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DEFINITIONS - Alphabetical glossary of 400+ terms used throughout Manufacturing: Materials Procurement, Operations Management, Design Engineering, Lean Production, Factory Automation, Machine Controls, Warehousing, Transportation, and Logistics.

A, B, C, D, E, F, G, H, I, J, K, L, M, N, O, Q, R, S, T, U, V, W, X, Y, Z  


Pareto: A means of sorting data for example.  For example, number of quality faults by frequency of occurrence.  An analysis that compares cumulative percentages of the rank ordering of costs, cost drivers, profits or other attributes to determine whether a minority of elements have a disproportionate impact. For example, identifying that 20 percent of a set of independent variables is responsible for 80 percent of the effect.  Also see: 80/20 Rule

Pareto Chart – A graphical tool for ranking causes from most significant to least significant. It is based on the Pareto principle, which was first defined with to quality by J.M. Juran in 1950.

Participative Design Engineering – A concept that refers to the participation of all the functional areas of the firm in the product design activity.

Pay-on-Use: Pay-on-Use is a process where payment is initiated by product consumption, i.e., consignment stock based on withdrawal of product from inventory. This process is popular with many European companies.

Payroll: Total of all fully burdened labor costs, including wage, fringe, benefits, overtime, bonus, and profit sharing.

Performance Measurement Program:  A performance measurement program goes beyond just having performance metrics in place. Many companies do not realize the full benefit of their performance metrics because they often do not have all of the necessary elements in place that support their metrics. Typical characteristics of a good performance measurement program include the following: Metrics that are aligned to strategy and linked to the “shop floor” or line level workers. A process and culture that drives performance and accountability to delivery performance against key performance indicators. An incentive plan that is tied to performance goals, objectives and metrics Tools/technology in place to support easy data collection and use.  This often includes the use of a “dashboard” or “scorecard” to allow for ease of understanding and reporting against key performance indicators.

Phantom Bill of Material: A bill-of-material coding and structuring technique used primarily for transient (nonstocked) subassemblies.  For the transient item, lead-time is set to zero and the order quantity to lot-for-lot.  A phantom bill of material represents an item that is physically built, but rarely stocked, before being used in the next step or level of manufacturing.  This permits MRP logic to drive requirements straight through (blow through) the phantom item to its components, but the MRP system usually retains its ability to net against any occasional inventories of the item.  This technique also facilitates the use of common bills of material for engineering and manufacturing.    Synonym: Pseudo Bill of Material. Also see: blow through

Planning Bill of Material: An artificial grouping of items or events in bill-of-material format used to facilitate master scheduling and material planning.  It may include the historical average of demand expressed as a percentage of total demand for all options within a feature or for a specific end item within a product family and is used as the quantity per in the planning bill of material.

Planning Horizon: The amount of time a plan extends into the future.  For a master schedule, this is normally set to cover a minimum of cumulative lead time plus time for lot sizing low- level components and for capacity changes of primary work centers or of key suppliers.  For longer-term plans the planning horizon must be long enough to permit any needed additions to capacity.  Also see: Cumulative Lead Time, Planning Time Fence

Planning Time Fence: A point in time denoted in the planning horizon of the master scheduling process that marks a boundary inside of which changes to the schedule may adversely affect component schedules, capacity plans, customer deliveries, and cost.  Outside the planning time fence, customer orders may be booked and changes to the master schedule can be made within the constraints of the production plan. The master scheduler must make changes inside the planning time fence manually.  Synonym: Planning Fence.  Also see: Cumulative Lead Time,
Demand Time Fence, Firm Planned Order, Planned Order, Planning Horizon, Time Fence.

Poka Yoke (mistake-proof): Mistake-proofing techniques designed in to prevent error from resulting in a product defect.

Portal: Websites that serve as starting points to other destinations or activities on the Web. Initially thought of as a "home base" type of web page, portals attempt to provide all Internet needs in one location. Portals commonly provide services such as e-mail, online chat forums, shopping, searching, content, and news feeds. 

