The web’s largest Lean glossary. A lexicon of over 1,500 terms used in industrial engineering, lean thinking, operations management, quality management, and business statistics.

A device that converts analog data into digital form.

An inventory classification scheme that ranks items based on past (or projected) annual usage times cost or price, with A items accounting for the top 10-20% in terms of number of items and 60-70% of dollar volume, B items the next 20-25% of items and 20-30% of dollar volume, and C items as the bottom 60-70% of items and only 15-30% of the dollar volume. A Class D is sometimes used for obsolete or non-moving items. ABC categories are often used in specifying the amount of attention and control paid to specific items, (with the tightest control over A items), in exception reporting and in selecting items for periodic inventory cycle counts (A items are counted the most frequently). See also 80/20 rule; Parato’s Law.

An unusually high product demand outside normal parameters that may be due to a promotion, price break or substitution. Forecast systems can filter abnormal demand outside calculated standard deviation parameters based on past history, and not assume the same demand will occur in the future.

See Activity Based Costing.

Being able to see and quickly take action to correct abnormalities (any straying from Standard Work). This is the goal of standardization and visual management. Continuous waste elimination and problem solving through kaizen are only possible when the abnormalities are visible.

The horizontal axis of a graph.

The allocation of specific pools or groups of fixed costs to associated units of production by a predetermined percentage or dollar amount, based on unit cost, machine or labor hours, or other factors.

A calculated or historical level of quality test results that indicates the future acceptance limits for production or purchased material.

The region of values for which the null hypothesis is accepted.

Predetermined rules for choosing and analyzing samples of production or purchased material based on third-party agreements or previous experience with product, equipment, date, vendor or other characteristics.

An item or service selected on an order designed for use with a base item. An accessory is not required to be ordered, while an option usually must be selected from the available choices (ex.- in ordering a laptop computer a carrying case is an accessory, while one option selection from the hard drive choices must be taken).

A current liability; the financial obligation created by the receipt of items and services not yet paid for. Also used to refer to the department that matches vendor invoices to receipts, prioritizes and selects invoices for payment, and performs the check processing/disbursement cycle.

A current asset; the expected value to be received from customers for items shipped and services performed but not yet paid for. Also used to refer to the department that applies cash received from customers against open invoices and manages invoice adjustments and credit memos.

Qualified organizations certified by a national body (e.g., the Registrar Accreditation Board in the U. S.) to perform audits to the QS-9000 and to register the audited facility as meeting these requirements for a given commodity. [6]

Recognizing revenues and expenditures as they occur, rather than when actual payment is received or made (as in the cash accounting method).

1. The degree to which an indicated value matches the actual value of a measured variable. 2. In process instrumentation, degree of conformity of an indicated value to a recognized accepted standard value, or ideal value.

Documentation from a vendor to a customer that verifies receipt of an order and associated date, quantity, item and terms information.

The material or chemical in a batch or formula responsible for producing the desired result and giving the product its main characteristic. Other substances enhance or buffer the active ingredient, and may be classified as inert.

A discrete unit of work that consumes organizational resources.

A cost accounting methodology that assigns costs to activities based on their use of resources, and assigns costs to cost objects (products, functions, projects) based on their use of activities. It attempts to precisely allocate overhead based on the real factors that create costs.

An overall approach to cost management that focuses on the relationships between activities, cost drivers and resources to identify and separate value-added and non-value added systems and functions.

The separation of invoices, orders, inventory and production lots into time buckets based on due dates, receipt dates, expiration dates, or other factors. Used to focus attention on past due and most urgent items. 

Automotive Industry Action Group

1. A prescribed set of well-defined rules or processes for the solution of a problem in a finite number of steps. 2. Detailed procedures for giving instructions to a computer.

A reservation of material based on an accepted order or system- generated planned order. The on-hand balance of an item, less the allocation, leaves the balance available for production or to promise to customer orders.

A percentage, unit or dollar amount added to a calculation of an exact specification to allow for an imperfect process or observed history (ex.- a material scrap factor or labor performance standard). The exact specification is not changed so that the theoretically-possible result is still visible.

The probability of accepting the alternate hypothesis when, in reality, the null hypothesis is true.

In exponential smoothing, the factor used to smooth or filter the data from the most recent period. (ex.- an alpha factor of 0.1 means to give the most recent data period a weighting of 0.1 and the previous period(s) a weighting of 0.9). A higher alpha indicates the future forecast will more closely resemble recent history, and is more likely to vary greatly with each recalculation.

