APICS CPIM Exam 1

ABC classification

Process of classifying items in descending order based on annual dollar volume or some other criteria. The list is then split into 3 classes - A, B, and C. A represents 10-20% of items but 50-70% of dollar volume; B represents 20% of items and 20% of dollar volume; C represents 60-70% of items but 10-30% of dollar volume. This principle states that effort and money can be saved by applying looser controls to the low dollar volume items (C class) than the higher dollar volume items (A & B classes) and applies to inventory, purchasing, sales, etc.

Advance ship notice (ASN)

Electronic data interchange (EDI) notification of shipment of goods

Andon

Electronic board that provides visibility of floor status and gives info to help coordinate efforts linked to work centers; green light = running, red light = stop, yellow light = needs attention

Anticipation inventories

Any additional inventory above basic pipeline stock to cover projected trends of increased sales, planned promo programs, seasonal fluctuation, plant shutdowns, and vacations

Assemble-2-order

Production environment where a good or service can be assembled after receipt of a customer's order. The key components (or ingredients) used in assembly or finishing process are planned and stocked in anticipation of a customer order. Receipt of order initiates assembly of the customized product. Useful strategy when a large number of end products can be assembled from common components

Available inventory

On-hand inventory balance minus allocations, reservations, backorders, and quantities held for quality problems

Backflush

Method of inventory bookkeeping where the book inventory is automatically reduced after completion of activity on component's upper-level parent item based on what should have been used as specified on the BOM and allocation records; disadvantage is difference between book inventory and physical OH inventory

Backhauling

Process of transportation returning from original destination point to point of origin; can be full, partial, or empty load

Backlog

All customer orders received but not yet shipped (open orders or order board)

Backorder

Unfulfilled customer order or commitment. An immediate (or past due) demand against an item whose inventory is insufficient to satisfy the demand

Back scheduling

Technique for calculating operation start dates and due dates; start with order due date and work backwards to calculate required start date and/or due dates for each operation

Batch

Qty scheduled to be produced or in production; type of mfg process used to produce items with similar designs & cover wide range of order volumes; items ordered are of a repeat nature

Bill of lading

Document issued by a carrier which details a shipment of merchandise and gives title of that shipment to a specified party.

Bill of material (BOM)

Listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make an assembly; used in conjunction with the master production schedule to determine the items for which purchase requisitions and production orders must be released; list of all the materials needed to make one production run of a product, by a contract manufacturer, of piece parts/components for its customers

Bonded warehouse

Buildings or parts of a building designated by Sec of Treasury for storing imported goods, operated under supervision of US Customs

Bottleneck

Facility, function, department, or resource whose capacity is less than the demand placed upon it; machine or work center

Break-bulk

Dividing truckloads of similar items into smaller, more appropriate qty's for use

Buffer

Qty of materials awaiting further processing; can refer to raw materials, semi-finished stores or hold points, or a work backlog that is purposely maintained behind a work center; in TOC, it can be time or material and support thruput and/or due date performance maintained at the constraint, convergent points (with a constraint part), divergent points, and shipping points

Buffer management

In TOC, process where all expediting in a shop is driven by what is scheduled to be in the buffers (constraint, shipping, or assembly); by expediting into buffers, system avoids idleness at the constraint and prevents missed due date

Business plan

Statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow (source and application of funds) statement; document consisting of the business details (organization, strategy, and financing tactics)

Capable-2-promise

Process of committing orders against available capacity as well as inventory. May involve multiple manufacturing or distribution sites. Used to determine when a new or unscheduled customer order can be delivered. Employs a finite-scheduling model of manufacturing system to determine when an item can be delivered. Includes any constraints that might restrict production, such as availability of resources, lead times for raw materials or purchased parts, and requirements for lower-level components or subassemblies. The resulting delivery date takes into consideration production capacity, current manufacturing environment, and future order commitments. Objective is to reduce time spent by planners in expediting orders and adjusting plans because of inaccurate delivery-date promises

Capacity control

Process of measuring production output and comparing it with the capacity plan to determine if variance exceeds pre-established limits and taking action to get back on plan if limits are exceeded

Capacity management

Function of establishing, measuring, monitoring, and adjusting limits of capacity in order to execute all mfg schedules; executed at 4 levels: resource requirements planning, rough-cut capacity planning, capacity requirements planning, and input/output control

Capacity planning

Process of determining amount of capacity required to produce in the future; may be performed at aggregate or product-line (RRP), master-schedule level (R-CCP), and materials requirements planning (CRP)

Capacity requirements planning (CRP)

Process of determining in detail amount of labor and machine resources required to complete task of production; inputs are open orders and planned orders; checks against all time periods

Carrying cost

% of dollar value of inventory per unit of time (generally one year); depends mainly on the cost of capital invested as well as such costs of maintaining the inventory as taxes and insurance, obsolescence, spoilage, and space occupied; varies from 10% to 35% annually, depending on type of industry

Cash flow

Net flow of dollars into or out of the proposed project; algebraic sum, in any time period, of all cash receipts, expenses, and investments

