GLOSSARY OF BUSINESS TERMS INCLUDING MANY REFERENCES TO JAPANESE BUSINESS CONCEPTS – IF YOU CAN’T FIND WHAT YOU ARE LOOKING FOR, PLEASE CONTACT ME
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From this CFS, we can see that the cash flow for FY 2003 was $1,522,000. The bulk of the positive cash flow stems from cash earned from operations, which is a good sign for investors. It means that core operations are generating business and that there is enough money to buy new inventory. The purchasing of new equipment shows that the company has cash to invest in inventory for growth. Finally, the amount of cash available to the company should ease investors’ minds regarding the notes payable, as cash is plentiful to cover that future loan expense.
Of course, not all cash flow statements look this healthy, or exhibit a positive cash flow. But a negative cash flow should not automatically raise a red flag without some further analysis. Sometimes, a negative cash flow is a result of a company’s decision to expand its business at a certain point in time, which would be a good thing for the future. This is why analyzing changes in cash flow from one period to the next gives the investor a better idea of how the company is performing, and whether or not a company may be on the brink of bankruptcy or success. (For information on cash flow accounting, see Cash Flow On Steroids: Why Companies Cheat.)
Tying the CFS with the Balance Sheet and Income Statement
As we have already discussed, the cash flow statement is derived from the income statement and the balance sheet. Net earnings from the income statement is the figure from which the information on the CFS is deduced. As for the balance sheet, the net cash flow in the CFS from one year to the next should equal the increase or decrease of cash between the two consecutive balance sheets that apply to the period that the cash flow statement covers. (For example, if you are calculating a cash flow for the year 2000, the balance sheets from the years 1999 and 2000 should be used.)
Conclusion
A company can use a cash flow statement to predict future cash flow, which helps with matters in budgeting. For investors, the cash flow reflects a company’s financial health: basically, the more cash available for business operations, the better. However, this is not a hard and fast rule. Sometimes a negative cash flow results from a company’s growth strategy in the form of expanding its operations.
By adjusting earnings, revenues, assets and liabilities, the investor can get a very clear picture of what some people consider the most important aspect of a company: how much cash it generates and, particularly, how much of that cash stems from core operations.
by Reem Heakal
Read more: http://www.investopedia.com/articles/04/033104.asp#ixzz1T3EGQz4P
CHAKU-CHAKU – A method of conducting single-piece flow, where the operator proceeds form machine to machine, taking the part from one machine and loading it into the next.
CHANGE AGENT – A person whose demonstrated mission is to be the catalytic force which moves firms and value streams from the now or current state, e.g. batch and queue, to the future or ideal state: lean manufacturing. One who leads cultural change in an organization.
CHECK SHEET – A simple data recording device. The check sheet is custom designed by the user, which allows him or her to readily interpret the results. The check sheet is one of the “seven tools of quality” (see listing). Check sheets are often confused with checklists
CELLULAR MANUFACTURING – The arrangement of people, machines, materials and methods such that processing steps are adjacent and in sequential order so that parts can be processed one at a time (or in some cases in a consistent small batch that is maintained through the process sequence). Typically, in a U-shaped configuration where operators remain within the cell and materials are presented to them from outside of the cell. The purpose of a cell is to achieve and maintain efficient continuous flow.
CHANGE – Tumultuous change is the norm in the business climate of the 21st century. Companies that prosper have the capacity to effectively solve problems, rapidly adapt to new situations, readily identify new opportunities and quickly capitalize on them. This capacity can be measured by the range of talent, experience, knowledge, insight, and imagination available in their workforces. In recruiting employees, successful companies recognize conformity to the status quo as a distinct disadvantage. In addition to their job-specific abilities, employees are increasingly valued for the unique qualities and perspectives that they can also bring to the table. According to Dr. Santiago Rodriguez, Director of Diversity for Microsoft, true diversity is exemplified by companies that “hire people who are different – knowing and valuing that they will change the way you do business.” For whichever of these reasons that motivates them, it is clear that companies that diversify their workforces will have a distinct competitive advantage over those that don’t. Further, it is clear that the greatest benefits of workforce diversity will be experienced, not by the companies that that have learned to employ people in spite of their differences, but by the companies that have learned to employ people because of them. “Rob McInnes, Diversity World – www.diversity world.com”
CHANGE MANAGEMENT – is a structured approach to shifting/transitioning individuals, teams, and organizations from a current state to a desired future state. It is an organizational process aimed at empowering employees to accept and embrace changes in their current business environment.. In project management, change management refers to a project management process where changes to a project are formally introduced and approved.
As a multidisciplinary practice that has evolved as a result of scholarly research, Change Management should begin with a systematic diagnosis of the current situation in order to determine both the need for change and the capability to change. The objectives, content, and process of change should all be specified as part of a Change Management plan.
