Description
APICS Terms and it contains topics like absorption costing, activity based cost accounting, activity based management, break even point, business process reengineering, cash conversion cycle, competitive advantage, computer integrated manufacturing, concurrent engineering, core competencies, critical chain method, ER
Strategic Management of Resources
Module Key Terms
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Absorption Costing
• An approach to inventory valuation in which variable costs and a portion of fixed costs are assigned to each unit of production. The fixed costs are usually allocated to units of output on the basis of direct labor hours, machine hours, or material costs.
– Syn: allocation costing. – See: activity-based costing.
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Acceptance Sampling
1. The process of sampling a portion of goods for inspection rather than examining the entire lot. The entire lot may be accepted or rejected based on the sample even though the specific units in the lot are better or worse than the sample. There are two types: attributes sampling and variables sampling. In attributes sampling, the presence or absence of a characteristic is noted in each of the units inspected. In variables sampling, the numerical magnitude of a characteristic is measured and recorded for each inspected unit; this type of sampling involves reference to a continuous scale of some kind. 2. A method of measuring random samples of lots or batches of products against pre-determined standards.
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Activity-Based Cost Accounting (ABC)
• A cost accounting system that accumulates costs based on activities performed and then uses cost drivers to allocate these costs to products or other bases, such as customers, markets, or projects. It is an attempt to allocate over-head costs on a more realistic basis than direct labor or machine hours.
– Syn: activity-based costing, activity-based cost accounting. – See: absorption costing.
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Activity-Based Management (ABM)
• The use of activity-based costing information about cost pools and drivers, activity analysis, and business processes to identify business strategies; improve product design, manufacturing, and distribution; and remove waste from operations.
– See: activity-based cost accounting.
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Backward Integration
• The process of buying or owning elements of the production cycle and channel of distribution back toward raw material suppliers.
– See: vertical integration.
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Baseline Measures
• A set of measurements (or metrics) that seeks to establish the current or starting level of performance of a process, function, product, firm, and so on. Baseline measures are usually established before implementing improvement activities and programs.
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Benchmarking
• The process of measuring the company's products, services, costs, and practices. Two types of benchmarking exist — competitive, a comparison against your industry best, and process, a comparison of a process to the best in class.
– See: competitive benchmarking, performance benchmarking, process benchmarking.
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Benchmark Measures
• A set of measurements (or metrics) that is used to establish goals for improvements in processes, functions, products, and so on. Benchmark measures are often derived from other firms that display best in class achievement.
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Break-Even Chart
• A graphical tool showing the total variable cost and fixed cost curve along with the total revenue curve. The point of intersection is defined as the break-even point, i.e., the point at which total revenues exactly equal total costs.
– See: total cost curve.
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Break-Even Point
• The level of production or the volume of sales at which operations are neither profitable nor unprofitable. The break-even point is the intersection of the total revenue and total cost curves.
– See: total cost curve.
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Bullwhip Effect
• An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain. The bullwhip effect can be eliminated by synchronizing the supply chain.
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Business Process Reengineering (BPR)
• A procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed. Any BPR activity is distinguished by its emphasis on (1) process rather than functions and products and (2) the customers for the process.
– Syn: reengineering.
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Capacity Strategy
• One of the strategic choices that a firm must make as part of its manufacturing strategy. There are three commonly recognized capacity strategies: lead, lag, and tracking. A lead capacity strategy adds capacity in anticipation of increasing demand. A lag strategy does not add capacity until the firm is operating at or beyond full capacity. A tracking strategy adds capacity in small amounts to attempt to respond to changing demand in the marketplace.
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Cash Conversion Cycle
1. In retailing, the length of time between the sale of products and the cash payments for a company's resources. 2. In manufacturing, the length of time from the purchase of raw materials to the collection of accounts receivable from customers for the sale of products or services.
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Competitive Advantage
• The advantage a company has over its rivals in attracting customers and defending against competitors. Sources of the advantage include characteristics such as a manufacturing technique, brand name, human skill set, etc., that a competitor cannot duplicate without substantial cost and risk.
– Syn: competitive edge.
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Computer-Aided Design (CAD)
• The use of computers in interactive engineering drawing and storage of designs. Programs complete the layout, geometric transformations, projections, rotations, magnifications, and interval (cross-section) views of a part and its relationship with other parts.
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Computer-Aided Engineering (CAE)
• The process of generating and testing engineering specifications on a computer workstation.
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Computer-Aided Manufacturing (CAM)
• The use of computers to program, direct, and control production equipment in the fabrication of manufactured items.
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Computer-Assisted Software Engineering (CASE)
• The use of computerized tools to assist in the process of designing, developing, and maintaining software products and systems.
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Computer-Integrated Manufacturing (CIM)
• The integration of the total manufacturing organization through the use of computer systems and managerial philosophies that improve the organization's effectiveness; the application of a computer to bridge various computerized systems and connect them into a coherent, integrated whole. For example, budgets, CAD/CAM, process controls, group technology systems, MRP II, financial reporting systems, etc., are linked and interfaced.
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Concurrent Engineering
• • Syn: participative design/engineering. participative design/engineering — A concept that refers to the simultaneous participation of all the functional areas of the firm in the product design activity. Suppliers and customers are often also included. The intent is to enhance the design with the inputs of all the key stakeholders. Such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs.
– Syn: co-design, concurrent design, concurrent engineering, new product development team, parallel engineering, simultaneous design/engineering, simultaneous engineering, team design/engineering. See: early manufacturing involvement.
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Core Competencies
• Bundles of skills or knowledge sets that enable a firm to provide the greatest level of value to its customers in a way that is difficult for competitors to emulate and that provides for future growth. Core competencies are embodied in the skills of the workers and in the organization. They are developed through collective learning, communication, and commitment to work across levels and functions in the organization and with the customers and suppliers.
– For example, a core competency could be the capability of a firm to coordinate and harmonize diverse production skills and multiple technologies. To illustrate, advanced casting processes for making steel require the integration of machine design with sophisticated sensors to track temperature and speed, and the sensors require mathematical modeling of heat transfer. For rapid and effective development of such a process, materials scientists must work closely with machine designers, software engineers, process specialists, and operating personnel. Core competencies are not directly related to the product or market.
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Core Process
• That unique capability that is central to a company's competitive strategy.
