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Terms Glossary


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A
Terms Glossary Definition
21 CFR Part 11 Compliance The Food & Drug Administration has specific rules related to the legal use of electronic signatures in industries regulated by the FDA. These industries include pharmaceuticals, life sciences, medical equipment and more. The term relates specifically to Part 11 of Title 21 of the Code of Federal Regulations (CFR).
Activity Based Costing (ABC) A cost accounting method which allocates activity costs (as opposed to direct labor or machine hours) to products, customers, projects, or other groups.
Actual Costing Actual labor, material, and overhead costs associated with a production run (job). Lot tracking is often used capture the actual cost of the material).
Advanced Planning & Scheduling (APS) APS is a process that typically takes place during sales order entry where the system runs MRP, schedules the parts and related subassemblies) based on current on-hand materials.
Assemble To Order (ATO) A manufacturing philosophy whereby components are manufactured to stock and then pulled for manufacturing when a specific customer order is received.
Available To Promise (ATP) ATP calculates inventory that is available to promise to fulfill a customer order on a specific date. Available inventory is that which is not already committed for existing orders or for manufacturing.
Average Costing The average cost of an item including labor, material, and overhead. Cost accounting systems calculate the average cost of an item by averaging the actual costs each time the item is made.
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B

Terms Glossary Definition
Backflush A process where materials are automatically moved from inventory into Work In Process based on the standard quantity required. Backflushing can also be used to allocate overhead and labor costs based on standard production quantities.
Bill of Materials The list and quantity of raw materials and components required to produce a finished good. Some manufacturing systems include labor and outside services in the bill of material. Bill of Material is a used mainly for discrete manufacturers and is synonymous with formulas for process manufacturers.
Burden A cost added to standard costs to cover overhead expenses.
By-Product A material that results from the manufacture of another item. By-products have value and can be sold as-is, used in the manufacture of other products, or recycled. E.g., regrind in injection molding or chips in machining operations.
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C

Terms Glossary Definition
Capable To Promise (CTP) CTP is sometimes used as an alternate term for Available To Promise. However, CTP typically includes not only the availability of uncommitted materials on a specific date but also the capacity (labor resources, machine availability, etc.) required to make the required quantity of an item. Therefore, CTP is often linked to MRP and APS to determine material availability as it relates to manufacturing capacity constraints.
Capacity Requirements Planning (CRP) CRP is a method used to evaluate the quantity of material that can be processed on a specific machine or in a specific work center. E.g., a machine may be able to produce 200 units in one hour. Therefore, the maximum capacity of the machine is 2,400 units per day. CRP is a critical part of most modern MRP and APS systems.
Component A raw material or subassembly used in the manufacture of a higher level finished good.
Computer Aided Design (CAD) A software application used by product engineers to design new products.
Computer Aided Manufacturing (CAM) Software used to control equipment used to manufacture products. E.g., CAM software can be used to specify the temperature of an oven used to dry a product or the dimensions of a product on a CNC machine.
Computer Integrated Manufacturing (CIM) The integration of computer systems for manufacturing. These may include some or all of the following: ERP, MRP, CAD, CAM, SPC, and other software applications.
Computerized Maintenance Management System (CMMS) Software for managing and scheduling maintenance-related activities. CMMS may include fixed asset accounting, asset depreciation, as well as machine, facility, and tool maintenance schedules.
Computer Numerical Control (CNC) CNC software provides a machine with instructions describing how to manufacture an item. This is similar to CAM but is specific to each machine. CNC machines are most often used for precision cutting, drilling, or shaping of metal products.
Concentration The percentage of an active ingredient within a specific unit of measure. E.g., 20% chlorine.
Configure To Order (CTO) Defining the routing and/or bill of materials to manufacture an item based on features and options such as color, size, etc.
Co-Product When more than one unique part results from a production run. E.g., multiple parts from a progressive die in stamping or multi-cavity mold in injection molding.
Core Cores are items that are refurbished or remanufactured. Specific requirements relate to the shipments, receipt, costing, and tracking of the core. Remanufacturing industries include engine overhaul and repair, ink/toner cartridge recharging, refurbishment of cylinders and rolls, and more.
Crew The number of people required to perform a manufacturing operation. Crew definitions typically affect labor schedules and allocated labor costs.
Critical Ratio A popular scheduling rule whereby the amount of time between the current date and the due date is divided by the amount of work remaining. E.g. A job that has 4 days before its due date and 2 days of remaining work would have an index number of 2. Work orders with the smallest (often fractional) index numbers are scheduled before work orders with larger index numbers. A ratio of 1.0 indicates the job is on schedule, less than 1.0 shows late jobs, and more than 1.0 represents jobs that are ahead of schedule.
Cycle Time The amount of time it takes to complete one unit or batch. E.g., if 20 parts are made per hour the cycle time is 3 minutes. If 1 batch is made per hour the cycle time is 60 minutes. Cycle times are typically reported in units per hour, hours per unit, or batch.
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D