Change Management processes may include creative marketing to enable communication between change audiences, but also deep social understanding about leadership’s styles and group dynamics. As a visible track on transformation projects Change Management aligns groups’ expectations, communicates, integrates teams and manages people training. It makes use of performance metrics, such as financial results, operational efficiency, leadership commitment, communication effectiveness, and the perceived need for change to design appropriate strategies, in order to avoid change failures or solve troubled change projects.
Successful change management is more likely to occur if the following are included:
1. Benefits management and realization to define measurable stakeholder aims, create a business case for their achievement (which should be continuously updated), and monitor assumptions, risks, dependencies, costs, return on investment, dis-benefits and cultural issues affecting the progress of the associated work.
2. Effective Communications that informs various stakeholders of the reasons for the change (why?), the benefits of successful implementation (what is in it for us, and you) as well as the details of the change (when? where? who is involved? how much will it cost? etc.).
3. Devise an effective education, training and/or skills upgrading scheme for the organization.
4. Counter resistance from the employees of companies and align them to overall strategic direction of the organization.
5. Provide personal counseling (if required) to alleviate any change related fears.
6. Monitoring of the implementation and fine-tuning as required. (source:Wkipedia)
CLASSIFICATION OF DEFECTS – The listing of possible defects of a unit, classified according to their seriousness. Note: Commonly used classifications: class A, class B, class C, class D; or critical, major, minor and incidental; or critical, major and minor. Definitions of these classifications require careful preparation and tailoring to the product(s) being sampled to ensure accurate assignment of a defect to the proper classification. A separate acceptance sampling plan is generally applied to each class of defects.
CLOSED-LOOP CORRECTIVE ACTION (CLCA) – A sophisticated engineering system to document, verify and diagnose failures, recommend and initiate corrective action, provide follow-up and maintain comprehensive statistical records. Code of conduct: Expectations of behavior mutually agreed on by a team.
CONSTRAINT – Anything that limits a system from achieving higher performance or throughput.
CONTINUAL IMPROVEMENT – The commitment to create a better product, work environment and business, every day.
CONTINUOUS FLOW – In its purest form, continuous flow means that items are processed and moved directly to the next process one piece at a time. Each processing step completes its work just before the next process needs the item, and the transfer batch size is one. Also, known as one piece flow.
COST OF QUALITY (COQ)- Another term for COPQ. It is considered by some to be synonymous with COPQ but is considered by others to be unique. While the two concepts emphasize the same ideas, some disagree as to which concept came first and which categories are included in each..
COMMON CAUSES – Causes of variation that are inherent in a process over time. They affect every outcome of the process and everyone working in the process. Also see “special causes.”
COMPANY CULTURE – A system of values, beliefs and behaviors inherent in a company. To optimize business performance, top management must define and create the necessary culture.
COMPLAINT TRACKING- Collecting data, disseminating them to appropriate persons for resolution, monitoring complaint resolution progress and communicating results.
COMPLIANCE – The state of an organization that meets prescribed specifications, contract terms, regulations or standards.
COMPUTER AIDED DESIGN (CAD) – A type of software used by architects, engineers, drafters and artists to create precision drawings or technical illustrations. CAD software can be used to create 2-D drawings or 3-D models.
COMPUTER AIDED ENGINEERING (CAE) – A broad term used by the electronic design automation industry for the use of computers to design, analyze and manufacture products and processes. CAE includes CAD (see listing) and computer aided manufacturing (CAM), which is the use of computers for managing manufacturing processes.
CONCURRENT ENGINEERING (CE) – A way to reduce cost, improve quality and shrink cycle time by simplifying a product’s system of life cycle tasks during the early concept stages.
CONFLICT RESOLUTION – The management of a conflict situation so as to arrive at a resolution satisfactory to all parties.
CONFORMANCE – An affirmative indication or judgment that a product or service has met the requirements of a relevant specification, contract or regulation.
CONTINUOUS SAMPLING PLAN – In acceptance sampling, a plan, intended for application to a continuous flow of individual units of product, that involves acceptance and rejection on a unit-by-unit basis and employs alternate periods of 100% inspection and sampling. The relative amount of 100% inspection depends on the quality of submitted product. Continuous sampling plans usually require that each t period of 100% inspection be continued until a specified number, i, of consecutively inspected units are found clear of defects. Note: For single level continuous sampling plans, a single d sampling rate (for example, inspect one unit in five or one unit in 10) is used during sampling. For multilevel continuous sampling plans, two or more sampling rates can be used. The rate at any time depends on the quality of submitted product.
CONTROL CHART – A chart with upper and lower control limits on which values of some statistical measure for a series of samples or subgroups are plotted. The chart frequently shows a central line to help detect a trend of plotted values toward either control limit.