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Corporate Culture
• The set of important assumptions that members of the company share. It is a system of shared values about what is important and beliefs about how the company works. These common assumptions influence the ways the company operates.
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Critical Chain
• In the theory of constraints, the longest route through a project network considering both technological precedence and resource contention constraints in completing the project. Where no resource contention exists the critical chain would be the same as the critical path.
– See: critical path.
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Critical Chain Method
• In the theory of constraints, a network planning technique for the analysis of a project's completion time, used for planning and controlling project activities. The critical chain, which determines project duration, is based on technological and resource constraints. Strategic buffering of paths and resources is used to increase project completion success.
– See: critical chain, critical path method.
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Critical Path Method (CPM)
• A network planning technique for the analysis of a project's completion time used for planning and controlling the activities in a project. By showing each of these activities and their associated times, the critical path, which identifies those elements that actually constrain the total time for the project, can be determined.
– See: critical chain method, network analysis.
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Database Management System (DBMS)
• The software designed for organizing data and providing the mechanism for storing, maintaining, and retrieving that data on a physical medium (i.e., a database). A DBMS separates data from the application programs and people who use the data and permits many different views of the data.
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Decision Support System (DSS)
• A computer system designed to assist managers in selecting and evaluating courses of action by providing a logical, usually quantitative, analysis of the relevant factors.
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Delivery Lead Time
• The time from the receipt of a customer order to the delivery of the product.
– Syn: delivery cycle.
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Depreciation
• An allocation of the original value of an asset against current income to represent the declining value of the asset as a cost of that time period. Depreciation does not involve a cash payment. It acts as a tax shield and thereby reduces the tax payment.
– See: capital recovery, depletion, double-declining-balance depreciation, straight line depreciation, units-of-production depreciation.
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Design for Manufacturability
• Simplification of parts, products, and processes to improve quality and reduce manufacturing costs.
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Discounted Cash Flow
• A method of investment analysis in which future cash flows are converted, or discounted, to their value at the present time. The net present value of an item is estimated to be the sum of all discounted future cash flows.
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Economic Value Added
• In managerial accounting, the net operating profit earned above the cost of capital for a profit center.
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Enterprise Resources Planning (ERP)
• Framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage.
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Expert System
• A type of artificial intelligence computer system that mimics human experts by using rules and heuristics rather than deterministic algorithms.
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Flexibility
1. The ability of the manufacturing system to respond quickly, in terms of range and time, to external or internal changes. Six different categories of flexibility can be considered: mix flexibility, design changeover flexibility, modification flexibility, volume flexibility, rerouting flexibility, and material flexibility (see each term for a more detailed discussion). In addition, flexibility involves concerns of product flexibility. Flexibility can be useful in coping with various types of uncertainty (regarding mix, volume, and so on). 2. The ability of a supply chain to mitigate, or neutralize, the risks of demand forecast variability, supply continuity variability, cycle time plus lead-time uncertainty, and transit time plus customs-clearance time uncertainty during periods of increasing or diminishing volume.
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Focused Factory
• A plant established to focus the entire manufacturing system on a limited, concise, manageable set of products, technologies, volumes, and markets precisely defined by the company's competitive strategy, technology, and economics.
– See: cellular manufacturing.
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Forward Integration
• Process of buying or owning elements of the production cycle and the channel of distribution forward toward the final customer.
– See: vertical integration.
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Gantt Chart
• The earliest and best-known type of planning and control chart, especially designed to show graphically the relationship between planned performance and actual performance over time. Named after its originator. Henry L. Gantt, the chart is used
1. for machine loading, in which one horizontal line is used to represent capacity and another to represent load against that capacity; or 2. for monitoring job progress, in which one horizontal line represents the production schedule and another parallel line represents the actual progress of the job against the schedule in time.
– Syn: job progress chart, milestone chart.
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Generally Accepted Accounting Principles (GAAP)
• Accounting practices that conform to conventions, rules, and procedures that have general acceptability by the accounting profession.
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Global Measures
• The set of measurements that refers to the overall performance of the firm. Net profit, return on investment, and cash flow are examples of financial measures; and throughput, operating expense, and inventory are examples of operational measures.
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Group Technology (GT)
• An engineering and manufacturing philosophy that identifies the physical similarity of parts (common routing) and establishes their effective production. It provides for rapid retrieval of existing designs and facilitates a cellular layout.
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House of Quality (HOQ)
• A structured process that relates customer-defined attributes to the product's technical features needed to support and generate these attributes. This technique achieves this mapping by means of a sixstep process:
1. 2. 3. 4. identification of customer attributes; identification of supporting technical features; correlation of the customer attributes with the supporting technical features; assignment of priorities to the customer requirements and technical features; 5. evaluation of competitive stances and competitive products; and 6. identification of those technical features to be used (deployed) in the final design of the product.
HOQ is part of the quality function deployment (QFD) process and forces designers to consider customer needs and the degree to which the proposed designs satisfy these needs.
– See: customer-defined attributes, quality function deployment.
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Hurdle Rate
• The minimum acceptable rate of return on a project.
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Information System Architecture
• A model of how the organization operates regarding information. The model considers four factors: (1) organizational functions, (2) communication of coordination requirements, (3) data modeling needs, and (4) management and control structures. The architecture of the information system should be aligned with and match the architecture of the organization.
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Internal Rate of Return
• The rate of compound interest at which the company's outstanding investment is repaid by proceeds from the project.
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ISO 9000
• A set of international standards on quality management and quality assurance developed to help companies effectively document the quality system elements to be implemented to maintain an efficient quality system. The standards, initially published in 1987,are not specific to any particular industry, product, or service. The standards were developed by the International Organization for Standardization, known as ISO, a specialized international agency for standardization composed of the national standards bodies of 91 countries. The standards underwent major revision in 2000and now include ISO 9000:2000 (definitions), ISO9001:2000 (requirements) and ISO 9004:2000 (continuous improvement).
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ISO 14000 Series Standards
• A series of generic environmental management standards developed by the International Organization of Standardization, which provide structure and systems for managing environmental compliance with legislative and regulatory requirements and affect every aspect of a company's environmental operations.
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Job Enlargement
• An increase in the number of tasks that an employee performs. Job enlargement is associated with the design of jobs, particularly production jobs, and its purpose is to reduce employee dissatisfaction.