Post-Deduct Inventory Transaction Processing: A method of inventory bookkeeping where the book (computer) inventory of components is reduced after issue. When compared to a real- time process, this approach has the disadvantage of a built-in differential between the book   record and what is physically in stock.   Consumption can be based on recorded actual use, or calculated using finished quantity received times the standard BOM quantity (back flush).  Also see: Back flush  

Process:  A series of time-based activities that are linked to complete a specific output.

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 Benchmarking: Benchmarking a process (such as the pick, pack, and ship process) against organizations known to be the best in class in this process. Process benchmarking is usually conducted on firms outside of the organization’s industry.  Also see: Benchmarking,
Best-in-Class, Competitive Benchmarking

Process Control – The automatic monitoring and control of a process by instruments and/or systems configured or programmed to respond appropriately to process feedback.

Process Engineering – The discipline of designing and improving manufacturing equipment and production processes to support the manufacturing of a product line.

Process Improvement: Designs or activities, which improve quality or reduce costs, often through the elimination of waste or non-value-added tasks.

Process Manufacturing - A production environment that adds value by mixing, separating, and/or performing chemical reactions. The production process can be done in either a batch or uninterrupted continuous manner. Key characteristics include: use of ingredient recipes, and yield measurement. Process production is generally associated with the following industries: chemical; pharmaceutical; -oil & gas; food & beverage.

Process Sheet – Detailed manufacturing instructions issued to the plant. The instructions may include specifications on speeds, feeds, temperatures, tools, fixtures, and sketches of setups and quality measurements.

Process Simulation – The use of mathematical computer models to implement different process design scenarios, and test design assumptions using real-time feedback.

Process Yield: The resulting output from a process. An example would be a quantity of finished product output from manufacturing processes.

Procurement: The business functions of procurement planning, purchasing, inventory control, traffic, receiving, incoming inspection, and salvage operations.  Syn: Purchasing.

Product Configurator - A software tool that simplifies order entry by asking which options the customer needs, and applies predefined rules to correctly configure the end product. The configurator then polls the attributes of the newly configured item, tests for conflicts, and generates the appropriate bill of material, routing, and price based on rules and calculations.  

Production Capacity: Measure of how much production volume may be experienced over a set period of time.

Production Control – Systematic planning, coordination and direction of all manufacturing activities to ensure that products are made on time, of adequate quality, and at reasonable cost.

Product Data Management Software (PDM) - Product Data Management software is a tool that helps engineers and others manage data and the product development process. Major PDM user components include: An electronic vault for storing all product data, product structures (commonly called bills of material), and engineering change histories. The "Vault" is the major component of PDM. The vault is a data warehouse that controls internally stored information histories about products and their associated parts structure. Access and modifications to vaulted products are strictly controlled by system rules, which eliminate having multiple descriptions for the same product.  

Production Planning and Scheduling: The systems that enable creation of detailed optimized plans and schedules taking into account the resource, material, and dependency constraints to meet the deadlines.

Programmable Logic Controller (PLC) – A PLC controls large numbers of analog and discrete elements such as limit switches, motors, and motion devices using very fast I/O scans.

Pull Signal: A signal from a using operation that triggers the issue of raw material.

Pull System – 1) In production, the production of items only as demanded for use or to replace those taken for use. 2) In material control, the withdrawal of inventory as demanded by the using operations. Material is not issued until a signal comes from the user. 3) In distribution, a system for replenishing field warehouse inventories where replenishment decisions are made at the field warehouse itself.  

Pull or Pull-through distribution: Supply-chain action initiated by the customer. Traditionally, the supply chain was pushed; manufacturers produced goods and "pushed" them through the supply chain, and the customer had no control. In a pull environment, a customer's purchase sends replenishment information back through the supply chain from retailer to distributor to manufacturer, so goods are "pulled" through the supply chain.