CONTROL LIMITS – The natural boundaries of a process within specified confidence levels, expressed as the upper control limit (UCL) and the lower control limit (LCL).
CONTROL PLAN (CP) – Written descriptions of the systems for controlling part and process quality by addressing the key characteristics and engineering requirements.
CORRECTIVE ACTION – A solution meant to reduce or eliminate an identified problem.
Cp – The ratio of tolerance to 6 sigma, or the upper specification limit (USL) minus the lower specification limit (LSL) divided by 6 sigma. It is sometimes referred to as the engineering tolerance divided by the natural tolerance and is only a measure of dispersion.
Cpk INDEX – Equals the lesser of the USL minus the mean divided by 3 sigma (or the mean) minus the LSL divided by 3 sigma. The greater the Cpk value, the better.
CROSS FUNCTIONAL – A term used to describe a process or an activity that crosses the boundary between functions. A cross functional team consists of individuals from more than one organizational unit or function.
CURRENT STATE – The current or existing view of the workflow
CUSTOMER RELATIONSHIP MANAGEMENT (CRM) – A strategy for learning more about customers’ needs and behaviors to develop stronger relationships with them. It brings together information about customers, sales, marketing effectiveness, responsiveness and market trends. It helps businesses use technology and human resources to gain insight into the behavior of customers and the value of those customers.
CUSTOMER SATISFACTION – The result of delivering a product or service that meets customer requirements.
CUSTOMER-SUPPLIER MODEL (CSM): A model depicting inputs flowing into a work process that, in turn, add value and produce outputs delivered to a customer. Also called customer-supplier methodology.
CUSTOMER-SUPPLIER PARTNERSHIP – A long-term relationship between a buyer and supplier characterized by teamwork and mutual confidence. The supplier is considered an extension of the buyer’s organization. The partnership is based on several commitments. The buyer provides long-term contracts and uses fewer suppliers. The supplier implements quality assurance processes so incoming inspection can be minimized. The supplier also helps the buyer reduce costs and improve product and process designs.
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DECISION MATRIX – A matrix teams use to evaluate problems or possible solutions. For example, a team might draw a matrix to evaluate possible solutions, listing them in the far left vertical column. Next, the team selects criteria to rate the possible solutions, writing them across the top row. Then, each possible solution is rated on a scale of 1 to 5 for each criterion, and the rating is recorded in the corresponding grid. Finally, the ratings of all the criteria for each possible solution are added to determine its total score. The total score is then used to help decide which solution deserves the most attention.
DEFECT – A product’s or service’s non-fulfillment of an intended requirement or reasonable expectation for use, including safety considerations. There are four classes of defects: class 1, very serious, leads directly to severe injury or catastrophic economic loss; class 2, serious, leads directly to significant injury or significant economic loss; class 3, major, is related to major problems with respect to intended normal or reasonably foreseeable use; and class 4, minor, is related to minor problems with respect to intended normal or reasonably foreseeable use. Also see “blemish,” “imperfection” and “nonconformity.”
DEFECTIVE – A defective unit; a unit of product that contains one or more defects with respect to the quality characteristic(s) under consideration.
DFA/DFM – Design for Assembly and Design for Manufacturability techniques that improve manufacturing productivity.
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EIGHT WASTES – Taiichi Ohno originally enumerated seven wastes (muda) and later added underutilized people as the eighth waste commonly found in physical production. The eight are: 1. overproduction ahead of demand; 2. waiting for the next process, worker, material or equipment; 3. unnecessary transport of materials (for example, between functional areas of facilities, or to or from a stockroom or warehouse); 4. over-processing of parts due to poor tool and product design; 5. inventories more than the absolute minimum; 6. unnecessary movement by employees during the course of their work (such as to look for parts, tools, prints or help); 7. production of defective parts; 8. under-utilization of employees’ brainpower, skills, experience and talents.
EIGHTY-TWENTY (80-20) – A term referring to the Pareto principle, which was first defined by J. M. Juran in 1950. The principle suggests most effects come from relatively few causes; that is, 80% of the effects come from 20% of the possible causes. Also see “Pareto chart.”
EDI – Short for Electronic Data Interchange, the transfer of data between different companies using networks, such as the Internet.
EMPLOYEE INVOLVEMENT (EI) – An organizational practice whereby employees regularly participate in making decisions on how their work areas operate, including suggestions for improvement, planning, goal setting and monitoring performance
EMPOWERMENT – A condition in which employees have the authority to make decisions and take action in their work areas without prior approval. For example, an operator can stop a production process if he or she detects a problem, or a customer service representative can send out a replacement product if a customer calls with a problem.
ELEMENTAL TIME – Time allotted to a specific operational step, within standard work.