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Job Enrichment
• An increase in the number of tasks that an employee performs and an increase in the control over those tasks. It is associated with the design of jobs and especially the production worker's job. Job enrichment is an extension of job enlargement.
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Knowledge-Based System
• A computer program that employs knowledge of the structure of relations and reasoning rules to solve problems by generating new knowledge from the relationships about the subject.
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Learning Curve
• A curve reflecting the rate of improvement in time per piece as more units of an item are made. A planning technique, the learning curve is particularly useful in project-oriented industries in which new products are frequently phased in. The basis for the learning curve calculation is that workers will be able to produce the product more quickly after they get used to making it.
– Syn: experience curve, manufacturing progress curve.
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Learning Organization
1. Group of people who have woven a continuous, enhanced capacity to learn into the corporate culture. 2. An organization in which learning processes are analyzed, monitored, developed, and aligned with competitive goals.
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Life-Cycle Costing
• In evaluating alternatives, the consideration of all costs, including acquisition, operation, and disposition costs, that will be incurred over the entire time of ownership of a product.
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Local Measures
• The set of measurements that relates to a resource, operation, process, or part and usually has low correlation to global organization measures. Examples are errors per printed page, departmental efficiency, and volume discounts.
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Manufacturing Execution System (MES)
• Programs and systems that participate in shop floor control, including
– – programmed logic controllers and process control computers for direct and supervisory control of manufacturing equipment; process information systems that gather historical performance information, then generate reports; graphical displays; and alarms that inform operations personnel what is going on in the plant currently and a very short history into the past.
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Quality control information is also gathered and a laboratory information management system may be part of this configuration to tie process conditions to the quality data that are generated. Thereby, cause-and-effect relationships can be determined. The quality data at times affect the control parameters that are used to meet product specifications either dynamically or off line.
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Manufacturing Strategy
• A collective pattern of decisions that acts upon the formulation and deployment of manufacturing resources. To be most effective, the manufacturing strategy should act in support of the overall strategic direction of the business and provide for competitive advantages (edges).
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Net Present Value (NPV)
• The present (discounted) value of future earnings (operating expenses have been deducted from net operating revenues) for a given number of time periods.
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Network Planning
• A generic term for techniques that are used to plan complex projects. Two of the best known network planning techniques are the critical path method (CPM) and the program evaluation and review technique (PERT).
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Participative Design / Engineering
• A concept that refers to the simultaneous participation of all the functional areas of the firm in the product design activity. Suppliers and customers are often also included. The intent is to enhance the design with the inputs of all the key stakeholders. Such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs.
– Syn: co-design, concurrent design, concurrent engineering, new product development team, parallel engineering, simultaneous design/engineering, simultaneous engineering, team design/engineering. See: early manufacturing involvement.
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Participative Management
• A system that encompasses various activities of high involvement in which subordinates share a significant degree of decision-making power with their immediate superiors. Participative management draws on the rationale that everyone in an organization is capable of and willing to help guide and direct the organization toward agreed-on goals and objectives.
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Payback
• A method of evaluating an investment opportunity that provides a measure of the time required to recover the initial amount invested in a project.
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Performance Measure
• In a performance measurement system, the actual value measured for the criterion.
– Syn: performance measurement. – See: performance criterion, performance measurement system, performance standard.
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Pilot Test
1. In computer systems, a test before final acceptance of a new business system using a subset of data with engineered cases and documented results. 2. Generally, production of a quantity to verify manufacturability, customer acceptance, or other management requirements before implementation of ongoing production. • Syn: pilot, walkthrough.
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Preventive Maintenance
• A type of preventive maintenance based on nondestructive testing and statistical analysis, used to predict when required maintenance should be scheduled.
– Syn: predictable maintenance.
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Process Capability
• Refers to the ability of the process to produce parts that conform to (engineering) specifications. Process capability relates to the inherent variability of a process that is in a state of statistical control.
– See: Cp , Cpk, process capability analysis.
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Process Control
1. The function of maintaining a process within a given range of capability by feedback, correction, etc. 2. The monitoring of instrumentation attached to equipment (valves, meters, mixers, liquid, temperature, time, etc.) from a control room to ensure that a highquality product is being produced to specification.
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Process Costing
• A cost accounting system in which the costs are collected by time period and averaged over all the units produced during the period. This system can be used with either actual or standard costs in the manufacture of a large number of identical units.
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Process Focused
• A type of manufacturing organization in which both plant and staff management responsibilities are delineated by production process. A highly centralized staff coordinates plant activities and intracompany material movements. This type of organization is best suited to companies whose dominant orientation is to a technology or a material and whose manufacturing processes tend to be complex and capital intensive.
– See: product focused, process-focused organization.
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Product Focused
• A type of manufacturing organization in which both plant and staff responsibilities are delineated by product, product line, or market segment. Management authority is highly decentralized, which tends to make the company more responsive to market needs and more flexible when introducing new products. This type of organization is best suited to companies whose dominant orientation is to a market or consumer group and where flexibility and innovation are more important than coordinated planning and tight control.
– See
rocess focused, process-focused organization.
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Product Profiling
1. A graphical device used to ascertain the level of fit between a manufacturing process and the orderwinning criteria of its products. Product profiling can be used at the process or company level to compare the manufacturing capabilities with the market requirements to determine areas of mismatch and identify steps needed for realignment. 2. Removing material around a predetermined boundary by means of numerically controlled machining. The numerically controlled tool path is automatically generated on the system.
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Program Evaluation and Review Technique (PERT)
• In project management, a network analysis technique in which each activity is assigned a pessimistic, most likely, and optimistic estimate of its duration. The critical path method is then applied using a weighted average of these times for each node. PERT computes a standard deviation of the estimate of project duration.
– See: critical path method, graphical evaluation and review technique, and network analysis.
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Project
• An endeavor with a specific objective to be met within predetermined time and dollar limitations and that has been assigned for definition or execution.
– See: project manufacturing, project management.
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Project Costing
• An accounting method of assigning valuations that is generally used in industries where services are performed on a project basis. Each assignment is unique and costed without regard to other assignments. Examples are shipbuilding, construction projects, and public accounting firms. Project costing is opposed to process costing, where products to be valued are homogeneous.
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Prototyping
1. A specialized product design and development process for developing a working model of a product. 2. A specialized system development process for performing a determination where user needs are extracted, presented, and developed by building a working model of the system. Generally, these tools make it possible to create all files and processing programs needed for a business application in a matter of days or hours for evaluation purposes.