Terms Glossary Definition
Discrete Manufacturing Manufacturing items based on a definitive bill of material or recipe as opposed to batch formulas. The bill of material or recipe is typically expressed in quantities per each as opposed to percentage per batch.
Down Time Time that a resource such as labor, machines, or tools are unavailable for production.
Drum-Buffer-Rope Part of the Theory of Constraints by Eliyahu Goldratt. This analogy shows that the bottleneck in manufacturing determines the output from the supply chain. The bottleneck (the "drum beat") must operate at maximum output in order to maintain an adequate stock of material (the buffer) from the supply chain (the rope). The bottleneck dictates the amount of stock that needs to be on-hand and the respective demands on the supplier (e.g., how much to buy, when to buy, etc.).
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E

Terms Glossary Definition
Engineering Change Order (ECO) A change management system designed to track changes made to production standards (routing and bill of material). Also called Engineering Change Requests (ECR) and Engineering Change Notifications (ECN) or Engineering Change Management (ECM). ECO systems typically affect material planning, inventory, purchasing and other departments within an organization.
Engineer To Order (ETO) A manufacturing philosophy whereby finished goods are designed and produced for specific customer orders. Assemblies and raw materials may be stocked but are not assembled into the finished good until a customer order is received and the part is designed by engineering.
Enterprise Asset Management (EAM) Asset management software designed to help companies track, depreciate, and maintain their fixed assets and capital equipment. EAM software is often integrated with ERP software for preventative maintenance planning as well as asset accounting.
Enterprise Resources Planning (ERP) ERP is an extension of MRP II and MRP. ERP software provides integration between all aspects of a company's business - accounting, distribution, manufacturing, human resources, customer relationship management, and more. One of the fundamental differences between MRP II and ERP is the use of relational databases and fourth generation programming languages. ERP software originally defined manufacturing software but is now used to define the main business management system used across industries.
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F

Terms Glossary Definition
Fab Shop A manufacturer of semiconductors, wafers, circuit boards or chips. Also refers to a metal fabricator.
FIFO Costing Stands for First In First Out. A cost accounting system whereby the first cost of raw materials is used to determine the cost of the finished good.
Finished Good The top level bill of material item. Finished Goods contain raw materials and/or components.
Finite Scheduling A production scheduling system that loads resources up to their maximum capacity without overloading. Resources include machines, work centers, tools, and/or labor.
Fixed Cost Costs that don't vary due to production volume. E.g., rent, insurance, taxes, etc.
Flow Manufacturing Manufacturing environments using assembly lines to produce the same or similar parts (or variations of the same part) in a repetitive manner. The assembly line contains one or more machines and/or work centers and is sometimes called a manufacturing cell. Production is scheduled by item (as opposed to a work order) and is based on the maximum throughput (rate) of the line or cell. Materials are typically backflushed to production at standard quantities and costs. Flow manufacturing often utilizes drum-buffer-rope principles which optimize bottleneck operations.
Formula Formulas include the list of ingredients and percentage of each required to make a finished good or finished good batch. Formulas are sometimes called recipes.
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G