ENTERPRISE RESOURCE PLANNING – ERP systems are usually broken down into modules such as Financials, Sales, Purchasing, Inventory Management, Manufacturing, MRP, etc.. The modules are designed to work seamlessly with the rest of the system and should provide a consistent user interface between them. These systems usually have extensive set-up options that allow you to customize their functionality to your specific business needs.
ERROR – The execution of a prohibited action, the failure to correctly perform a required action or the misinterpretation of information essential to the correct execution of an action.
ERROR PROOFING – (Japanese Poka-Yoke) also called Mistake Proofing. A system that addresses both the product and the processes to detect errors before they become defects.
EXPECTATIONS – Customer perceptions about how an organization’s products and services will meet their specific needs and requirements.
EXPERIMENTAL DESIGN – A formal plan that details the specifics for conducting an experiment, such as which responses, factors, levels, blocks, treatments and tools are to be used.
EXTERNAL SET-UP – Elements of tooling set-up or machine changeover that can be performed safely while the machine is still running or in motion.
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FIFO – First-in-first-out. In warehousing describes the method of rotating inventory to used oldest product first.
FINANCIAL RATIOS – Right click and open the hyperlink in new page. Thist will take you to Profitability Ratios, Liquidity Ratios, Activity (Efficiency) Ratios, Debt Ratios, Market ratios and Capital Budgeting Ratios.
FINANCIAL STATEMENT ANALYSIS – is defined as the process of identifying financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account.There are various methods or techniques that are used in analyzing financial statements, such as comparative statements, schedule of changes in working capital, common size percentages, funds analysis, trend analysis, and ratios analysis.Financial statements are prepared to meet external reporting obligations and also for decision making purposes. They play a dominant role in setting the framework of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However, the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements.
FIVE S’S – A method of workplace organization and visual controls developed by Hiroyuki Hirano. Japanese “S” Seiri (Organization), Seiton (Tidiness), Seiso (Purity), Seiketso Cleanliness), Shitsuke (Discipline) English “S” Sort, Set in order, Shine, Standardize, Sustain.
FISCAL CAPACITY – In economics, the ability of groups, institutions, etc. to generate revenue. The fiscal capacity of governments depends on a variety of factors including industrial capacity, natural resource wealth and personal incomes. When governments develop their fiscal policy, determining fiscal capacity is an important step. Identifying fiscal capacity gives governments a good idea of the different programs and services that they will be able to provide to their citizens. It also helps governments determine the tax rate necessary to provide a certain level of programs. The theory behind fiscal capacity can also be used by other groups, such as school districts, who need to determine what they will be able to provide to their students.
FISCAL DEFICIT – When a government’s total expenditures exceed the revenue that it generates (excluding money from borrowings). Deficit differs from debt, which is an accumulation of yearly deficits.A fiscal deficit is regarded by some as a positive economic event. For example, economist John Maynard Keynes believed that deficits help countries climb out of economic recession. On the other hand, fiscal conservatives feel that governments should avoid deficits in favor of a balanced budget policy.
FISCAL IMBALANCE - A situation where all of the future debt obligations of a government are different from the future income streams. Both of the obligations and the income streams are measured at their respective present values, and will be discounted at the risk free rate plus a certain spread.
A vertical fiscal imbalance describes a situation where revenues do not match expenditures for different levels of government. A horizontal imbalance describes a situation where revenues do not match expenditures for different regions of the country. To measure the fiscal imbalance, take the difference between the present value of all future debt and the present value of all income streams.
At any given time, there will be a fiscal imbalance for a particular government; a sustained and positive balance will be detrimental to society and the economy. If there is a sustained positive fiscal imbalance, then tax revenues will likely increase in the future, causing both current and future household consumption to fall.
FISCAL POLICY – Government spending policies that influence macroeconomic conditions. These policies affect tax rates, interest rates and government spending, in an effort to control the economy.
FORCE FIELD ANALYSIS – A technique for analyzing what aids or hinders an organization in reaching an objective. An arrow pointing to an objective is drawn down the middle of a piece of paper. The factors that will aid the objective’s achievement, called the driving forces, are listed on the left side of the arrow. The factors that will hinder its achievement, called the restraining forces, are listed on the right side of the arrow.
14 POINTS – W. Edwards Deming’s 14 management practices to help companies increase their quality and productivity: 1. create constancy of purpose for improving products and services; 2. adopt the new philosophy; 3. cease dependence on inspection to achieve quality; 4. end the practice of awarding business on price alone; instead, minimize total cost by working with a single supplier; 5. improve constantly and forever every process for planning, production and service; 6. institute training on the job; 7. adopt and institute leadership; 8. drive out fear; 9. break down barriers between staff areas; 10. eliminate slogans, exhortations and targets for the workforce; 11. eliminate numerical quotas for the workforce and numerical goals for management; 12. remove barriers that rob people of pride of workmanship, and eliminate the annual rating or merit system; 13. institute a rigorous program of education and self-improvement for everyone; 14. put everybody in the company to work to accomplish the transformation. Frequency distribution (statistical): A table that graphically presents a large volume of data so the central tendency (such as the average or mean) and distribution are clearly displayed.