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QS 9000 Series Standards
• ?????
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Quality Costs
• The overall costs associated with prevention activities and the improvement of quality throughout the firm before, during, and after production of a product. These costs fall into four recognized categories: internal failures, external failures, appraisal costs, and prevention costs.
– – – – Internal failure costs relate to problems before the product reaches the customer. These usually include rework, scrap, downgrades, reinspection, retest, and process losses. External failure costs relate to problems found after the product reaches the customer. These usually include such costs as warranty and returns. Appraisal costs are associated with the formal evaluation and audit of quality in the firm. Typical costs include inspection, quality audits, testing, calibration, and checking time. Prevention costs are those caused by improvement activities that focus on reducing failure and appraisal costs. Typical costs include education, quality training, and supplier certification.
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Quality Function Deployment (QFD)
• A methodology designed to ensure that all the major requirements of the customer are identified and subsequently met or exceeded through the resulting product design process and the design and operation of the supporting production management system. QFD can be viewed as a set of communication and translation tools. QFD tries to eliminate the gap between what the customer wants in a new product and what the product is capable of delivering. QFD often leads to a clear identification of the major requirements of the customers. These expectations are referred to as the voice of the customer (VOC).
– See: house of quality
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Return on Investment (ROI)
• A financial measure of the relative return from an investment, usually expressed as a percentage of earnings produced by an asset to the amount invested in the asset.
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Strategic Drivers
• Factors that influence business unit and manufacturing strategies.
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Sunk Cost
1. The unrecovered balance of an investment. It is a cost, already paid, that is not relevant to the decision concerning the future that is being made. Capital already invested that for some reason cannot be retrieved. 2. A past cost that has no relevance with respect to future receipts and disbursements of a facility undergoing an economic study. This concept implies that since a past outlay is the same regardless of the alternative selected, it should not influence the choice between alternatives.
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Surge Capacity
• The ability to meet sudden, unexpected increases in demand by expanding production with existing personnel and equipment.
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Synchronized Production
• A manufacturing management philosophy that includes a consistent set of principles, procedures, and techniques where every action is evaluated in terms of the global goal of the system. Both kanban, which is a part of the JIT philosophy, and drum-buffer-rope, which is a part of the theory of constraints philosophy, represent synchronized production control approaches.
– Syn: synchronous manufacturing. – See: drum-buffer-rope, kanban, synchronous scheduling.
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Theory of Constraints (TOC)
• A management philosophy developed by Dr. Eliyahu M. Goldratt that can be viewed as three separate but interrelated areas — logistics, performance measurement, and logical thinking.
– – – Logistics includes drum-buffer-rope scheduling, buffer management, and VAT analysis. Performance measurement includes throughput, inventory and operating expense, and the five focusing steps. Thinking process tools are important in identifying the root problem (current reality tree), identifying and expanding win-win solutions (evaporating cloud and future reality tree), and developing implementation plans (prerequisite tree and transition tree).
• • Syn: constraint theory. See: constraints management.
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Theory of Constraints Accounting
• A cost and managerial accounting system that accumulates costs and revenues into three areas—throughput, inventory, and operating expense. It does not create incentives (through allocation of overhead) to build up inventory. The system is considered to provide a truer reflection of actual revenues and costs than traditional cost accounting. It is closer to a cash flow concept of income than is traditional accounting. The theory of constraints (TOC) accounting provides a simplified and more accurate form of direct costing that subtracts true variable costs (those costs that vary with throughput quantity). Unlike traditional cost accounting systems in which the focus is generally placed on reducing costs in all the various accounts, the primary focus of TOC accounting is on aggressively exploiting the constraint(s) to make more money for the firm.
– Syn: constraint accounting, throughput accounting.
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Value Chain
• The functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment.
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Variable Costing
• An inventory valuation method in which only variable production costs are applied to the product; fixed factory overhead is not assigned to the product. Traditionally, variable production costs a redirect labor, direct material, and variable overhead costs. Variable costing can be helpful for internal management analysis but is not widely accepted for external financial reporting. For inventory order quantity purposes, however, the unit costs must include both the variable and allocated fixed costs to be compatible with the other terms in the order quantity formula. For make-or-buy decisions, variable costing should be used rather than full absorption costing.
– Syn: direct costing.
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VAT Analysis
• In the theory of constraints, a procedure for determining the general flow of parts and products from raw materials to finished products (logical product structure). A "V" logical structure starts with one or a few raw materials, and the product expands into a number of different products as it flows through divergent points in its routings. The shape of an "A" logical structure is dominated by converging points. Many raw materials are fabricated and assembled into a few finished products. A "T" logical structure consists of numerous similar finished products assembled from common assemblies, subassemblies, and parts. Once the general parts flow is determined, the system control points (gating operations, convergent points, divergent points, constraints, and shipping points) can be identified and managed.
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Vertical Integration
• The degree to which a firm has decided to directly produce multiple value-adding stages from raw material to the sale of the product to the ultimate consumer. The more steps in the sequence, the greater the vertical integration. A manufacturer that decides to begin producing parts, components, and materials that it normally purchases is said to be backward integrated. Likewise, a manufacturer that decides to take over distribution and perhaps sale to the ultimate consumer is said to be forward integrated.
– See: backward integration, forward integration.
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Voice of the Customer (VOC)
• Actual customer descriptions in words for the functions and features customers desire for goods and services. In the strict definition, as relates to quality function deployment (QFD), the term customer indicates the external customer of the supplying entity.
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Continuous Manufacturing
• A type of manufacturing process that is dedicated to the production of very narrow range of standard products. The rate of product change and new product information is very low. Significant investment in highly specialized equipment allows for a high volume of production at the lowest manufacturing cost. Thus, unit sales volumes are very large, and price is almost always a key order-winning criterion. Examples of items produced by a continuous process include gasoline, steel, fertilizer, glass, and paper.
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Residual Income
• The net operating income that an investment center earns above the minimum required return on it operating assets.
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Systems Thinking
• A school of thought that focuses on recognizing the interconnections between the parts of a system and synthesizing them into a unified view of the whole.