Terms Glossary Definition
Gantt Chart The graphical display of scheduled operations by work center or machine along a time horizon.
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I

Terms Glossary Definition
Infinite Scheduling A production scheduling system that schedules production to resources regardless of capacity (overloading). Resources include machines, work centers, tools, and/or labor.
Ingredient A raw material contained in a formula or recipe.
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J

Terms Glossary Definition
Job Costing A manufacturing costing system that show actual cost per job (work order) compared to the standard and/or estimated cost. Note that job costing systems can be used in FIFO/LIFO, Actual, Standard and Average costing environments.
Job Shop Job shops typically have minimal raw materials and finished goods inventory. Materials are purchased and manufactured specifically for a customer order. Job shops are also make to order.
Just In Time (JIT) A manufacturing technique based on a pull system such as kanban.
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K

Terms Glossary Definition
Kanban A method of achieving just in time manufacturing through the use of "kanbans" or pull cards to indicate when a machine or work center is running low on materials. Most kanban systems do not use work orders.
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L

Terms Glossary Definition
Lead Time Also called manufacturing lead time. The total time to make a part. For make to order companies it is the time from release to production to shipment of parts. For make to stock companies it is the time from release to production until the parts are moved into finished goods inventory.
Lean Manufacturing Manufacturing which seeks to eliminate waste. Most often associated with JIT and kanban.
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M

Terms Glossary Definition
Machine Equipment or labor resource used in a manufacturing operation. Machines are often grouped into work centers and need to be scheduled and maintained.
Maintenance, Repair, Operating Supplies (MRO) Maintenance, Repair and Operating stock used to maintain equipment. MRO inventories include such items as grease, oil, and spare parts for maintaining and/or repairing machinery, equipment, and other assets. MRO stock are often accounted for as current assets rather than fixed assets.
Make To Order (MTO) A manufacturing philosophy whereby finished goods are manufactured for specific customer orders. MTO includes ATO, CTO, ETO, and Job Shop manufacturers.
Make To Stock (MTS) A manufacturing philosophy whereby finished goods are produced to stock. Incoming customer orders are then fulfilled from stock as opposed to being directly fulfilled from manufacturing. Manufacturing proactively maintains adequate stock levels for in-coming customer orders.
Manufacturing Execution System (MES) A shop floor control system which includes either manual or automatic labor and production reporting as well as on-line inquiries and links to tasks that take place on the production floor MES includes links to work orders, receipt of goods, shipping, quality control, maintenance, scheduling, and other related tasks.
Manufacturing Resources Planning (MRP II) An extension of MRP to manage all resources in a company beyond materials. Other resources include labor, financial planning, supply chain management, and more. MRP II typically provides simulation capabilities and links business planning, sales, operations, production, scheduling, MRP, capacity planning, and other systems for a cohesive management system.
Master Production Schedule (MPS) An interim production schedule that is used in some systems to drive MRP for finished goods. The MPS typically considers sales forecasts, material availability, work center load, labor resources, and other constraints in order to effectively predict demand and manage resources. The MPS can be managed at the item level or by product line.
Material Requirements Planning (MRP) A software application that uses bill of material, routing, inventory, work order, sales order, purchase order, transfer order, and other information to recommend purchase orders, transfers, and work orders to balance supply and demand. MRP has been extended beyond traditional manufacturing environments to help distributors and service organizations manage their inventories and purchases.
Material Safety Data Sheets (MSDS) A Material Safety Data Sheet (MSDS) contains basic information intended to help people work safely with a material. MSDS typically include a list of all hazardous materials contained in a product and the recommended treatment of individuals who may be injured by the product. E.g., whether or not to induce vomiting if the product is swallowed. MSDS may also state the correct temperature to store flammable or combustible materials as well as other material handling instructions. MSDS are required by OSHA and other government regulated manufacturers or distributors.
Minimum Slack A scheduling rule used to prioritize jobs with the least amount of slack time first. Slack is defined as the amount of time between the scheduled due date and the estimated completion date. If a job can be completed ahead of schedule it has slack time; if it is likely to be completed behind schedule, it has negative slack time.
Mixed Mode Manufacturing finished goods using several different manufacturing philosophies. E.g., a company that processes cheese (process) and then cuts and wraps the cheese (discrete) would be considered mixed-mode. Further, a company that makes products to stock and to order would also be considered mixed-mode.
Move Time The amount of time required to move parts either from inventory to the first production operation or to the next production operation.
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N