FORECAST – A Forecast is an estimation of future demand. Some forecasts use historical demand to calculate future demand. Adjustments for cyclicity and trend are often necessary.
FUTURE STATE – A potential improved view of the workflow.
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GEMBA- is a Japanese word meaning real place, where the real action takes place. In business, GEMBA is where the value-adding activities to satisfy the client are carried out.
GEMBUTSU- Japanese for ‘actual thing’ or ‘actual product’. The tools, materials, machines, parts, and fixtures that are the focus of kaizen activity or a problem solving exercise.
GENJITSU- Japanese for ‘the facts’ or ‘the reality’. The actual facts or the reality of what is happening on the shop floor and in the business.
GENCHI GENBUTSU – Tells us to go out there and see the world for ourselves and not to rely on reports that distance us from reality.
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HANEDASHI – A device that allows a machine to automatically unload a part without waiting for an operator.
HEIJUNKA – Keeping total manufacturing volume as constant as possible (production smoothing). Production smoothing; creating a build sequence that is determined by SKU average demand.
HITO-ZUKURI – (Making good product is equal to making good people); Mutual trust of management and employees
HOSHIN KANRI -The selection of goals, projects to achieve the goals, designation of people and resources for project completion, and establishment of project metrics.
HOSHIN PLANNING – Breakthrough planning. A Japanese strategic planning process in which a company develops up to four vision statements that indicate where the company should be in the next five years. Company goals and work plans are developed based on the vision statements. Periodic submitted audits are then conducted to monitor progress. Also see “value stream.”
HOUSE OF QUALITY – A product planning matrix, somewhat resembling a house, that is developed during quality function deployment and shows the relationship of customer requirements to the means of achieving these requirements.
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INCOME STATEMENT – Also referred as profit and loss statement (P&L), statement of financial performance, earnings statement, operating statement or statement of operations is a company’s financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the “top line”) is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as the “bottom line”). It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes.[1] The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.
IJO-KANRI – 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
INSPECTION – Measuring, examining, testing and gauging one or more characteristics of a product or service and comparing the results with specified requirements to determine whether conformity is achieved for each characteristic.
INSPECTION COST – The cost associated with inspecting a product to ensure it meets the internal or external customer’s needs and requirements; an appraisal cost.
INSPECTION, CURTAILED – Sampling inspection in which inspection of the sample is stopped as soon as a decision is certain. Thus, as soon as the rejection number for defectives is reached, the decision is certain and no further inspection is necessary. In single sampling, however, the whole sample is usually inspected in order to have an unbiased record of quality history. This same practice is usually followed for the first sample in double or multiple sampling.
INSPECTION LOT – A collection of similar units or a specific quantity of similar material offered for inspection and acceptance at one time.
INSPECTION, NORMAL – Inspection used in accordance with a sampling plan under ordinary circumstances.
INSPECTION, 100% – Inspection of all the units in the lot or batch.
INSPECTION, REDUCED – Inspection in accordance with a sampling plan requiring smaller sample sizes than those used in normal inspection. Reduced inspection is used in some inspection systems as an economy measure when the level of submitted quality is sufficiently good and other stated conditions apply. Note: The criteria for determining when quality is “sufficiently good” must be defined in objective terms for any given inspection system.
INSPECTION, TIGHTENED – Inspection in accordance with a sampling plan that has stricter acceptance criteria than those used in normal inspection. Tightened inspection is used in some inspection systems as a protective measure when the level of submitted quality is sufficiently poor. The higher rate of rejections is expected to lead suppliers to improve the quality of submitted product. Note: The criteria for determining when quality is “sufficiently poor” must be defined in objective terms for any given inspection system.
INTERNAL SET-UP – Elements of tooling set-up or machine changeover that is performed while the machine is not in motion.
INVENTORY – Usually the highest cost category, inventory is all raw materials, purchased parts, work-in-progress and finished goods that are not yet sold to a customer.
INVENTORY TURNS – How many times you can “Turn” your money over in a year. This is expressed as a ratio of the total inventory to the annual sales. Example: If the dollar value of the inventory is $5,000,000 and annual sales is $25,000,000 the inventory turns are five. If the inventory can be reduced to $1,000,000 the inventory turns become 25.
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JIDOKA – See “autonomation” Japanese term for transferring human intelligence to a machine. Jidoka, as applied to manned operations, refers to the practice of stopping the entire line or process when something goes amiss. This has important psychological and practical effects that contribute greatly to “continuous Improvement.”
