Term
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Definition
Measure of the distribution of actual measurements around the mean
Adjusted for the number of measurements
“Mean of the squared deviations" |
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Term
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Definition
| square root of variance-squared |
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Term
| Step-by-step: EOQ w/ quantity discounts |
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Definition
Step-by-step: EOQ with quantity discounts
Compute basic EOQ. It will fall within one of the price ranges specified by the supplier.
If the EOQ falls within the cheapest price range, the EOQ is the optimal order quantity.
If the EOQ does not, all price ranges having lower prices than the range the EOQ falls in must be evaluated.
The optimal quantity will be at the lowest allowable quantity of a price range. For each quantity, compute the total cost (carrying, order, and purchase price) for the quantity at each price break. |
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Term
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Definition
Different from “Activity Based Costing”
Categorization of inventory items by importance (demand or dollar usage)
“A” items are critical and warrant the most sophisticated systems
10 percent of items??
“B” items are less critical and would need less sophisticated system
Next 30 to 40 percent of items?
“C” items are relatively unimportant |
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Term
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Definition
A measure of inventory productivity computed by dividing sales by the average value of inventory.
Could be improved by increasing sales, but this isn’t the usual interpretation
Can be improved by reducing inventory
Turnover should be increased in a way that will not harm service quality or delivery reliability – unless:
Cost of a stock out is irrelevant for some reason
There are no options/competitors |
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Term
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Definition
The dollar value of an item in inventory multiplied by the number of days until it will be sold.
Targets high cost inventory
Targets slow-moving inventory |
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Term
| Material Requirements Planning (MRP) |
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Definition
is an inventory management approach used to manage dependent demand inventory that plans order releases for the future based on production schedules.
The same two questions get answered: ‘When?’ and ‘How many?’
“How many” is determined by a process called netting: computing net requirements. Net requirements are total quantity needed less on-hand inventory
“When” is determined by backward scheduling, where a known completion date or due date is used to determine a start date |
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Term
| Master Production Schedule |
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Definition
| A schedule of end products that must be completed in a specific time period |
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Term
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Definition
| A file containing information about the materials required to produce a product or component. |
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Term
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Definition
| A file containing information about an inventory item such as the quantity on hand, the cost, and so on. |
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Term
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Definition
| total quantity needed to meet demand |
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Term
| Beginning on-hand inventory |
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Definition
| inventory at the beginning of a time period |
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Term
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Definition
| inventory at the end of a time period |
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Term
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Definition
| gross requirements less beginning on-hand inventory |
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Term
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Definition
| the planned receipt of material that results from a planned order release |
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Term
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Definition
| an order planned to be released to satisfy a future net requirement |
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Term
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Definition
| Ordering exactly the amount of the net requirements. |
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Term
| Fixed-quantity order policy |
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Definition
Rather than ordering the quantity of the net requirements, orders are placed in increments of a fixed quantity.
Trades off reduction in ordering costs against increases in carrying costs |
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Term
| The economic order quantity (EOQ) model is ... |
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Definition
is used to determine an order quantity that minimizes the sum of ordering and carrying costs.
“economical” because you are balancing inversely related costs. |
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Term
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Definition
Annual demand is known
Demand is even
Lead time is constant
No quantity discounts
Only one product is involved
Orders are received in single deliveries |
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Term
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Definition
The sum of the measurements divided by the number of measurements taken.
is also referred to as x (x-bar) when talking about just a part of the population (i.e., a “sample”) |
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Term
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Definition
Most generally assumed “distribution”
Replicates the distribution of many naturally occurring phenomena
Symmetrical - If data are “normally distributed” also means 50-50 chance of a particular observation being above or below the mean
68.26% within one s.d. of mean
95.44% within two s.d. of mean
99.74% within three s.d. of mean |
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Term
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Definition
Uses sampling to determine if the process can produce consistently within acceptable customer limits
Cp and Cpk |
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Term
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Definition
Identifies potential problems before defects are created by watching the process unfold
X-bar & R Charts |
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Term
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Definition
quantifying the relationship between control limits and customer specifications
Cp -- Used to determine “capability” when the process is “mean-centered” |
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Term
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Definition
In “process capability” terms, Six Sigma means that control limits set at plus or minus 6 σ will be inside of the customer’s specifications.
This greatly reduces the likelihood of a defect occurring from common cause variability. |
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Term
Advantages of Acceptance Sampling
(sampling to accept/reject the immediate lot of product at hand - ensure quality is within predetermined level) |
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Definition
Advantages:
Economy -Less handling damage -Fewer inspectors -Upgrading of the inspection job -Applicability to destructive testing -Entire lot rejection (motivation for improvement) |
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Term
Disadvantages of Acceptance Sampling
(sampling to accept/reject the immediate lot of product at hand - ensure quality is within predetermined level) |
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Definition
-Risks of accepting “bad” lots and rejecting “good” lots
-Added planning and documentation
-Sample provides less information than 100-percent inspection |
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Term
| Acceptance Quality Level (AQL) |
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Definition
Is the max. acceptable percentage of defectives that defines a “good” lot
Producer’s risk is the probability of rejecting a good lot |
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Term
| Lot tolerance percent defective (LTPD) |
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Definition
Is the percentage of defectives that defines consumer’s rejection point
Consumer’s risk is the probability of accepting a bad lot |
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Term
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Definition
As deviation from the target increases, customers get increasingly dissatisfied and costs increase.
Traditional views define deviation in terms of being “good” or “defective.” Taguchi views deviation in terms of costs that occur even if the deviation is slight, and increasing costs as deviation increases |
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Term
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Definition
The identification of the critical
instances when a customer judges service quality and
determines the experience enhancers, standard expectations, and experience detractors. |
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Term
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Definition
| Experiences that make the customer feel good about the interaction and make the interaction better. |
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