Cause-and-effect diagram

Tool for analyzing process dispersion

Cellular manufacturing

Mfg process that produces families of parts within a single line or cell of machines controlled by operators who work only within the line or cell

Chase production method

Production planning method that maintains stable inventory level while varying production to meet demand

Continuous replenishment

Process by which supplier is notified daily of actual sales or warehouse shipments and commits to replenish

Control chart

Graphic comparison of process performance data with predetermined computed control limits; primary use is to detect assignable causes of variation in the process (as opposed to random ones)

Control limit

Statistically determined line on a control chart (upper control limit or lower control limit)

Cost of poor quality

Costs associated with providing poor quality products or services: (1) internal failure costs (2) external failure costs (3) appraisal costs (costs incurred to determine the degree of conformance to quality requirements (4) prevention costs

Critical path method (CPM)

Network planning technique for analysis of project's completion time used for planning & controlling the activities in the project; by showing each activity and associated time to complete identifies those elements that actually constrain the total project time, determining the critical path

Cross-docking

Concept of packing products on the incoming shipments so they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destinations; items are carried from incoming vehicle docking point to outgoing vehicle docking point without being stored in inventory in the warehouse

Cycle stock

Average amount of inventory a business needs to meet customer demand between the times it orders more inventory from suppliers

Cycle time

In materials management, it refers to the length of time from when material enters a production facility until it exits; in industrial engineering, the time between completions of two discrete units of production.

Decoupling inventory

Amount of inventory kept between entities in a mfg or distribution network to create independence between processes or entities; objective is to disconnect the rate of use from the rate of supply of the item

Delivery lead time

Time from receipt of a customer order to the delivery of the product

Demand lead time

Amount of time potential customers are willing to wait for the delivery of a good or service

Demand management

Function of recognizing all demands for goods and services to support the marketplace; involves prioritizing it when supply is lacking

Demand planning

Using forecasts and experience to estimate demand for various items at various points in a supply chain; several forecasting techniques may be used during the planning process; often, families of items are aggregated (geographical region or by life cycle stage)

Demand pull

Triggering of material movement to a work center only when that work center is ready to begin the next job; in effect eliminates the queue from in front of a work center, but it can cause a queue at the end of a previous work center

Demonstrated capacity

Proven capacity calculated from actual performance data, usually expressed as the average # of items produced multiplied by standard hours per item

Demurrage

Carrier charges and fees applied when rail freight and ships are retained beyond a specified loading or unloading time

Detention

Carrier charges and fees applied when truck trailers are retained beyond a specified loading and unloading time

Discrete order picking

Method of picking orders in which items on one order are picked before items on next order is picked

Dispatching

Selecting and sequencing of available jobs to be run at individual workstations and the assignment of those jobs to workers

Distribution

Activity associated with movement of material (FG or parts) from the mfg to customer; encompass transportation, warehousing, inventory control, material handling, order administration, site & location analysis, industrial packaging, data processing, and communications necessary for effective mgmt; includes all activities related to physical distribution, as well as return of goods to mfg; systematic division of a whole into discrete parts with different characteristics

Distribution center

Warehouse with FG and/or service items

Distribution channel

Distribution route, from raw materials thru consumption, that products travel

Distribution inventory

Inventory, usually spare parts and finished goods, located in the distribution system (e.g., in warehouses, in transit between warehouses and the consumer)

Distribution requirements planning (DRP)

Function of determining the need to replenish inventory at branch warehouses; time-phased order point approach is used where the planned orders at the branch warehouse level are ""exploded"" via MRP logic to become gross requirements on the supplying source; In multilevel distribution networks, this explosion process can continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and become input to the master production schedule; demand on the supplying sources is recognized as dependent, and standard MRP logic applies; replenishment inventory calculations, may be based on other planning approaches such as period order quantities or ""replace exactly what was used,"" rather than being limited to the time-phased order point approach

Distribution warehouse

Facility that receives items in large lots, stores them temporarily, and breaks them into smaller lots destined for a variety of locations

Dock-2-stock

Program where specific quality and packaging requirements are met before the product is released; prequalified goods are shipped directly into the customer's inventory; eliminates costly handling of components (receiving & inspection) and enables them to move into production

Drum schedule

Detailed production schedule for a resource that sets the pace for the entire system; must reconcile the customer requirements with system constraint(s)

Economic order quantity (EOQ)

Type of fixed order qty model that determines amt of item to be purchased or manufactured at one time

Efficiency

Measurement of actual output to the standard output expected

Electronic data interchange (EDI)

Paperless (electronic) exchange of trading documents, such as purchase orders, shipment authorizations, advanced shipment notices, and invoices, using standardized document formats

Enterprise resource 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

External failure costs

Includes such costs as warranty and returns

External setup time

Time associated with elements of a setup procedure performed while process or machine is running

Extrinsic forecasting method

Forecast method on a correlated leading indicator, such as estimating furniture sales based on housing starts; tends to be more useful for large aggregations, such as total company sales, than for individual product sales