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Cash-to-Cash Cycle Time
• An indicator of how efficiently a company manages its assets to improve cash flow.
inventory days + accounts receivable days – accounts payable = cash-to-cash cycle time
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doc_312166077.ppt
APICS Terms and it contains topics like absorption costing, activity based cost accounting, activity based management, break even point, business process reengineering, cash conversion cycle, competitive advantage, computer integrated manufacturing, concurrent engineering, core competencies, critical chain method, ER
Strategic Management of Resources
Module Key Terms
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Absorption Costing
• An approach to inventory valuation in which variable costs and a portion of fixed costs are assigned to each unit of production. The fixed costs are usually allocated to units of output on the basis of direct labor hours, machine hours, or material costs.
– Syn: allocation costing. – See: activity-based costing.
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Acceptance Sampling
1. The process of sampling a portion of goods for inspection rather than examining the entire lot. The entire lot may be accepted or rejected based on the sample even though the specific units in the lot are better or worse than the sample. There are two types: attributes sampling and variables sampling. In attributes sampling, the presence or absence of a characteristic is noted in each of the units inspected. In variables sampling, the numerical magnitude of a characteristic is measured and recorded for each inspected unit; this type of sampling involves reference to a continuous scale of some kind. 2. A method of measuring random samples of lots or batches of products against pre-determined standards.
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Activity-Based Cost Accounting (ABC)
• A cost accounting system that accumulates costs based on activities performed and then uses cost drivers to allocate these costs to products or other bases, such as customers, markets, or projects. It is an attempt to allocate over-head costs on a more realistic basis than direct labor or machine hours.
– Syn: activity-based costing, activity-based cost accounting. – See: absorption costing.
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Activity-Based Management (ABM)
• The use of activity-based costing information about cost pools and drivers, activity analysis, and business processes to identify business strategies; improve product design, manufacturing, and distribution; and remove waste from operations.
– See: activity-based cost accounting.
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Backward Integration
• The process of buying or owning elements of the production cycle and channel of distribution back toward raw material suppliers.
– See: vertical integration.
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Baseline Measures
• A set of measurements (or metrics) that seeks to establish the current or starting level of performance of a process, function, product, firm, and so on. Baseline measures are usually established before implementing improvement activities and programs.
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Benchmarking
• The process of measuring the company's products, services, costs, and practices. Two types of benchmarking exist — competitive, a comparison against your industry best, and process, a comparison of a process to the best in class.
– See: competitive benchmarking, performance benchmarking, process benchmarking.
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Benchmark Measures
• A set of measurements (or metrics) that is used to establish goals for improvements in processes, functions, products, and so on. Benchmark measures are often derived from other firms that display best in class achievement.
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Break-Even Chart
• A graphical tool showing the total variable cost and fixed cost curve along with the total revenue curve. The point of intersection is defined as the break-even point, i.e., the point at which total revenues exactly equal total costs.
– See: total cost curve.
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Break-Even Point
• The level of production or the volume of sales at which operations are neither profitable nor unprofitable. The break-even point is the intersection of the total revenue and total cost curves.
– See: total cost curve.
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Bullwhip Effect
• An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain. The bullwhip effect can be eliminated by synchronizing the supply chain.
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Business Process Reengineering (BPR)
• A procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed. Any BPR activity is distinguished by its emphasis on (1) process rather than functions and products and (2) the customers for the process.
– Syn: reengineering.
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Capacity Strategy
• One of the strategic choices that a firm must make as part of its manufacturing strategy. There are three commonly recognized capacity strategies: lead, lag, and tracking. A lead capacity strategy adds capacity in anticipation of increasing demand. A lag strategy does not add capacity until the firm is operating at or beyond full capacity. A tracking strategy adds capacity in small amounts to attempt to respond to changing demand in the marketplace.
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Cash Conversion Cycle
1. In retailing, the length of time between the sale of products and the cash payments for a company's resources. 2. In manufacturing, the length of time from the purchase of raw materials to the collection of accounts receivable from customers for the sale of products or services.
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Competitive Advantage
• The advantage a company has over its rivals in attracting customers and defending against competitors. Sources of the advantage include characteristics such as a manufacturing technique, brand name, human skill set, etc., that a competitor cannot duplicate without substantial cost and risk.
– Syn: competitive edge.
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Computer-Aided Design (CAD)
• The use of computers in interactive engineering drawing and storage of designs. Programs complete the layout, geometric transformations, projections, rotations, magnifications, and interval (cross-section) views of a part and its relationship with other parts.
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Computer-Aided Engineering (CAE)
• The process of generating and testing engineering specifications on a computer workstation.
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Computer-Aided Manufacturing (CAM)
• The use of computers to program, direct, and control production equipment in the fabrication of manufactured items.
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Computer-Assisted Software Engineering (CASE)
• The use of computerized tools to assist in the process of designing, developing, and maintaining software products and systems.
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Computer-Integrated Manufacturing (CIM)
• The integration of the total manufacturing organization through the use of computer systems and managerial philosophies that improve the organization's effectiveness; the application of a computer to bridge various computerized systems and connect them into a coherent, integrated whole. For example, budgets, CAD/CAM, process controls, group technology systems, MRP II, financial reporting systems, etc., are linked and interfaced.
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Concurrent Engineering
• • Syn: participative design/engineering. participative design/engineering — A concept that refers to the simultaneous participation of all the functional areas of the firm in the product design activity. Suppliers and customers are often also included. The intent is to enhance the design with the inputs of all the key stakeholders. Such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs.
– Syn: co-design, concurrent design, concurrent engineering, new product development team, parallel engineering, simultaneous design/engineering, simultaneous engineering, team design/engineering. See: early manufacturing involvement.
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Core Competencies
• Bundles of skills or knowledge sets that enable a firm to provide the greatest level of value to its customers in a way that is difficult for competitors to emulate and that provides for future growth. Core competencies are embodied in the skills of the workers and in the organization. They are developed through collective learning, communication, and commitment to work across levels and functions in the organization and with the customers and suppliers.
– For example, a core competency could be the capability of a firm to coordinate and harmonize diverse production skills and multiple technologies. To illustrate, advanced casting processes for making steel require the integration of machine design with sophisticated sensors to track temperature and speed, and the sensors require mathematical modeling of heat transfer. For rapid and effective development of such a process, materials scientists must work closely with machine designers, software engineers, process specialists, and operating personnel. Core competencies are not directly related to the product or market.
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Core Process
• That unique capability that is central to a company's competitive strategy.
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Corporate Culture
• The set of important assumptions that members of the company share. It is a system of shared values about what is important and beliefs about how the company works. These common assumptions influence the ways the company operates.