Terms Glossary Definition
North American Industrial Classification System (NAICS) On April 9, 1997, the US Office of Management and Budget (OMB) announced its decision to adopt the North American Industry Classification System (NAICS pronounced Nakes) as the industry classification system used by the statistical agencies of the United States. NAICS replaces the 1987 Standard Industrial Classification (SIC) and is used by the United States, Canada, and Mexico.
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O

Terms Glossary Definition
Occupational Safety & Health Administration (OSHA) The US Congress created OSHA under the Occupational Safety and Health Act, which was signed by President Richard M. Nixon on December 29, 1970. OSHA creates and enforces policy to prevent work-related injuries, illnesses, and deaths.
Operator Factor The operator factor defines the number of employees required to perform an operation. This can be a partial employee such as 1/2 if one person can work on two jobs at the same time (common in machining industries). Operator factors can also be used to define crews of more than one employee required to perform an operation. Operator factors help manufacturers schedule labor resources and accurately account for labor costs.
Outsourcing Manufacturing services purchased from another company. Outsourcing is common in many industries for services such as heat treating, plating, painting, and assembly. Manufacturing software must be able to track costs of purchased services, quantities of products shipped to subcontractors, and material receipts from vendors. Virtual manufacturers outsource most of their operations.
Overhead Costs such as administration, maintenance, other general costs incurred by a company in the course of doing business. Also called burden.
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P

Terms Glossary Definition
Phantom Bill of Material Phantom bills of material are built but not stocked. They are used to setup common bills of material that are used to plan for component demand across multiple finished goods. MRP explodes phantoms in order to plan for component demand (much like a kit).
Potency The measure of an active ingredient compared to the composition of other materials in a solution or mixture.
Process Manufacturing Manufacturing items based on a formula or batch size as opposed to discrete bill of materials. The formula or recipe is typically expressed as a percentage of the batch instead of a quantity per each. Process-related operations may include blending, mixing, formulating, distilling, or diluting. Other terms related to process manufacturing are potency, specific gravity, concentration, and strength.
Product Configurator A tool that simplifies order entry and routing/bill of material design based on features and options selected for a customer order. Product Configurators are useful when an item is available in different colors, sizes, or other variations to determine 1) which part the customer is ordering 2) how to manufacture the item 3) if the item can be manufactured at all 4) what the cost will be to make the item 5) what quantity of raw material(s) is required to make the item and 6) the price to charge the customer.
Product Data Management (PDM) Product data management systems connect design and revision of mechanical drawings (CAD) with production systems. PDM is part of Product Lifecycle Management.
Product Lifecycle Management (PLM) A system used to manage design and revisions to engineering drawings and bills of materials through the life of a manufactured or engineered part. PLM is an extension of PDM and is often integrated to ERP systems. Modern PLM systems have collaborative features supporting design and product structure management from multiple geographic areas.
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Q

Terms Glossary Definition
Quality Control A broad range of applications designed to ensure that manufactured parts meet or exceed predefined benchmarks. Quality Control systems are used in virtually every manufacturing industry to test and record item attributes such as chemical composition, flavor, tensile strength, etc.
Queue Time Queue time is a general term used to describe the amount of time that a part has to wait at a work center before production can begin. Queue time is often used when parts must dry (painted parts) or cool (heated parts) before further processing.
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R

