Activity-Based Costing (ABC)
An accounting technique that enables an organization to determine the actual cost of a product or service by tracing the cost back to the specific activities that produce or provide it. Compare to Traditional Cost Accounting (TCA).
When opposite sides of a part, tool, material, or fixture are different in size, shape, or relative position. Asymmetrical differences can be hard to spot, resulting in errors. Compare to symmetry.
A program in which equipment operators share responsibility with maintenance staff for the care of the equipment they use.
The amount of time a service operation or product unit waits while other operations or units in the lot, or batch, are completed or processed.
The movement of products through the manufacturing process in large numbers of identical units at once. Entire batches, or lots, are sent to each operation in the production process at the same time. Also known as large-lot processing. Compare to one-piece flow.
(build to schedule) A metric that measures the percentage of units scheduled for production on a given day that are actually produced on the correct day, in the correct mix, and in the correct sequence.
The ability of a machine and its operator to complete the work required.
constant order-cycle system
An inventory-control system that features a fixed reorder date and a varying order quantity.
constant order-quantity system
An inventory-control system that features a fixed order quantity and a varying reorder date.
The manufacturing step that determines the upper limit on the number of finished parts that can be produced within a value stream. Also known as a bottleneck operation.
An operation that is long in duration or is critical to completing a manufacturing process.
An error-proofing method that involves inspecting the size, shape, or color of an object to determine if any deviations exist.
The essential activities an organization must perform to produce products, complete order-fulfillment functions, maintain its assets, and complete all supporting business functions.
Moving costs from one account to another without creating any real savings. Cost shifting often hides waste rather than removing it.
An aspect of a product or service for which a customer is willing to pay.
The time it takes to successfully complete the tasks required for a work process.
A part, product, or service that does not conform to specifications or a customer’s expectations. Defects are caused by errors.
All the parts, materials, and services supplied by outside sources that are necessary to produce a product or service.
A metric that measures how long it takes raw materials or sub-components coming into a plant to be turned into finished products.
An inspection or check done at the end of a process. See also judgment inspection.
Enterprise resource planning (ERP)
The integration of all an organization’s departments and functions onto a single computer system that can serve all those different departments’ needs.
Any deviation from a specified manufacturing or business process. Errors cause defects in products or services.
Mechanical, electrical, or pneumatic devices that signal existing errors or prevent potential ones.
Activities that an equipment operator can perform while the production line is still running. Compare to internal processes.
FIFO (first-in, first-out)
A production method in which the oldest remaining items in a batch are the first to move forward in the production process.
5S’s (Sort, Shine, Set in Order, Standardize, and Sustain)
A method of creating a clean and orderly workplace that exposes waste and errors.
Costs that aren’t changed by production or service/sales levels, such as rent, property tax, insurance, and interest expenses. They are the costs of being in business. Compare to variable costs.
An error-proofing method that ensures the right quantity of parts is used or the right number of activities are performed.
FTT (first time through)
A metric that measures the percentage of units or aspects of a service that are completed without error the first time they go through your work processes.
Money that actually produces cash savings or profit increases and directly affects a company’s profit-and-loss statement. Compare to soft-cost savings.
An error-proofing method that provides timely information about a defect so that a root-cause analysis can be performed and process adjustments can be made before significant numbers of defects are created.
Activities that an equipment operator must perform while the production line is idle. Compare to external processes.
Any part or product that is not immediately required for a customer order, such as excess raw materials, work in progress (WIP), and finished goods.
ITO (inventory turnover rate)
A metric that measures how quickly your company sells the products you produce.
An error-proofing method in which a quality inspector or operator compares the final product or part with a standard. It is a type of end of-the-line inspection.
Just-in-time inventory (JIT)
A method of inventory management in which small shipments of stock are delivered as soon as they are needed. JIT minimizes stocking levels.
A production-control system that uses cards or tickets as visual signals to trigger or control the flow of materials or parts during the manufacturing process.
Refers to activities that continuously improve all functions and involve all employees from the CEO to the assembly line workers. Kaizen aims to eliminate waste by improving standardized activities and processes.
The time it takes to complete an activity from start to finish; it includes batch and process delays.
Financial, behavioral, and core-process measurements that help you monitor your organization’s progress toward achieving the goals of your lean initiative.
Finding a balance between the volume of work that your organization needs to do and your capacity.
Adjusting a production schedule to meet unexpected changes in customer demand.
Markers that show where and how much material should be kept in a specific location in a work area.
An area where materials are stocked in a supermarket system.
An error-proofing method that involves checking to make sure actions are performed in the correct sequence.
OEE (overall equipment effectiveness)
A metric that measures the availability, performance efficiency, and quality rate of your equipment.
OFLT (order-fulfillment lead time)
The average time that elapses between your company’s receipt of an order from a customer and when you send an invoice to your customer for the finished product or service.
