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Production and Operations  Definitions


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Added Value

The difference between the value of the completed or partially completed product and the raw materials used to make it.


A product or part of a product made up of individual parts and or subassemblies.

Assemble To Order (ATO)

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.

Advanced Planning and Scheduling (APS)

A real-time tool combining material and capacity planning at the same time, as opposed to separate batch material and capacity runs. APS tools use finite scheduling and material availability data to schedule orders and demand. They can typically be used to evaluate the effect of adding single new orders into an existing schedule, and are often used as a short-term tool in conjunction with longer-term family level planning.


Back Scheduling

The term given to scheduling an operation backwards from a due date such that the latest start times can be arrived at.

Bill of Material BOM

A structured list of all parts required to manufacture an assembly giving information on the numbers of each part required, the manufacturing lead time of each part, and the assembly level of each part.



The amount of output that can be consistently achieved from a manufacturing process or a workstation.

Capacity Planning

The process of analysing the capacity available from work centres over a number of time periods.


Money invested in the assets of the business

Carrying Costs

The cost of keeping any items or products in stock.


Dependent Items

Items whose requirements depend on the demand for other items such as sub assemblies or finished products.

Due Date

The date specified for completion of an operation


Economic Batch Quantity

The batch quantity which gives an optimum balance between set-up costs and manufacturing costs.

Explosion .

The process of analysing the Bill of Material for a product or subassembly to determine the parts and quantities required



Monitoring of a system to establish if the performance is to plan. Is usually used to give a controlling influence.

Fill Rate

The percentage of order items that the picking operation actually fills within a given period of time.

Fill Rates by Order

Whether orders are received and released consistently, or released from a blanket purchase order, this metric measures the percentage of ship-from-stock orders shipped within 24 hours of order "release". Make-to-Stock schedules attempt to time the availability of finished goods to match forecasted customer orders or releases. Orders that were not shipped within 24 hours due to consolidation but were available for shipment within 24 hours are reported separately. In calculating elapsed time for order fill rates, the interval begins at ship release and ends when material is consigned for shipment.

Calculation: [Number of orders filled from stock shipped within 24 hours of order release] / [Total number of stock orders]

Note: The same concept of fill rates can be applied to order lines and individual products to provide statistics on percentage of lines shipped completely and percentage of products shipped completely

Final Assembly Schedule FAS

A schedule for the completion of a final assembly from previously-stocked subassemblies based on the receipt of a customer order. Typically used in assemble-to-order (ATO) or make-to-order (MTO) environments, it may include finishing operations such as labeling, packing and adding accessories.

Finite Capacity Planning

Planning the capacity requirements to satisfy the production target with regard to the actual capacity available.

Finite Forward Scheduling

An equipment scheduling technique that builds a schedule by proceeding sequentially from the initial period to the final period while observing capacity limits. A Gantt chart may be used with this technique.

Finite Scheduling

Creating production schedules that automatically take resource availability into account. Schedule dates are moved forward or backward in time as far as necessary to stay within prescribed capacity, and some systems also contain rules to move orders for certain products to approved alternate facilities when the initial resource is full. Finite scheduling systems normally do not ensure that material plans are automatically revised in conjunction with production rescheduling. 

Firm Planned Order (FPO)

A manufacturing order that reserves capacity and allocates material but, unlike a work order, has not been authorized for release to the production floor. MRP planned orders are automatically changed by the system at each regeneration; FPOs are manually controlled by the planner and are normally either turned into actual work orders, or cancelled. A tool for what-if capacity analysis, and also sometimes used to allocate known components on a bill of material that is not complete and requires finalization before releasing to production orders for the floor. 


Good Manufacturing Practices (GMP)

Description of standardized, acceptable methods, controls and production facilities used in pharmaceutical, medical device and food manufacturing industries.


Independent Items

Items which are not dependent on parent assemblies.

Infinite Capacity Planning

Planning of the capacity requirements to satisfy a production target without regard to the actual capacity available.


All materials, products, subassemblies and parts within a company at a given point in time


Just-in-Time (JIT)

A manufacturing and inventory management philosophy that seeks to effectively manage resources and improve organizational effectiveness by identifying and eliminating sources of waste (anything that does not add to the customer's perception of value). Among other areas, it focuses on the reduction of lead times, small lot sizes, flexible production facilities and workforces, elimination of quality defects, and the reduction of inventory levels to as close to zero as possible. Inventory is seen in the JIT philosophy as not necessarily an asset, but as an unnecessary cost and potential liability that lengthens lead times, increases the chance for obsolescence and hides inefficient processes and systems. It also emphasizes group and partner involvement in design, manufacturing and logistics. 


The concept of adding an element of human judgment to automated equipment. In doing this, the equipment becomes capable of discriminating against unacceptable quality, and the automated process becomes more reliable. This concept, also known as autorotation, was pioneered by Sakichi Toyoda at the turn of the twentieth century when he invented automatic looms that stopped instantly when any thread broke. This permitted one operator to oversee many machines with no risk of producing large amounts of defective cloth. The term has since been extended beyond its original meaning to include any means of stopping production to prevent scrap (for example the andon cord which allows assembly-plant workers to stop the line), even where this capability is not built-in to the production machine itself.

Job Shop

A production environment in which similar operations and equipment are organized by function. A form of manufacturing in which the jobs pass through functional departments in lots, and each lot may have a different operational routing. However, each job follows a distinct routing through the shop.


Kanban is a finished goods and components management system where the manufacturer keeps safety stock on hand at all times for each stage in the manufacturing process. A subcontractor will have safety stock for relevant components, a vendor will have safety stock for sub-assemblies, and finally there will be safety stock for finished goods. Typically, the customer will draw from the inventory which is then replenished within an agreed upon time frame.

The Japanese term for improvement; continuing improvement involving everyone: managers and workers. In manufacturing, kaizen relates to finding and eliminating waste in machinery, labour, or production methods. Also see: Continuous Process Improvement


Lead Time

The time required to complete an operation

Level Code

The level of assembly of a product element relative to that of the product


Manufacturing Resource Planning

A total manufacturing methodology which integrates all areas of the business to produce an agreed company plan in which all the company areas work together using one common database and common objectives. Has been defined as Organised Common Sense.

Materials Requirements Planning MRP

A procedure for determining the net number of dependent items required to satisfy the scheduled requirements of product.


Net Change MRP

A MRP procedure based on processing only the changes in information occurring since the previous processing activity. Net Change is useful in that it greatly reduces the processing time required compared to Regen, MRP.


On Time In Full (OTIF)

The right quantity and the right quality delivered to the customer on the agreed order delivery date. If there are multiple lines or items on an order, one hit means all ordered item lines are delivered on time in full. If one line item is missed, this is a miss for the whole order. The agreed order delivery date can include a reasonable amount of agreed re-scheduling.


Production Control

The process of monitoring production plans and taking corrective action as necessary to ensure the planned objectives are achieved.



The process of arranging the times at which individual operations are carried out to satisfy the planned due dates.

Shop Floor Levelling

The process of rearranging work loads in order to balance workstation capacities against loadings.


This is the difference in time between the planned time for an operation and the actual time required.





Work Centre

A discrete organised area where activities are carried out.