Purchase Order (PO): The purchaser’s authorization used to formalize a purchase transaction with a supplier.  The physical form or electronic transaction a buyer uses when placing order for merchandise.

Push System – 1) In production, the production of items at times required by a given schedule planned in advance. 2) In material control, the issuing of material according to a given schedule or issuing material to a job order at its start time. 3) In distribution, a system for replenishing field warehouse inventories from a centralized supply facility.



Quality: Conformance to requirements or fitness for use.  Quality can be defined through five principal approaches: (1) Transcendent quality is an ideal, a condition of excellence.  (2) Product-based quality is based on a product attribute.  (3) User-based quality is fitness for use. (4) Manufacturing-based quality is conformance to requirements.  (5) Value-based quality is the degree of excellence at an acceptable price.  Also, quality has two major components:  (a) quality of conformance—quality is defined by the absence of defects, and (b) quality of design—quality is measured by the degree of customer satisfaction with a product’s characteristics and features.

Quality Circle: In quality management, a small group of people who normally work as a unit and meet frequently to uncover and solve problems concerning the quality of items produced, process capability, or process control.  Also see: Small Group Improvement activity

Quality Control – The process of measuring quality conformance by comparing the actual with a standard for the characteristic and acting on the difference.

Quarantine: In quality management, the setting aside of items from availability for use or sale until all required quality tests have been performed and conformance certified.



Radio Frequency (RF or RFID):  A form of wireless communications that lets users relay information via electromagnetic energy waves from a terminal to a base station, which is linked in turn to a host computer.  The terminals can be place at a fixed station, mounted on a forklift truck, or carried in the worker's hand.  The base station contains a transmitter and receiver for communication with the terminals.  RF systems use either narrow-band or spread-spectrum transmissions.  Narrow-band data transmissions move along a single limited radio frequency, while spread-spectrum transmissions move across several different frequencies.  When combined with a bar-code system for identifying inventory items, a radio-frequency system can relay data instantly, thus updating inventory records in so-called "real time." 

Rate-Based Scheduling: A method for scheduling and producing based on a periodic rate, e.g., daily, weekly, or monthly.  This method has traditionally been applied to high-volume and process industries. The concept has recently been applied within job shops using cellular layouts and mixed-model level schedules where the production rate is matched to the selling rate.

Receiving: The function encompassing the physical receipt of material, the inspection of the shipment for conformance with the purchase order (quantity and damage), the identification and delivery to destination, and the preparation of receiving reports.

Reengineering: 1) A fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in performance.  2) A term used to describe the process of making (usually) significant and major revisions or modifications to business processes. 3) Also called Business Process Reengineering. 

Regeneration MRP: An MRP processing approach where the master production-schedule is totally re-exploded down through all bills of material, to maintain valid priorities. New requirements and planned orders are completely recalculated or “regenerated” at that time.  

Remanufacturing - An industrial process in which used products known as cores, are disassembled, worn parts removed and refurbished, or new parts added, in order to restore the core product to like new condition. A key characteristic is the exchange of cores (like batteries) and the core value.  

Repetitive Manufacturing - The production of discrete units in a high-volume concentration of available capacity using fixed routings. Generally work orders are not used, but can be used if desired. Products are generally made of standard components. Production is generally based on a predetermined rate.  

Replenishment: The process of moving or re-supplying inventory from reserve storage location to a primary picking location, or to another mode of storage in which picking is performed.

Reverse Engineering: A process whereby competitors’ products are disassembled & analyzed for evidence of the use of better processes, components & technologies

Routing or Routing Guide: 1) Process of determining how shipment will move between origin and destination.  Routing information includes designation of carrier(s) involved, actual route of carrier, and estimated time enroute.  2) Right of shipper to determine carriers, routes and points for transfer shipments.  3) In manufacturing this is the document that defines a process of steps used to manufacture and/or assemble a product.