JURAN TRILOGY – Three managerial processes identified by Joseph M. Juran for use in managing for quality: quality planning, quality control and quality improvement.
JUST-IN-TIME (JIT) – Producing the product at the correct time in the correct amount, to meet the customer’s requirements – No More; No Less. The opposite of Just-In-Time is “Just-In-Case”; avoid this temptation.
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KAIZEN- As we use the term, it is a method that strives toward perfection by eliminating waste
- It eliminates waste by empowering people with tools and a methodology for uncovering improvement opportunities and making change
- Kaizen understands waste to be any activity that is not value-adding from the perspective of the customer
- It is based on the fundamentals of scientific analysis in which you analyze (take apart-Kai) the elements of a process or system to understand how it works so that you can learn how to influence it (make it better-Zen)
KAIZEN EVENT – A time-sensitive, rapid-deployment methodology that employs a focused, team-based approach to small but never ending incremental improvements.
KAIZEN NEWSPAPER – A tool for visually managing continuous improvement suggestions. Based on the PDCA cycle and designed to manage input by the workforce in an organized way.
KAIKAKU – Radical improvement, in a business process, that affects the value stream in a major, positive gain.
KANBAN – Visual signal. Typically a small card, sign or signboard, an instruction to produce or supply something. A re-order card or other method of triggering the pull system, based on actual usage of material. A central element to JIT system. There are two types; production and withdrawal. It should be located for use at the point of manufacturing.
KEY PERFORMANCE INDICATOR (KPI) – A statistical measure of how well an organization is doing in a particular area. A KPI could measure a company’s financial performance or how it is holding up against customer requirements.
KEY PROCESS – A major system level process that supports the mission and satisfies major consumer requirements.
KEY PRODUCT CHARACTERISTIC – A product characteristic that can affect safety or compliance with regulations, fit, function, performance or subsequent processing of product.
KEY PROCESS CHARACTERISTIC – A process parameter that can affect safety or compliance with regulations, fit, function, performance or subsequent processing of product.
KEY RESULTS AREA – Customer requirements that are critical
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LEAD TIME – The amount of time required to produce a single product, from the time of customer order to shipping.
LEAN MANUFACTURING/PRODUCTION – An initiative focused on eliminating all waste in manufacturing processes. Principles of lean manufacturing include zero waiting time, zero inventory, scheduling (internal customer pull instead of push system), batch to flow (cut batch sizes), line balancing and cutting actual process times. The production systems are characterized by optimum automation, just-in-time supplier delivery disciplines, quick changeover times, high levels of quality and continuous improvement.
LEAN MIGRATION – The journey from traditional manufacturing methods to one in which all forms of waste are systematically eliminated.
LEVEL LOADING – A technique for balancing production throughput over time. Life cycle stages: Design, manufacturing, assembly, installation, operation and shutdown periods of product development
LINE BALANCING – A process in which work elements are evenly distributed and staffing is balanced to meet takt time (see listing).
LIFO, LAST-IN-FIRST-OUT – The method for using the newest inventory first.
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MACHINE TIME – The time is takes for a machine to produce one unit, exclusive of loading and unloading.
MACHINE CYCLE TIME – The time it takes for a machine to produce one unit, including the time it takes to load and unload.
MASTER PRODUCTION SCHEDULE (MPS) – Production schedule specifying specific items, quantities, and dates at which production is expected to take place. The primary purpose of an MPS is to manage capacity when you have some time periods where demand is expected to exceed capacity. You will then use MPS to produce some products in advance of demand (forecasted or actual orders) during periods when capacity exceeds demand.
MILK RUN – The route of a material handler within a factory is called a milk run.
MONETARY POLICY – The actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault (bank reserves). In the United States, the Federal Reserve is in charge of monetary policy. Monetary policy is one of the ways that the U.S. government attempts to control the economy. If the money supply grows too fast, the rate of inflation will increase; if the growth of the money supply is slowed too much, then economic growth may also slow. In general, the U.S. sets inflation targets that are meant to maintain a steady inflation of 2% to 3%.
MONOZUKURI – Is a unique Japanese trait defined as “the art of making things and the spirit of research and creativity.”
MONUMENTS – Equipment that is too costly or disruptive to move is considered a monument.
MRP/MRPII, MANUFACTURING RESOURCE PLANNING – The process for determining material, labor and machine requirements in a manufacturing environment. MRPII is the consolidation of Material Requirements Planning (MRP), Capacity Requirements Planning (CRP), and Master Production Scheduling (MPS). . When labor and machine (resources) planning were incorporated MRP became known as MRPII.
MUDA – Waste or any activity that adds to cost without adding to value of the product.