A tentative explanation which indicates that an event does not follow a chance distribution; a contrast to the null hypothesis.

A manufacturing operation done instead of the standard or normal operation. Typically used due to short term material or capacity shortages.

A variety of practices such as depreciation, depletion, or write-offs to expense the initial cost of a capital investment over multiple fiscal periods.

The representation of numerical quantities by means of physical variables, such as translation, rotation, voltage, or resistance; contrasted with digital.

A statistical method used for a single dependent variable that performs comparisons and tracks the effects of a number of discrete factors (independent variables), each of which may have a number of levels and may interact to affect the dependent variable.

A tool of visual management, originating from the Japanese word for 'lamp'. Most commonly andons are lights placed on machines or on production lines to indicate operation status. Andons are commonly color-coded green (normal operations), yellow (changeover or planned maintenance), and red (abnormal, machine down). Often combined an audible signal such as music or alarms.

Short term or current period data used to project results for a hypothetical full year that filters out seasonality and abnormalities.

American National Standards Institute

A report of production or purchase orders that are projected to be delayed past the current schedule date. It should include the orders, products and facilities affected and provide reasons for the delay to allow later analysis of recurring problems.

A third party that provides ERP or other business applications on a hosted basis to customers and users. Instead of buying a license from the software vendor, the customer contracts for Internet or other access to specific applications and usage volumes with the third party, who is responsible for software maintenance, upgrades and security.

Software written to provide manufacturing, financial, distribution or support functions (as opposed to systems software that regulates the operation of hardware and network systems).

See acceptable quality level.

The Auto Regressive Integrated Moving Average forecast technique based on time series analysis and regression modeling; often useful in creating short-term forecasts.

Documentation containing shipment arrival date and location information sent by a carrier to a designated third party.

A manufacturing environment where the final product is assembled based on the receipt of a customer order (instead of to stock). The assembly is normally performed using standard components, modules and subassemblies that are already stocked based on forecasts developed from past usage history. An ATO environment allows each customer order to specify a custom combination of previously-defined standard options.

Quality system requirements for suppliers to the aerospace industry (previously known as AS9000).

American Society for Quality.

Variations in data which can be attributed to specific causes.

Rules that relate objects or events based on if this, then that logic.

American Society for Testing and Materials

Results of quality tests that charts the percent and number of products or quality characteristics that do not conform to specification.

Numerical information at the nominal level; subdivision is not conceptually meaningful; data which represents the frequency of occurrence within some discrete category, e.g., 42 solder shorts.

Qualitative data that can be counted for recording and analysis. Examples include characteristics such as the presence of a required label and the installation of all required fasteners. A characteristic that may take on only one value, e.g. 0 or 1.

Systematic, independent and documented process obtaining audit evidence and evaluating it objectively to determine the extent to which audit criteria are fulfilled. An onsite verification activity used to determine the effective implementation of a supplier's documented quality system. [6]

1) Production orders at a given work center or line that have been released and scheduled; production of other items or quantities is considered unscheduled and may not be included in incentive programs 2) Vendor production that occurs in a given time frame or zone based on agreement with the customer that allows adding labor value to vendor raw materials.

Automatic identification and tracking of material move

Software system functions that automatically generate purchase or production orders based on system suggestions, instead of requiring manual review and creation by a planner or buyer. Many systems contain time fences that only allow auto-creation beyond a specified future date.

Warehouse and logistics equipment, such as robots or picking systems with no operator, that are routed to planned inventory or production locations by software and network commands.

A system that uses automatic machines and controls to locate, transport, store and retrieve materials as directed by order requirements.

Test systems integrated into the production process that operate and report without human intervention.

Software functions that automatically substitute a pre-approved alternate component or product for picking to a production or customer order when the primary item is not available.

The time when a machine is running on auto cycle and a person does not needed to be there to operate the machine. Commonly used for NC machine cycles, oven cycles, wash cycles, etc.

Machines are given ‘human intelligence’ and are able to detecting and preventing defects. Machines stop autonomously when defects are made, asking for help. Autonomation was pioneered by Sakichi Toyoda with the invention of automatic looms that stopped when a thread broke, allowing an operator to manage many looms without risk of producing large amounts of defective cloth. Autonomation is a pillar of the Toyota Production System. Also Jidoka.