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Critical Chain
• In the theory of constraints, the longest route through a project network considering both technological precedence and resource contention constraints in completing the project. Where no resource contention exists the critical chain would be the same as the critical path.
– See: critical path.
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Critical Chain Method
• In the theory of constraints, a network planning technique for the analysis of a project's completion time, used for planning and controlling project activities. The critical chain, which determines project duration, is based on technological and resource constraints. Strategic buffering of paths and resources is used to increase project completion success.
– See: critical chain, critical path method.
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Critical Path Method (CPM)
• A network planning technique for the analysis of a project's completion time used for planning and controlling the activities in a project. By showing each of these activities and their associated times, the critical path, which identifies those elements that actually constrain the total time for the project, can be determined.
– See: critical chain method, network analysis.
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Database Management System (DBMS)
• The software designed for organizing data and providing the mechanism for storing, maintaining, and retrieving that data on a physical medium (i.e., a database). A DBMS separates data from the application programs and people who use the data and permits many different views of the data.
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Decision Support System (DSS)
• A computer system designed to assist managers in selecting and evaluating courses of action by providing a logical, usually quantitative, analysis of the relevant factors.
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Delivery Lead Time
• The time from the receipt of a customer order to the delivery of the product.
– Syn: delivery cycle.
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Depreciation
• An allocation of the original value of an asset against current income to represent the declining value of the asset as a cost of that time period. Depreciation does not involve a cash payment. It acts as a tax shield and thereby reduces the tax payment.
– See: capital recovery, depletion, double-declining-balance depreciation, straight line depreciation, units-of-production depreciation.
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Design for Manufacturability
• Simplification of parts, products, and processes to improve quality and reduce manufacturing costs.
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Discounted Cash Flow
• A method of investment analysis in which future cash flows are converted, or discounted, to their value at the present time. The net present value of an item is estimated to be the sum of all discounted future cash flows.
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Economic Value Added
• In managerial accounting, the net operating profit earned above the cost of capital for a profit center.
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Enterprise Resources Planning (ERP)
• Framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage.
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Expert System
• A type of artificial intelligence computer system that mimics human experts by using rules and heuristics rather than deterministic algorithms.
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Flexibility
1. The ability of the manufacturing system to respond quickly, in terms of range and time, to external or internal changes. Six different categories of flexibility can be considered: mix flexibility, design changeover flexibility, modification flexibility, volume flexibility, rerouting flexibility, and material flexibility (see each term for a more detailed discussion). In addition, flexibility involves concerns of product flexibility. Flexibility can be useful in coping with various types of uncertainty (regarding mix, volume, and so on). 2. The ability of a supply chain to mitigate, or neutralize, the risks of demand forecast variability, supply continuity variability, cycle time plus lead-time uncertainty, and transit time plus customs-clearance time uncertainty during periods of increasing or diminishing volume.
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Focused Factory
• A plant established to focus the entire manufacturing system on a limited, concise, manageable set of products, technologies, volumes, and markets precisely defined by the company's competitive strategy, technology, and economics.
– See: cellular manufacturing.
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Forward Integration
• Process of buying or owning elements of the production cycle and the channel of distribution forward toward the final customer.
– See: vertical integration.
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Gantt Chart
• The earliest and best-known type of planning and control chart, especially designed to show graphically the relationship between planned performance and actual performance over time. Named after its originator. Henry L. Gantt, the chart is used
1. for machine loading, in which one horizontal line is used to represent capacity and another to represent load against that capacity; or 2. for monitoring job progress, in which one horizontal line represents the production schedule and another parallel line represents the actual progress of the job against the schedule in time.
– Syn: job progress chart, milestone chart.
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Generally Accepted Accounting Principles (GAAP)
• Accounting practices that conform to conventions, rules, and procedures that have general acceptability by the accounting profession.
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Global Measures
• The set of measurements that refers to the overall performance of the firm. Net profit, return on investment, and cash flow are examples of financial measures; and throughput, operating expense, and inventory are examples of operational measures.
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Group Technology (GT)
• An engineering and manufacturing philosophy that identifies the physical similarity of parts (common routing) and establishes their effective production. It provides for rapid retrieval of existing designs and facilitates a cellular layout.
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House of Quality (HOQ)
• A structured process that relates customer-defined attributes to the product's technical features needed to support and generate these attributes. This technique achieves this mapping by means of a sixstep process:
1. 2. 3. 4. identification of customer attributes; identification of supporting technical features; correlation of the customer attributes with the supporting technical features; assignment of priorities to the customer requirements and technical features; 5. evaluation of competitive stances and competitive products; and 6. identification of those technical features to be used (deployed) in the final design of the product.
HOQ is part of the quality function deployment (QFD) process and forces designers to consider customer needs and the degree to which the proposed designs satisfy these needs.
– See: customer-defined attributes, quality function deployment.
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Hurdle Rate
• The minimum acceptable rate of return on a project.
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Information System Architecture
• A model of how the organization operates regarding information. The model considers four factors: (1) organizational functions, (2) communication of coordination requirements, (3) data modeling needs, and (4) management and control structures. The architecture of the information system should be aligned with and match the architecture of the organization.
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Internal Rate of Return
• The rate of compound interest at which the company's outstanding investment is repaid by proceeds from the project.
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ISO 9000
• A set of international standards on quality management and quality assurance developed to help companies effectively document the quality system elements to be implemented to maintain an efficient quality system. The standards, initially published in 1987,are not specific to any particular industry, product, or service. The standards were developed by the International Organization for Standardization, known as ISO, a specialized international agency for standardization composed of the national standards bodies of 91 countries. The standards underwent major revision in 2000and now include ISO 9000:2000 (definitions), ISO9001:2000 (requirements) and ISO 9004:2000 (continuous improvement).
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ISO 14000 Series Standards
• A series of generic environmental management standards developed by the International Organization of Standardization, which provide structure and systems for managing environmental compliance with legislative and regulatory requirements and affect every aspect of a company's environmental operations.
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Job Enlargement
• An increase in the number of tasks that an employee performs. Job enlargement is associated with the design of jobs, particularly production jobs, and its purpose is to reduce employee dissatisfaction.
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Job Enrichment
• An increase in the number of tasks that an employee performs and an increase in the control over those tasks. It is associated with the design of jobs and especially the production worker's job. Job enrichment is an extension of job enlargement.
