Z94.14 - Operations & Inventory Planning & Control

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PAPERLESS PURCHASING. A purchasing operation which does not employ purchase requisitions or hard copy purchase orders. In actual practice a small amount of "paperwork" usually remains, normally in the form of the vendor schedule. (See JUST-IN-TIME, VENDOR SCHEDULER.)

PARETO'S LAW. A concept developed by Vilfredo Pareto, an Italian economist, stating that a small percentage of a group accounts for the largest fraction of the effort, value, etc. For example, twenty percent of the inventory items comprise eighty percent of the inventory value. (See ABC CLASSIFICATION.) Syn: 80/20 rule.

PART NUMBER. A number which serves to uniquely identify a component, product, or raw material. Syns: stock code, product coding.

PART-PERIOD.  The relative cost of holding one part for one period. Used in part-period inventory models.

PEGGING. In MRP displaying for a given item the details of parent items gross requirements and/or allocations.

PERCENT OF FILL. A measure of the effectiveness with which the inventory management system responds to actual demand. For example, the percent of customer orders filled off the shelf can be measured in either units or dollars. (See STOCKOUT PERCENTAGE.)

PERIODIC INVENTORY SYSTEM. A system in which the quantity in storage is reviewed at a fixed time interval. The size of the replenishment order depends upon the number of units in stock at that time, the expected demands and lead time.

PERIOD ORDER QUANTITY. A lot sizing technique under which the lot size will be equal to the net requirements for a given number of future periods (e.g., weeks). (See FIXED ORDER QUANTITY, LOT-FOR-LOT.) Syns: days supply, weeks supply.

PERPETUAL INVENTORY SYSTEM. An inventory record-keeping system where each transaction, whether in or out, is recorded and a new balance is computed. (See physical inventory.)


PHYSICAL DISTRIBUTION. The combination of activities associated with moving material, usually finished products, from the manufacturer to the customer. In many cases, this movement is made through one or more levels of field warehouses. (See DISTRIBUTION REQUIREMENTS PLANNING.)

PHYSICAL INVENTORY. (1) The actual material held in stock. (2) Determining inventory quantity by actual count. Physical inventories can be taken on a continuous, periodic, or annual basis. (See CYCLE COUNTING.)

PICKING. The process of withdrawing from stock either components for assembly or finished goods to be shipped to a customer (See KITTING.)

PICKING LIST. A document that is used by operating personnel to pick manufacturing or shipping orders.

PICK-TO-ORDER. An order for a customer which is satisfied from current stores. Manufacturing may not be involved.

PIECE-PARTS. Individual items in inventory at the simplest level of manufacturing.

PLANNED ISSUE RECEIPT. A transaction that updates the on-hand balance and the related allocation or open order.

PLANNED ORDER. A suggested order quantity and due date created by MRP processing when it encounters net requirements. In a MRP system planned orders are created by the computer, exist only within the computer, and may be changed or deleted by the computer during subsequent processing if conditions change. Planned orders at one level will be exploded into gross requirements for components at the next lower level. Planned orders also serve as input to capacity requirements planning, along with released orders, to show the total capacity requirements in future time periods.

PLANNING BILL OF MATERIAL. An artificial grouping of items used to facilitate master scheduling and/or material planning. (See COMMON PARTS BILL OF MATERIAL, OPTION, SUPER BILL OF MATERIAL.)

PLANNED QUEUE MANAGEMENT. A technique in on-line MRP systems where planner priorities are specified based on messages in electronic queues. Examples are: Panic-work first, Reschedule out-work second, etc. Planner performance can also be measured based on success in working electronic queues in a specified time. This measures the planner's quantity output.

PLANNING HORIZON. The span of time from the present to some future date for which material plans are generated. This must cover at least the cumulative purchasing and manufacturing lead time, and usually is quite a bit longer to facilitate MRP II planning.

POINT-OF-USE STORAGE. Keeping inventory in specified locations on a plant floor near the operation where it is to be used. Syns: departmental stocks, floor stocks.

POST-DEDUCT INVENTORY TRANSACTION PROCESSING. A method of doing inventory bookkeeping in which the book (computer) inventory of components is reduced only after completion of activity on their upper-level parent or assembly. This approach has the disadvantage of a built-in differential between the book record and what is physically in stock. (See DIRECT-DEDUCT INVENTORY TRANSACTION PROCESSING, PRE-DEDUCT INVENTORY TRANSACTION PROCESSING.)

PRE-DEDUCT INVENTORY TRANSACTION PROCESSING. A method of doing bookkeeping in which the book (computer) inventory of components is reduced prior to issue, at the time a scheduled receipt for their parent or assembly is created. This approach has the disadvantage of a built-in differential between the book record and what is physically in stock. The advantage is that inventory can be committed to a given assembly. (See DIRECT-DEDUCT INVENTORY TRANSACTION PROCESSING, POST-DEDUCT INVENTORY TRANSACTION PROCESSING.)