MURA – Variation or fluctuation in work, process quality, cost and delivery. A lean system seeks to reduce mura through heijunka.
MURI – means, difficult to do, unreasonableness; demand exceeds capacity.
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NAGARA SYSTEM – Accomplishing two or more activities with one motion and at the same time.
NEMAWASHI – (根回し) in Japanese means an informal process of quietly laying the foundation for some proposed change or project, by talking to the people concerned, gathering support and feedback, and so forth. It is considered an important element in any major change, before any formal steps are taken, and successful nemawashi enables changes to be carried out with the consent of all sides. Nemawashi literally translates as “going around the roots”, from 根 (ne, root) and 回す (mawasu, to go around [something]). Its original meaning was literal: digging around the roots of a tree, to prepare it for a transplant. Nemawashi is often cited as an example of a Japanese word which is difficult to translate effectively, because it is tied so closely to Japanese culture itself, although it is often translated as ‘laying the groundwork.’
NON-VALUE ADDED – Any activity that absorbs or consumes resources (e.g. material, time, equipment, people, paper, space, etc.) without creating value (muda).
NOT-FOR-PROFIT – A not-for-profit corporation is an incorporated organization created by statute, government or judicial authority and registered at the Registry of Commerce, that is not intended to provide a profit to the owners or members. It differs from a for-profit corporation substantially as this is organized to provide profits to its owners or members. A non-profit corporation is always organized as a non-stock corporation.
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ONE-TOUCH EXCHANGE OF DIES – The reduction of die set-up activities down to a single step.
ONE-PIECE FLOW – A manufacturing philosophy or concept which supports the movement of product from one workstation to the next, one piece at a time, without allowing inventory to build up in between.
OPERATOR CYCLE TIME – The time it takes for a person to complete a predetermined sequence of operations, inclusive of loading and unloading, exclusive of time spent waiting.
OPERATOR/MACHINE BALANCE CHARTS – A systemic method of measuring the work being done within the cycle time of the operation. The work is then divided into:
- Value Added Time
- Incidental Work
- Waste (MUDA)
Then a conscious effort is made to eliminate the waste and reduce incidental work.
ORDER FREQUENCY – The frequency at which the consuming process will place orders to the supplying process for the production of a component or product.
ORDER FREQUENCY DETERMINATION – A method of establishing the net capability of a resource to produce. Also quantifies the time available at each machine center for set-up.
ORGANIZATIONAL DEVELOPMENT (OD) – is the process of improving organizations. The process is carefully planned and implemented to benefit the organization, its employees and its stakeholders. The client organization may be an entire company, public agency, non-profit organization, volunteer group – or a smaller part of a larger organization.
The change process supports improvement of the organization or group, as a whole. The client and CONTRACT EXECUTIVE work together to gather data, define issues and determine a suitable course of action. The organization is assessed to create an understanding of the current situation and to identify opportunities for change that will meet business objectives.
OD differs from traditional consulting because client involvement is encouraged throughout the entire process. The ways in which people communicate and work together are addressed concurrently with technical or procedural issues that need resolution.
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PACEMAKER – A technique for pacing a process to takt time.
PPM – (Parts per million) The number of defective parts the customer receives per million parts shipped. This can be used to measure your supplies as well as your customer use, to measure you.
PLC – PROGRAMMABLE LOGIC CONTROLLER – Computerized device used to control functions of machines. PLCs are used in automation of manufacturing equipment and material handling equipment such as automated conveyor systems.
PARADIGM SHIFT – Changing one’s concept as what was believed to be correct. For example: A production machine must be kept running all the time to
it’s ok for a production machine to be idle, but not ok for an operator to be idle. Waste is scrap and rework. Waste is anything that doesn’t add value to the product or Waste is anything for which the customer is not willing to pay.
PILOT – An experimental task or exercise to demonstrate the success of a concept which is to be deployed throughout the organization.
PDCA – Plan – A change aimed at improvement. In this phase, analyze what you intend to improve, looking for areas that hold opportunities for change. Do - Implement the change you decided on in the plan phase. Check or Study - What was learned? What went wrong? After you have implemented the change for a short time, you must determine how well it is working. Is it really leading to improvement in the way you had hoped? Act – Adopt the change, abandon it, or run through the cycle again. After planning a change, implementing and then monitoring it, you must decide whether it is worth continuing that particular change. If the change led to a desirable improvement, you may consider expanding the change to a different area.
POLICY DEPLOYMENT – Matching the strategic business goals of an organization to its available resources. Communicating those goals throughout the organization and linking everyone to the same objectives.
POKA YOKE – A Japanese word for mistake proofing, literally translated means, “to avoid inadvertent errors”. An inexpensive poka yoke device prevents or eliminates the possibility of a human error from affecting a machine or process; prevents operator mistakes or errors from becoming defects.