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Knowledge-Based System
• A computer program that employs knowledge of the structure of relations and reasoning rules to solve problems by generating new knowledge from the relationships about the subject.
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Learning Curve
• A curve reflecting the rate of improvement in time per piece as more units of an item are made. A planning technique, the learning curve is particularly useful in project-oriented industries in which new products are frequently phased in. The basis for the learning curve calculation is that workers will be able to produce the product more quickly after they get used to making it.
– Syn: experience curve, manufacturing progress curve.
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Learning Organization
1. Group of people who have woven a continuous, enhanced capacity to learn into the corporate culture. 2. An organization in which learning processes are analyzed, monitored, developed, and aligned with competitive goals.
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Life-Cycle Costing
• In evaluating alternatives, the consideration of all costs, including acquisition, operation, and disposition costs, that will be incurred over the entire time of ownership of a product.
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Local Measures
• The set of measurements that relates to a resource, operation, process, or part and usually has low correlation to global organization measures. Examples are errors per printed page, departmental efficiency, and volume discounts.
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Manufacturing Execution System (MES)
• Programs and systems that participate in shop floor control, including
– – programmed logic controllers and process control computers for direct and supervisory control of manufacturing equipment; process information systems that gather historical performance information, then generate reports; graphical displays; and alarms that inform operations personnel what is going on in the plant currently and a very short history into the past.
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Quality control information is also gathered and a laboratory information management system may be part of this configuration to tie process conditions to the quality data that are generated. Thereby, cause-and-effect relationships can be determined. The quality data at times affect the control parameters that are used to meet product specifications either dynamically or off line.
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Manufacturing Strategy
• A collective pattern of decisions that acts upon the formulation and deployment of manufacturing resources. To be most effective, the manufacturing strategy should act in support of the overall strategic direction of the business and provide for competitive advantages (edges).
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Net Present Value (NPV)
• The present (discounted) value of future earnings (operating expenses have been deducted from net operating revenues) for a given number of time periods.
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Network Planning
• A generic term for techniques that are used to plan complex projects. Two of the best known network planning techniques are the critical path method (CPM) and the program evaluation and review technique (PERT).
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Participative Design / Engineering
• A concept that refers to the simultaneous participation of all the functional areas of the firm in the product design activity. Suppliers and customers are often also included. The intent is to enhance the design with the inputs of all the key stakeholders. Such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs.
– Syn: co-design, concurrent design, concurrent engineering, new product development team, parallel engineering, simultaneous design/engineering, simultaneous engineering, team design/engineering. See: early manufacturing involvement.
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Participative Management
• A system that encompasses various activities of high involvement in which subordinates share a significant degree of decision-making power with their immediate superiors. Participative management draws on the rationale that everyone in an organization is capable of and willing to help guide and direct the organization toward agreed-on goals and objectives.
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Payback
• A method of evaluating an investment opportunity that provides a measure of the time required to recover the initial amount invested in a project.
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Performance Measure
• In a performance measurement system, the actual value measured for the criterion.
– Syn: performance measurement. – See: performance criterion, performance measurement system, performance standard.
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Pilot Test
1. In computer systems, a test before final acceptance of a new business system using a subset of data with engineered cases and documented results. 2. Generally, production of a quantity to verify manufacturability, customer acceptance, or other management requirements before implementation of ongoing production. • Syn: pilot, walkthrough.
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Preventive Maintenance
• A type of preventive maintenance based on nondestructive testing and statistical analysis, used to predict when required maintenance should be scheduled.
– Syn: predictable maintenance.
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Process Capability
• Refers to the ability of the process to produce parts that conform to (engineering) specifications. Process capability relates to the inherent variability of a process that is in a state of statistical control.
– See: Cp , Cpk, process capability analysis.
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Process Control
1. The function of maintaining a process within a given range of capability by feedback, correction, etc. 2. The monitoring of instrumentation attached to equipment (valves, meters, mixers, liquid, temperature, time, etc.) from a control room to ensure that a highquality product is being produced to specification.
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Process Costing
• A cost accounting system in which the costs are collected by time period and averaged over all the units produced during the period. This system can be used with either actual or standard costs in the manufacture of a large number of identical units.
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Process Focused
• A type of manufacturing organization in which both plant and staff management responsibilities are delineated by production process. A highly centralized staff coordinates plant activities and intracompany material movements. This type of organization is best suited to companies whose dominant orientation is to a technology or a material and whose manufacturing processes tend to be complex and capital intensive.
– See: product focused, process-focused organization.
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Product Focused
• A type of manufacturing organization in which both plant and staff responsibilities are delineated by product, product line, or market segment. Management authority is highly decentralized, which tends to make the company more responsive to market needs and more flexible when introducing new products. This type of organization is best suited to companies whose dominant orientation is to a market or consumer group and where flexibility and innovation are more important than coordinated planning and tight control.
– See
rocess focused, process-focused organization.UNRESTRICTED - May be shared with anyone
Product Profiling
1. A graphical device used to ascertain the level of fit between a manufacturing process and the orderwinning criteria of its products. Product profiling can be used at the process or company level to compare the manufacturing capabilities with the market requirements to determine areas of mismatch and identify steps needed for realignment. 2. Removing material around a predetermined boundary by means of numerically controlled machining. The numerically controlled tool path is automatically generated on the system.
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Program Evaluation and Review Technique (PERT)
• In project management, a network analysis technique in which each activity is assigned a pessimistic, most likely, and optimistic estimate of its duration. The critical path method is then applied using a weighted average of these times for each node. PERT computes a standard deviation of the estimate of project duration.
– See: critical path method, graphical evaluation and review technique, and network analysis.
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Project
• An endeavor with a specific objective to be met within predetermined time and dollar limitations and that has been assigned for definition or execution.
– See: project manufacturing, project management.
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Project Costing
• An accounting method of assigning valuations that is generally used in industries where services are performed on a project basis. Each assignment is unique and costed without regard to other assignments. Examples are shipbuilding, construction projects, and public accounting firms. Project costing is opposed to process costing, where products to be valued are homogeneous.
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Prototyping
1. A specialized product design and development process for developing a working model of a product. 2. A specialized system development process for performing a determination where user needs are extracted, presented, and developed by building a working model of the system. Generally, these tools make it possible to create all files and processing programs needed for a business application in a matter of days or hours for evaluation purposes.