PREDICTION. An intuitive estimate of demand taking into account changes and new factors as opposed to a forecast which is an objective projection of the past into the future. (See FORECAST.)

PRE-EXPEDITING. The function of following up on open orders before the scheduled delivery date to ensure the timely delivery of materials in the specified quantity.

PRIORITY. The relative importance of jobs or work stations, i.e. which jobs should be worked on and when. (See SEQUENCING, SCHEDULING.)

PROCESS MANUFACTURING. Production which adds value by mixing, separating, forming and/or chemical reactions. It may be done in either batch or continuous mode.

PROCESSING TIME. The sum of all operation times necessary to complete a component or an assembly.

PRODUCT. Any commodity produced for sale.

PRODUCT FAMILY. A group of products with similar characteristics, often used in production planning.

PRODUCTION CONTROL. The function of directing or regulating the movement of goods through the entire manufacturing cycle from the requisitioning of raw materials to the delivery of the finished product. (See INVENTORY CONTROL.)

PRODUCTION PLAN. The agreed-upon strategy that comes from the production planning function. (See PRODUCTION PLANNING.)

PRODUCTION PLANNING. The function of setting the overall level of manufacturing output. Its prime purpose is to establish production rates that will achieve management's objective in terms of raising or lowering inventories or backlogs, while usually attempting to keep the production force relatively stable. The production plan is usually stated in broad terms (e.g., product groupings, families of products). It must extend through a planning horizon sufficient to plan the labor, equipment, facilities, material, and finances required to accomplish the production plan. Various units of measure are used by different companies to express the plan such as standard hours, tonnage, labor operators, units, pieces, dollars, etc. As this plan affects all company functions, it is normally prepared with information from marketing, manufacturing, engineering, finance, materials, etc. In turn, the production plan becomes management's authorization for the Master Scheduler to convert it into a more detailed plan. (See BUSINESS PLAN, CLOSED LOOP MRP.) Syn: production program. 

PRODUCTION RATES. The quantity of production usually expressed in units per time, i.e., parts per hour, tons per day, etc. (See PRODUCTION PLANNING.) Syn: production levels.

PRODUCTION SCHEDULE. A plan which authorizes the factory to manufacture a certain quantity of a specific item. Usually initiated by the production planning department.

PRODUCTIVITY. Refers to a relative measure of output per labor or machine hour.

PRODUCT LOAD PROFILE. A statement of the resources required to manufacture one unit of a selected item. Often used to predict the impact of the item scheduled in the master production schedule on these resources. Syn: bill of labor, bill of resources, resource profile, bill of capacity.

PRODUCT MIX. The combination of individual product types and the volume produced that make up the total production volume. Changes in the product mix can mean drastic changes in the manufacturing requirements for certain types of labor and material.

PRODUCT STRUCTURE. A graphical representation of the bill of materials. (See BILL OF MATERIAL.)

PROGRAM EVALUATION AND REVIEW TECHNIQUE (PERT). A project planning technique similar to the Critical Path Method, which additionally includes obtaining a pessimistic, most likely, and optimistic time for each activity from which the most likely completion time for the project along the critical path is computed. (See CRITICAL PATH METHOD.)

PROJECTED AVAILABLE BALANCE. The inventory balance projected out into the future. It is the running sum of on-hand inventory minus requirements plus scheduled receipts.

PROJECTION. Estimation based on past data. (See FORECAST.) Syn: extrapolation.


PULL DISTRIBUTION SYSTEM. A system for replenishing field warehouse inventories wherein replenishment decisions are made at the field warehouse itself, not at the central supply warehouse or plant. (See PUSH DISTRIBUTION SYSTEM.)

PURCHASE ORDER. The purchaser's document used to formalize a purchase transaction with a vendor. A purchase order, when given to a vendor, should contain statements of the quantity, description, and price of the goods or services ordered; agreed terms as to payment, discounts, date of performance, transportation terms, and all other agreements pertinent to the purchase and its execution by the vendor.

PURCHASE REQUISITION. A document conveying authority to the procurement department to purchase specified materials in specified quantities within a specified time.

PURCHASING CAPACITY. The act of buying capacity or machine time from a vendor. This allows a company to use and schedule the capacity of the machine or  a part of the capacity of the machine as if it were  in their own shop.

PURCHASING LEAD TIME. The total time required to obtain a purchased item. Included are times associated with the following: procurement,  vendor, production, transportation, receiving, inspection, and put away. 

PUSH DISTRIBUTION SYSTEM. A system for replenishing  field warehouse inventories wherein replenishment decision making is centralized, usually at the manufacturing site or central supply facility.  (See DISTRIBUTION REQUIREMENTS PLANNING, PULL DISTRIBUTION SYSTEM.)

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