Kaizen: The Japanese term for improvement continuing improvement involving everyone— managers and workers. In manufacturing, kaizen relates to finding and eliminating waste in machinery, labor, or production methods. Also see: Continuous Process Improvement
Kaizen Blitz: A rapid improvement of a limited process area, for example, a production cell.
Part of the improvement team consists of workers in that area. The objectives are to use innovative thinking to eliminate non-value-added work and to immediately implement the changes within a week or less. Ownership of the improvement by the area work team and the development of the team’s problem-solving skills are additional benefits.
Keiretsu: A form of cooperative relationship among companies in Japan where the companies largely remain legally and economically independent, even though they work closely in various ways such as sole sourcing and financial backing. A member of a keiretsu generally owns a limited amount of stock in other member companies. A keiretsu generally forms around a bank and a trading company but “distribution” (supply chain) keiretsus exist linking companies from raw material suppliers to retailers.
Kanban: Japanese word for "visible record", loosely translated means card, billboard or sign.
Popularized by Toyota Corporation, it uses standard containers or lot sizes to deliver needed parts to assembly line "just in time" for use.
Key Point Back flush – Another term for count point back flush.
Kitting: Light assembly of components or parts into defined units. Kitting reduces the need to maintain an inventory of pre-built completed products, but increases the time and labor consumed at shipment. Also see: Postponement
Landed Cost: Cost of product plus relevant logistics costs such as transportation, warehousing, handling, etc. Also called Total Landed Cost or Net Landed Costs
Last In, First Out (LIFO): Accounting method of valuing inventory that assumes latest goods purchased are first goods used during accounting period.
Lead Time: The total time that elapses between an order's placement and its receipt. It includes the time required for order transmittal, order processing, order preparation, and transit.
Lean Manufacturing - A manufacturing philosophy that shortens the timeline between the customer order and shipment by eliminating waste. Lean manufacturing includes three elements: Flow, Pull, and striving for excellence. Flow is a line synchronization method to make the product flow through production without interruption. Pull systems cascade back from actual customer demand by replenishing what the next operation takes away at short intervals. Striving for excellence is a culture in which everyone is striving for continuous improvement.
Life Cycle Cost: In cost accounting, a product’s life cycle is the period that starts with the initial product conceptualization and ends with the withdrawal of the product from the marketplace and final disposition. A product life cycle is characterized by certain defined stages, including research, development, introduction, maturity, decline, and abandonment. Life cycle cost is the accumulated costs incurred by a product during these stages.
Logistics System - The planning and coordinating of the physical movement aspects of a firms operations such that a flow of raw materials, parts, and finished goods is achieved in a manner that minimizes total costs for the levels of service desired.
Logistics Management as defined by the Council of Logistics Management (CLM): “Definition Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements. Boundaries and Relationships - Logistics Management activities typically include inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management, supply/demand planning, and management of third party logistics services providers. To varying degrees, the logistics function also includes sourcing and procurement, production planning and scheduling, packaging and assembly, and customer service. It is involved in all levels of planning and execution – strategic, operational and tactical. Logistics Management is an integrating function, which coordinates and optimizes all logistics activities, as well as integrates logistics activities with other functions including marketing, sales manufacturing, finance and information technology.”
Lot-for-Lot: A lot-sizing technique that generates planned orders in quantities equal to the net requirements in each period. Also see: Discrete Order Quantity.
Maintenance Management - A system used to support repair operations, such as skilled repair personnel, maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations.
Maintenance, Repair, and Operating Supplies (MRO): Items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations.
Maintenance Management Systems – Automated software systems for handling maintenance work orders, as well as associated maintenance: inventories, purchasing, and human resources skills.
Make to Order - A production environment where a product or service can be made after receipt of a customer's order. The end item finished product is generally a combination of standard components and custom designed components that meet the unique needs of a specific customer. Where options or accessories are pre-stocked prior to customer orders, the term assemble-to-order is frequently used. Also known as assemble to order.
Make to Stock - A production environment where end item products are usually finished before receipt of a customer order. Customer orders are generally filled from finished goods inventories, and production orders are used to replenish finished goods inventories.
Manufacturing Calendar: A calendar used in inventory and a production-planning function that consecutively numbers only the working days so that the component and work order scheduling may be done based on the actual number of workdays available. Synonyms: M-Day Calendar, Planning Calendar, Production Calendar, Shop Calendar.
Manufacture Cycle Time: The average time between commencement and completion of a manufacturing process, as it applies to make-to-stock products.
Manufacturing Engineering - The engineering discipline with responsibility for designing, maintaining, and improving the manufacturing production process.
Manufacturing Execution Systems (MES) - Manufacturing Execution Systems track work-in-process functions on the plant floor. Through use of automated data collection devices, MES software captures information about setup times, throughput, and yields, allowing managers to identify bottlenecks and measure constraints.
Manufacturing Lead Time: The total time required to manufacture an item, exclusive of lower level purchasing lead-time. For make-to-order products, it is the length of time between the release of an order to the production process and shipment to the final customer. For make-to- stock products, it is the length of time between the release of an order to the production process and receipt into finished goods inventory. Included here are order preparation time, queue time, setup time, run time, move time, inspection time, and put-away time. Synonyms: Manufacturing Cycle Time. Also see: Lead Time.
