from a sales outlet directly to the end user, usually at prices lower than full retail price. There are usually no sales personnel to e+plain the purpose and value of the product or service. Ser*ice G""$s - goods viewed by the consumer as competitive products offering a standard JserviceJ and are basically similar, so they will JshopJ to get the best price. This would include such products as lawnmowers, refrigerators, television sets, automobiles, etc. S9immi + Prici + Strate+4 - if you desire ;uick cash and have minimal desires for significant market penetration and control, then you set your prices very high (this is sometimes called JskimmingJ). S"le Pr"#riet"rs3i# - an enterprise that is owned by a single individual. S#ecialt4 G""$s - goods that appeal to a large segment of the buying public and are considered JspecialJ enough that the consumer will specifically ask for the product. &or instance, if you invented a cigarette that tasted good and was also proven to be good for your health, people would probably ask for the Jhealthy cigaretteJ (even if they didn t know the name). The type of product is not the issue, but rather whether the product is JspecialJ enough that the consumers will Jseek it out.J

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Strate+ic Relati" s3i#s - an agreement between two or more enterprises to conduct specified business processes in a 9oint manner. 7sually related to technology development and'or marketing and distribution efforts. S1##lies G""$s - production support products that will not become a part of the purchaser s end product. -+amples are drill bits, machine lubricants, wiping rags, etching chemicals, pencils, paper, paper clips, etc. Tra$emar9 - the name of a product or service that has been legally registered as the property of an enterprise. U s"1+3t G""$s - products that are usually purchased due to adversity rather than desire. &or e+ample, coffins, crutches, and medicine are all unsought goods. *nother form of unsought goods are products such as life insurance and encyclopedias. They are products that the consumer seldom goes out looking for, therefore, a constant, aggressive selling process is re;uired. Vertical I te+rati" - the potential within an enterprise to incorporate all aspects of management, production, sales and distribution into their business operations. #n theory, the greater the vertical integration, the less vulnerable an enterprise is to outside forces. :3"lesale Sales Met3"$ - selling to distributors at significantly discounted prices who in turn sell to full service or self service retail outlets. :"r9i + Ca#ital - the cash available to an enterprise for day-to-day operations. Qust #n Time (BIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs. The bgprocess is driven by a series of signals, or 4anban (Qp. also ), that tell production processes to make the ne+t part. 4anban are usually simple visual signals, such as the presence or absence of a part on a shelf. Q#T can lead to dramatic improvements in a manufacturing organization s return on investment, ;uality, and efficiency when implemented correctly. 0ew stock is ordered when stock reaches the re-order level. This saves warehouse space and costs. 3owever, one drawback of the Q#T system is that the re-order level is determined by historical demand. #f demand rises above the historical average planning duration demand, the firm could deplete inventory and cause customer service issues. To meet a @AP service rate a firm must carry about : standard deviations of demand in safety stock. &orecasted shifts in demand should be planned for around the 4anban until trends can be established to reset the appropriate 4anban level. #n recent years manufacturers have touted a trailing 2> week average is a better predictor than most forecastors could provide

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