Terms Glossary Definition
Radio Frequency (RF) RF technologies enable remote access to your business system from within your warehouse or manufacturing facility.
Raw Material Purchased items that are used in components or finished goods.
Recipe Recipes can be either discrete or batch process. They include the list of ingredients and quantities or percentage of each required to make a finished good or finished good batch. Recipes are sometimes called formulas or bill of materials.
Remanufacturing A manufacturing process whereby products are refurbished. Remanufacturing often relates to "cores" which is the worn part that is being repaired.
Rework Additional manufacturing operations needed to salvage scrapped or otherwise defective parts.
Routing The routing describes the process of making an item. Some manufacturing applications include only labor operations in the routing (drilling, assembling, milling, etc.) while others combine both labor and material operations into one cohesive routing.
Run Time Time to process a part or group of parts for one operation. Run time does not include setup time, move time, or queue time.
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S

Terms Glossary Definition
SARA Title III Superfund Amendments & Reauthorization Act - created a new nationwide program known as Emergency Planning and Community Right-to-Know. The law was designed to improve local hazardous materials emergency response capabilities and provide the public with information concerning hazardous and toxic chemicals in their community.
Setup Time The time it takes to setup a machine or work center in order to perform a specific operation. E.g., calibrate a machine.
Specific Gravity Specific gravity is the density of a substance relative to water. E.g., the specific gravity of quartz is 2.65 meaning that the weight of quartz is 2.65 times that of an equal volume of water. Specific gravity is used in many process manufacturing industries to identify item attributes and to calculate material quantities for formulation.
Standard Industrial Classification (SIC) The SIC, used since the 1930s, was developed by an Interdepartmental Committee on Industrial Statistics, established by the Central Statistical Board of the United States. Its charge was to develop a plan of classification of various types of statistical data by industries and to promote the general adoption of such classification as the standard classification of the Federal Government. The US government now uses the North American Industrial Classification System (NAICS) instead of SIC for classifying companies by industry.
Standard Costing Standard costs are the target cost established for item. They represent the ideal cost associated with the manufacture of an item. Actual costs are tracked with variances (if any) from the standard cost posted to the general ledger.
Subassembly A component item comprised of other components and/or raw materials.
Supply Chain Management (SCM) Software designed to manage delivery vehicles, distribution centers, factories, and raw material suppliers. SCM's goal is to move product from the point of origin to that of consumption as quickly as possible. SCM balances inventory supplies with customer demand and often includes sales forecasting, purchasing and production planning, demand and distribution management and business intelligence.
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T

Terms Glossary Definition
Theory of Constraints Made popular by Eli Goldratt in the 1980s with his book "The Goal." The basis of TOC is that in every production process there are bottlenecks or constraints that determine the throughput of a factory. Eliminating these constraints will greatly improve throughput.
Tool Tools are resources necessary to perform an operation and may include molds, dies, jigs, or CNC attachments. Some scheduling systems consider tool availability in addition to machine and labor resource constraints.
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V

Terms Glossary Definition
Variable Cost Operating costs that vary as production increases. E.g., electricity for machines increases in relation to the output of the machine (in units).
Virtual Manufacturing Virtual manufacturers typically outsource all or most of their manufacturing to vendors. However, they still require manufacturing software to manage costs and shipments/receipts of in-process goods.
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W

Terms Glossary Definition
Warehouse Costing Costs such as labor rates, shipping, taxes, rent, insurance, etc. vary geographically. As such, many multi-site companies maintain different costs per part per warehouse location.
Warehouse Management System (WMS) WMS software supports daily tasks performed within a warehouse or distribution center including picking, shipping, cycle counting, and stock movement. Most WMS system utilize radio frequency technology for remote data entry.
Work Breakdown Structure (WBS) WBS supports the cost reporting requirements of U.S. government contractors (Department of Defense) as well as activity-based costing requirements for commercial manufacturers. WBS typically includes project management, multi-level costing and reporting and budgeting.
Work Center A group of similar machines. Work centers may be used for scheduling and to define costs and/or cost centers. Work centers can also be grouped into higher level departments.
Work In Process (WIP) WIP represents a product's value as it moves through the production process. WIP includes raw material costs, value added by labor, and other costs.
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