Manufacturing Process - The series of operations performed upon material to convert it from the raw material to a designed part. The manufacturing process consists of the process layout, product-manufacturing sequence of machine and labor operations required to convert raw materials into finished products.
Manufacturing Resource Planning (MRP II): A method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer what-if questions. It is made up of a variety of processes, each linked together: business planning, production planning (sales and operations planning), master production scheduling, material requirements planning, capacity requirements planning, and the execution support systems for capacity and material.
Output from these systems is integrated with financial reports such as the business plan, purchase commitment report, shipping budget, and inventory projections in dollars.
Manufacturing resource planning is a direct outgrowth and extension of closed-loop MRP.
Master Production Schedule (MPS): The master level or top-level schedule used to set the production plan in a manufacturing facility.
Material Acquisition Costs: One of the elements comprising a company's total supply-chain management costs. These costs consist of the following: 1. Materials (Commodity) Management and Planning: All costs associated with supplier sourcing, contract negotiation and qualification, and the preparation, placement, and tracking of a purchase order. Also, this category includes all costs related to buyer/planners. 2. Supplier Quality Engineering: The costs associated with the determination, development/certification, and monitoring of suppliers' capabilities to fully satisfy the applicable quality and regulatory requirements. 3. Inbound Freight and Duties: Freight costs associated with the movement of material from a vendor to the buyer and the associated administrative tasks. Duties are those fees and taxes levied by government for moving purchased material across international borders. Customs broker fees should also be considered in this category. 4. Receiving and Material Storage: All costs associated with taking possession of material. This does not include inspection. Note that inventory-carrying costs are covered in a subsequent worksheet. 5. Incoming Inspection: All costs associated with the inspection and testing of received materials to verify compliance with specifications. 6. Material Process and Component Engineering: Those tasks required to document and communicate component specifications, as well as reviews to improve the manufacturability of the purchased item. 7. Tooling: Those costs associated with the design, development, and depreciation of the tooling required to produce a purchased item. A company would incur a tooling cost if they actually paid for equipment and/or maintenance for a contract manufacturer that makes their product. Sometimes, there isn’t enough incentive for a contract manufacturer to upgrade plant equipment to a level of quality that a company requires, so the company will pay for the upgrades and maintenance to ensure high quality. May not be common in some industries such as the Chemicals
Materials Requirements Planning (MRP): A decision-making methodology used to determine the timing and quantities of materials to purchase.
Milk Run: A regular route for pickup of mixed loads from several suppliers. For example, instead of each of five suppliers sending a truckload per week to meet the weekly needs of the customer, one truck visits each of the suppliers on a daily basis before delivering to the customer’s plant. Five truckloads per week are still shipped, but each truckload contains the daily requirement from each supplier. Also see: Consolidation
Min – Max System: A type of order point replenishment system where the “min” (minimum) is the order point, and the “max” (maximum) is the “order up to” inventory level. The order quantity is variable and is the result of the max minus the available and on-order inventory. An order is recommended when the sum of the available and on-order inventory is at or below the min.
Mixed Model Production – Making several different parts or products in varying lots sizes so that a factory produces close to the same mix of products that will be sold that day.
Net Change MRP: An approach in which the material requirements plan is continually retained in the computer. Whenever a change is needed in requirements, open order inventory status, or bill of material, a partial explosion and netting is made for only those parts affected by the change. Antonym: Regeneration MRP.
Net Requirements: In MRP, the net requirements for a part or an assembly are derived as a result of applying gross requirements and allocations against inventory on hand, scheduled receipts, and safety stock. Net requirements, lot-sized and offset for lead-time, become planned orders.
Nonconformity: Failure to fulfill a specified requirement. See: blemish, defect, imperfection.
On-Hand Balance: The quantity shown in the inventory records as being physically in stock.
On order: The quantity of goods that has yet to arrive at a location or retail store. This includes all open purchase orders including, but not limited to, orders in transit, orders being picked, and orders being processed through customer service.
On Order: The amount of goods that has yet to arrive at a location or retail store. This includes all open purchase orders including, but not limited to, orders in transit, orders being picked, and orders being processed through customer service.
Order Entry and Scheduling: The process of receiving orders from the customer and entering them into a company’s order processing system. Orders can be received through phone, fax, or electronic media. Activities may include “technically” examining orders to ensure an orderable configuration and provide accurate price, checking the customer’s credit and accepting payment (optionally), identifying and reserving inventory (both on hand and scheduled), and committing to scheduling a delivery date.
Order Management: The planning, directing, monitoring, and controlling of the processes related to customer orders, manufacturing orders, and purchase orders. Regarding customer orders, order management includes order promising, order entry, order pick, pack and ship, billing, and reconciliation of the customer account. Regarding manufacturing orders, order management includes order release, routing, manufacture, monitoring, and receipt into stores or finished goods inventories. Regarding purchasing orders, order management includes order placement, monitoring, receiving, acceptance, and payment of supplier.
Order Picking: Selecting or “picking” the required quantity of specific products for movement to a packaging area (usually in response to one or more shipping orders) and documenting that the material was moved from one location to shipping. Also see: Batch Picking, Discrete Order
Picking, Zone Picking
Order Processing: Activities associated with filling customer orders.