Field service

Functions of installing and maintaining a product for a customer after the sale or during the lease; may also include training and implementation assistance

Final assembly schedule (FAS)

Schedule of end items to finish the product for specific customers' orders in a make-2-order or assemble-2-order environment

Finite forward schedule

Equipment scheduling technique that builds a schedule by proceeding sequentially from the initial period to the final period while observing capacity limits; uses Gantt chart

Finite loading

Assigning no more work to a work center than the work center can be expected to execute in a given time period; usually refers to a computer technique that involves calculating shop priority revisions in order to level load operation by operation

Firm planned order (FPO)

Planned order that can be frozen in time and qty; computer isn't allowed to change it automatically, must be done by planner in charge of item; this technique can aid planners working with MRP systems to respond to material and capacity issues

Flowchart

One of 7 tools of quality that shows the operations, transportation, storages, delays, inspections, and so on related to a process

Flow processing

System in which work flows over a stationary path with little variance in the rate of flow; known as repetitive mfg if discrete units are produced (otherwise continuous mfg)

Fluctuation inventory

Inventory that is carried as a cushion to protect against forecast error

Freight forwarder

"middle man" between carrier and organization shipping the product. Often combines smaller shipments to take advantage of lower bulk costs

Functional layout

Facility configuration where operations of a similar nature or function are grouped together; organizational structure based on departmental specialties

Gantt chart

Earliest and best known type of planning & control chart designed to show graphically the relationship between planed performance and actual performance over time; used for machine loading (one horizontal line is capacity and other is load against that capacity) or monitoring job progress (one horizontal line is production schedule and other is actual progress of job against schedule in time)

Hedge inventory

Form of inventory buildup to buffer against some event that may not happen; involves speculation related to potential labor strikes, price increases, unsettled governments, and events that could severely impact a company's strategic initiatives

Heijunka

JIT philosophy where level production throughout SC matches planned rate of end product sales

Hoshin

Statement of objectives

Hoshin planning

Breakthrough planning where a company develops up to 4 vision statements that indicate where company should be in next 5 years; goals and work plans are developed based on the vision statements; periodic audits are conducted to monitor progress

Idle capacity

Available capacity that exists on non-constraint resources beyond the capacity required to support the constraint

Incoterms

International Commercial Terms; created to simplify international transactions

Infinite loading

Calculation of capacity required at work centers in time periods required regardless of capacity available to perform work

Input/output control (I/O)

Technique for capacity control where planned and actual inputs and planned and actual outputs of a work center are monitored; planned inputs and outputs for each work center are developed by CRP and approved by mfg management; actual input is compared to planned input to identify when work center output might vary from plan because work is not available at the work center

Intermittent production

Form of mfg where jobs pass thru functional departments in lots, and each lot may have a different routing

Intermodal transport

Shipments moved by different types of equipment combining the best features of each mode

Internal failure costs

Costs of things that go wrong before the product reaches the customer, usually includes rework, scrap, downgrades, re-inspection, retest, and process losses

Internal setup time

Time associated with elements of a setup procedure performed while process or machine isn't running

Intrinsic forecast method

A forecast based on internal factors, such as an average of past sales

Jidoka

Practice of stopping the production line when a defect occurs

Job shop

Organization where similar equipment is organized by function; each job follows distinct route thru shop; type of mfg process used to produce items to a customer's specifications; production operations are designed to handle a wide range of product designs and are performed at fixed-plant locations using general purpose equipment

Kaizen

Improvement; continuing improvement involving everyone: managers and workers; in mfg, relates to finding and eliminating waste in machinery, labor, or production methods

Kanban

Method of Just-in-Time production that uses standard containers or lot sizes with a single card attached to each; a pull system in which work centers signal with a card that they wish to withdraw parts from feeding operations or suppliers; loosely translated, means card, billboard, or sign, but other signaling devices such as colored golf balls have also been used; often used synonymously for the specific scheduling system developed and used by Toyota

Landed cost

Product cost plus the costs of logistics, such as warehousing, transportation, handling fees, duty, taxes, and tariffs

Lead-time offset

Technique used in MRP where a planned order receipt in one time period will require the release of that order in an earlier time period based on lead time for item

Leading indicator

Specific business activity index that indicates future trends, such as housing starts being leading indicator for industry that supplies builders' hardware

Lean production

Philosophy of production that emphasizes the minimization of the amount of all the resources (incl time) used in the various activities of the enterprise; involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with customers; contains a set of principles and practices to reduce cost through the relentless removal of waste and through the simplification of all mfg and support processes

Level production method

Production planning method that maintains a stable production rate while varying inventory levels to meet demand

Level schedule

Production schedule or MPS that generates material and labor requirements that are as evenly spread over time as possible

Line-haul costs

Within physical distribution, cost elements that vary by distance traveled and not by weight carried (e.g., fuel, drivers' wages, wear and tear on the vehicle)

Load

Amt of planned work scheduled for and actual work released to a facility, work center, or operation for a specific time period; usually expressed as standard work hours or units of production