Safety Stock: The inventory a company holds above normal needs as a buffer against delays in receipt of supply or changes in customer demand.

Sales Planning: The process of determining the overall sales plan to best support customer needs and operations capabilities while meeting general business objectives of profitability, productivity, competitive customer lead times, and so on, as expressed in the overall business plan.  Also see: Production Planning, Sales and Operations Planning

Supervisory Control and Data Acquisition (SCADA) – An acronym for computer systems used for gathering and analyzing real time data. SCADA systems are used to monitor and control a plant or equipment. SCADA systems can be used to monitor simple systems or complex systems like fully automated manufacturing facilities.  

Shingo’s Seven Wastes: Shigeo Shingo, a pioneer in the Japanese Just-in-Time philosophy, identified seven barriers to improving manufacturing.  They are 1) the waste of overproduction, 2) waste of waiting, 3) waste of transportation, 4) waste of stocks, 5) waste of motion, 6) waste of making defects, and 7) waste of the processing itself.

Shipping: The function that performs tasks for the outgoing shipment of parts, components, and products.  It includes packaging, marking, weighing, and loading for shipment.

Shop Floor Production Control Systems: The systems that assign priority to each shop order, maintaining work-in-process quantity information, providing actual output data for capacity control purposes and providing quantity by location by shop order for work-in-process inventory and accounting purposes.

Sigma: A Greek letter commonly used to designate the standard deviation of a population.

Simulation – The technique of using computer models to reproduce and test various conditions likely to occur in the actual performance of a system.

Six-Sigma Quality: A term used generally to indicate that a process is well controlled, i.e., tolerance limits are ±6 sigma {3.4 defects per million events) from the centerline in a control chart.  The term is usually associated with Motorola, which named one of its key operational initiatives Six-Sigma Quality. 

Six Sigma - A term generally used to indicate that a process is well controlled, i.e. plus or minus 6 sigma points from the midpoint in a control chart. The term is usually associated with Motorola, which named a major quality initiative "Six-Sigma Quality."  

Standard Cost Accounting System: A cost accounting system that uses cost units determined before production for estimating the cost of an order or product.  For management control purposes, the standards are compared to actual costs, and variances are computed.

Standard Deviation: 1) the amount of forecast error or variance from the mathematical mean.
2) How close the forecast is to the actual demand for products, expressed as a percentage. 

Statistical Process Control Software (SPC) - Statistical Process Control Software (SPC) interacts with measurement gauges to continuously monitor a process, collecting sample data on manufactured parts and process characteristics. The SPC software is capable of sorting collected data samples into a number of "Control Charts" that continuously measure quality and process shift against predefined upper and lower limits.

Statistical Process Control (SPC) – Statistical Process Control is a quality control method focusing on continuous monitoring of the process, with the intent to achieve closed loop control of the process to eliminate defective product.

Supervisory Control – The use of computers to accomplish operator interface, data acquisition, process monitoring, and some degree of production control.

Supply Chain:  1) starting with unprocessed raw materials and ending with the final customer using the finished goods, the supply chain links many companies together.  2) The material and Informational interchanges in the logistical process stretching from acquisition of raw materials to delivery of finished products to the end user. All vendors, service providers and customers are links in the supply chain. 

Supply Chain Execution (SCE): The ability to move the product out the warehouse door. This is a critical capacity and one that only brick-and-mortar firms bring to the B2B table.

Supply Chain Management (SCM) as defined by the Council of Logistics Management (CLM): “Definition - Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.  Boundaries and Relationships - Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the Logistics Management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology.”

Supply Chain Planning Software (SCP) - Supply Chain Planning, unlike ERP planning tools such as Material Requirements Planning (MRP) and Master Production Scheduling (MPS), makes use of advanced planning and scheduling (APS) technology, which provides schedules based on a much wider range of constraints than is possible in MRP and MPS, but includes materials and capacity in it's planning.  


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