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QS 9000 Series Standards
• ?????
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Quality Costs
• The overall costs associated with prevention activities and the improvement of quality throughout the firm before, during, and after production of a product. These costs fall into four recognized categories: internal failures, external failures, appraisal costs, and prevention costs.
– – – – Internal failure costs relate to problems before the product reaches the customer. These usually include rework, scrap, downgrades, reinspection, retest, and process losses. External failure costs relate to problems found after the product reaches the customer. These usually include such costs as warranty and returns. Appraisal costs are associated with the formal evaluation and audit of quality in the firm. Typical costs include inspection, quality audits, testing, calibration, and checking time. Prevention costs are those caused by improvement activities that focus on reducing failure and appraisal costs. Typical costs include education, quality training, and supplier certification.
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Quality Function Deployment (QFD)
• A methodology designed to ensure that all the major requirements of the customer are identified and subsequently met or exceeded through the resulting product design process and the design and operation of the supporting production management system. QFD can be viewed as a set of communication and translation tools. QFD tries to eliminate the gap between what the customer wants in a new product and what the product is capable of delivering. QFD often leads to a clear identification of the major requirements of the customers. These expectations are referred to as the voice of the customer (VOC).
– See: house of quality
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Return on Investment (ROI)
• A financial measure of the relative return from an investment, usually expressed as a percentage of earnings produced by an asset to the amount invested in the asset.
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Strategic Drivers
• Factors that influence business unit and manufacturing strategies.
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Sunk Cost
1. The unrecovered balance of an investment. It is a cost, already paid, that is not relevant to the decision concerning the future that is being made. Capital already invested that for some reason cannot be retrieved. 2. A past cost that has no relevance with respect to future receipts and disbursements of a facility undergoing an economic study. This concept implies that since a past outlay is the same regardless of the alternative selected, it should not influence the choice between alternatives.
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Surge Capacity
• The ability to meet sudden, unexpected increases in demand by expanding production with existing personnel and equipment.
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Synchronized Production
• A manufacturing management philosophy that includes a consistent set of principles, procedures, and techniques where every action is evaluated in terms of the global goal of the system. Both kanban, which is a part of the JIT philosophy, and drum-buffer-rope, which is a part of the theory of constraints philosophy, represent synchronized production control approaches.
– Syn: synchronous manufacturing. – See: drum-buffer-rope, kanban, synchronous scheduling.
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Theory of Constraints (TOC)
• A management philosophy developed by Dr. Eliyahu M. Goldratt that can be viewed as three separate but interrelated areas — logistics, performance measurement, and logical thinking.
– – – Logistics includes drum-buffer-rope scheduling, buffer management, and VAT analysis. Performance measurement includes throughput, inventory and operating expense, and the five focusing steps. Thinking process tools are important in identifying the root problem (current reality tree), identifying and expanding win-win solutions (evaporating cloud and future reality tree), and developing implementation plans (prerequisite tree and transition tree).
• • Syn: constraint theory. See: constraints management.
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Theory of Constraints Accounting
• A cost and managerial accounting system that accumulates costs and revenues into three areas—throughput, inventory, and operating expense. It does not create incentives (through allocation of overhead) to build up inventory. The system is considered to provide a truer reflection of actual revenues and costs than traditional cost accounting. It is closer to a cash flow concept of income than is traditional accounting. The theory of constraints (TOC) accounting provides a simplified and more accurate form of direct costing that subtracts true variable costs (those costs that vary with throughput quantity). Unlike traditional cost accounting systems in which the focus is generally placed on reducing costs in all the various accounts, the primary focus of TOC accounting is on aggressively exploiting the constraint(s) to make more money for the firm.
– Syn: constraint accounting, throughput accounting.
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Value Chain
• The functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment.
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Variable Costing
• An inventory valuation method in which only variable production costs are applied to the product; fixed factory overhead is not assigned to the product. Traditionally, variable production costs a redirect labor, direct material, and variable overhead costs. Variable costing can be helpful for internal management analysis but is not widely accepted for external financial reporting. For inventory order quantity purposes, however, the unit costs must include both the variable and allocated fixed costs to be compatible with the other terms in the order quantity formula. For make-or-buy decisions, variable costing should be used rather than full absorption costing.
– Syn: direct costing.
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VAT Analysis
• In the theory of constraints, a procedure for determining the general flow of parts and products from raw materials to finished products (logical product structure). A "V" logical structure starts with one or a few raw materials, and the product expands into a number of different products as it flows through divergent points in its routings. The shape of an "A" logical structure is dominated by converging points. Many raw materials are fabricated and assembled into a few finished products. A "T" logical structure consists of numerous similar finished products assembled from common assemblies, subassemblies, and parts. Once the general parts flow is determined, the system control points (gating operations, convergent points, divergent points, constraints, and shipping points) can be identified and managed.
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Vertical Integration
• The degree to which a firm has decided to directly produce multiple value-adding stages from raw material to the sale of the product to the ultimate consumer. The more steps in the sequence, the greater the vertical integration. A manufacturer that decides to begin producing parts, components, and materials that it normally purchases is said to be backward integrated. Likewise, a manufacturer that decides to take over distribution and perhaps sale to the ultimate consumer is said to be forward integrated.
– See: backward integration, forward integration.
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Voice of the Customer (VOC)
• Actual customer descriptions in words for the functions and features customers desire for goods and services. In the strict definition, as relates to quality function deployment (QFD), the term customer indicates the external customer of the supplying entity.
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Continuous Manufacturing
• A type of manufacturing process that is dedicated to the production of very narrow range of standard products. The rate of product change and new product information is very low. Significant investment in highly specialized equipment allows for a high volume of production at the lowest manufacturing cost. Thus, unit sales volumes are very large, and price is almost always a key order-winning criterion. Examples of items produced by a continuous process include gasoline, steel, fertilizer, glass, and paper.
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Residual Income
• The net operating income that an investment center earns above the minimum required return on it operating assets.
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Systems Thinking
• A school of thought that focuses on recognizing the interconnections between the parts of a system and synthesizing them into a unified view of the whole.
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Cash-to-Cash Cycle Time
• An indicator of how efficiently a company manages its assets to improve cash flow.
inventory days + accounts receivable days – accounts payable = cash-to-cash cycle time
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doc_312166077.ppt