The movement of products through the manufacturing process one unit at a time. Compare to batch processing.
OTD (on-time delivery)
A metric that measures the percentage of units you produce that meet your customers’ deadlines.
Maintenance activities that are performed on a set schedule. Compare to reactive maintenance.
PQ analysis table
A tool that helps employees understand the types of products your organization produces and the volume that your customers demand. (The P in PQ stands for products; the Q stands for quantity of production output.)
A series of steps or actions that produces a completed order or product.
Process capacity table
A tool for gathering information about the sequence of operations that make up a work process and the time required to complete each operation.
The time that batches or lots must wait until the next process begins.
Process route table
A tool that shows the machines and equipment that are needed for processing a component or completing an assembly process. Aids in grouping your manufacturing tasks into work cells.
Synchronizing the production of your company’s different products to match your customer demand.
The ratio of output to input. It provides information about the efficiency of your core processes.
A production system in which goods are built only when requested by a downstream process. A customer’s order “pulls” a product from the production system. Nothing is produced until it is needed or wanted downstream. Compare to push system.
A production system in which goods are produced and handed off to a downstream process, where they are stored until needed. This type of system creates excess inventory. Compare to pull system.
Quality function deployment
A structured process that provides a means to identify and carry customer requirements through each stage of product and service development and implementation. Quality responsibilities are effectively deployed to any needed activity within a company to ensure that appropriate quality is achieved.
A method of analyzing your organization’s manufacturing processes and then reducing the materials, skilled resources, and time needed for equipment setup, including the exchange of tools and dies. It allows your organization to implement small-batch production or one-piece flow in a cost-effective manner.
Maintenance activities that are performed after a piece of equipment breaks. Compare to planned maintenance.
A situation in which the probability that errors will happen is high.
Return on investment (ROI)
Profit from an investment as a percentage of the amount invested.
A process of identifying problems in an organization, finding their causes, and creating the best solutions to keep them from happening again.
RTY (rolled throughput yield)
A metric that measures the probability that a process will be completed without a defect occurring.
An inspection performed by the opera-tor at his or her own workstation or area.
A visual control technique that uses an image of an object to show where it should be stored.
Assets that are freed up so they can be used for another purpose. This contributes no positive change to a company’s profit-and-loss statement. Compare to hard-cost savings.
An inspection that detects errors in the manufacturing process before a defect occurs in the final part or product.
Standard operating procedures (SOPs)
Reliable instructions that describe the correct and most effective way to get a work process done.
The most efficient work combination that an organization can put together.
Standard operations combination chart
A tool that enables you to study the work sequence for all your organization’s work processes.
Statistical process control (SPC)
The use of mathematics and statistical measurements to solve an organization’s problems and build quality into its products and services.
To reduce the time spent in non-value added steps, such as downtime, travel time, and inspecting or reworking materials.
An inspection that is performed after one operation in the production process is completed, by employees who perform the next operation in the process.
A stocking system in which materials are stored by the operation that produces them until they are retrieved by the operation that needs them. When a store is full, production stops.
When opposite sides of a part, tool, material, or fixture are, or seem to be, identical. The identical sides of a symmetrical object can be confused during an operation, resulting in errors. Compare to asymmetry.
The total available work time per day (or shift) divided by customer-demand requirements per day (or shift). Takt time sets the pace of production to match the rate of customer demand. For example, if your customers demand 480 spark plugs per day and your production line operates 960 minutes per day, takt time is two minutes; if customers want two new contracts written per month, takt time is two weeks
Traditional Cost Accounting (TCA)
An accounting technique that arbitrarily allocates overhead to the products or services an organization creates. It is unable to calculate the actual cost of a product or service. Compare to Activity-Based Costing (ABC). An accounting technique that arbitrarily allocates overhead to the products or services an organization creates. It is unable to calculate the actual cost of a product or service. Compare to Activity-Based Costing (ABC).
Tasks performed during the production of a product or service that increase its value to the customer.
All the activities that a company must do to design, order, produce, and deliver its products or services to customers.
Value stream map
An illustration that uses simple graphics or icons to show the sequence and movement of information, materials, and actions in a company’s value stream.
(value-added to non-value-added) ratio A metric that compares the amount of time in your work process spent on value-added activities to the amount of time spent on non-value-added activities.
Costs that vary with production or service/sales levels, such as the costs of raw materials used in the manufacturing process. Compare to fixed costs.
Waste – Muda
Any activity that takes time, resources, or space, but does not add value to a product or service.
A mixture of people, processes, materials, and technology that comes together to enable the completion of a work process.
The steps and motions employees take to perform their work tasks.
Workflow (spaghetti) diagram
A graphic that shows your organization’s current equipment layout and the movement of materials and workers during work processes.
The sequential order in which tasks that make up a work process are performed.
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