POINT KAIZEN – An improvement activity focused directly on a single workstation, performed quickly by two or three specialists. Typically follows a full-blown kaizen event.
PROBLEM-SOLVING PROCESS – A formal, structured approach to solving a problem such as the 8-D Process or DMAIC (as used in 6 sigma).
PROCESS AVERAGE QUALITY – Expected or average value of process quality.
PROCESS CAPABILITY – A statistical measure of the inherent process variability of a given characteristic. The most widely accepted formula for process capability is 6 sigma.
PROCESS CAPABILITY INDEX – The value of the tolerance specified for the characteristic divided by the process capability. The several types of process capability indexes include the widely used Cpk and Cp.
PROCESS CAPACITY TABLE – A chart primarily used in a machining environment that compares machine load to available capacity.
PROCESS CONTROL – The method for keeping a process within boundaries; the act of minimizing the variation of a process.
PROCESS FLOW DIAGRAM – A depiction of the flow of materials through a process, including any rework or repair operations; also called a process flow chart.
PROCESS IMPROVEMENT – The application of the plan-do-check-act cycle (see listing) to processes to produce positive improvement and better meet the needs and expectations of customers.
PROCESS IMPROVEMENT TEAM – A structured group often made up of cross functional members who work together to improve a process or processes.
PROCESS KAIZEN – Improvements made at an individual process or in a specific area. Sometimes called “point kaizen.”
PROCESS MANAGEMENT – The pertinent techniques and tools applied to a process to implement and improve process effectiveness, hold the gains and ensure process integrity in fulfilling customer requirements.
PROCESS MAP – A type of flowchart depicting the steps in a process and identifying responsibility for each step and key measures.
PROCESS OWNER – The person who coordinates the various functions and work activities at all levels of a process, has the authority or ability to make changes in the process as required and manages the entire process cycle to ensure performance effectiveness.
PROCESS QUALITY – The value of percentage defective or of defects per hundred units in product from a given process. Note: The symbols “p” and “c” are commonly used to represent the true process average in fraction defective or defects per unit; and “l00p” and “100c” the true process average in percentage defective or in defects per hundred units.
PROCESS RE-ENGINEERING - A strategy directed toward major rethinking and restructuring of a process; often referred to as the “clean sheet of paper” approach.
PRODUCT FAMILY – Is a group of products that use similar processing methods.
PRODUCTION SMOOTHING – A method of production scheduling that, over a period of time, takes the fluctuation of customer demand out of manufacturing. “Produce every part, every day”.
PHYSICAL INVENTORY – This is the process of counting all inventories in a warehouse and plant. Operations are usually shut down during a physical inventory.
PLC – PROGRAMMABLE LOGIC CONTROLLER – Computerized device used to control functions of machines.
PULL – To produce an item only when the customer asks for it. Typically, the customer withdraws the item and we “plug the gap” created thereby.
PUSH – To produce an item irrespective of actual demand; creates the muda of overproduction, among others.
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QUALITY FUNCTION DEPLOYMENT (QFD) – A structured method in which customer requirements are translated into appropriate technical requirements for each stage of product development and production. The QFD process is often referred to as listening to the voice of the customer.
QUALITY LOSS FUNCTION – A parabolic approximation of the quality loss that occurs when a quality characteristic deviates from its target value. The quality loss function is expressed in monetary units: the cost of deviating from the target increases quadratically the farther the quality characteristic moves from the target. The formula used to compute the quality loss function depends on the type of quality characteristic being used. The quality loss function was first introduced in this form by Genichi Taguchi.
QUALITY MANAGEMENT (QM) – The application of a quality management system in managing a process to achieve maximum customer satisfaction at the lowest overall cost to the organization while continuing to improve the process.
QUALITY MANAGEMENT SYSTEM (QMS) – A formalized system that documents the structure, responsibilities and procedures required to achieve effective quality management.
QUALITY PLAN – A document or set of documents that describe the standards, quality practices, resources and processes pertinent to a specific product, service or project.
QUALITY POLICY – An organization’s general statement of its beliefs about quality, how quality will come about and its expected result.
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RELIABILITY – The probability of a product’s performing its intended function under stated conditions without failure for a given period of time.
REPEATABILITY – The variation in measurements obtained when one measurement device is used several times by the same person to measure the same characteristic on the same product.
REPRODUCIBILITY – The variation in measurements made by different people using the same measuring device to measure the same characteristic on the same product.
REQUIREMENTS – The ability of an item to perform a required function under stated conditions for a stated period of time.
REQUIREMENTS STUDY – The quantification and study of the amount of resource consumption necessary to satisfy the needs of a consuming process.
RESOURCE UTILIZATION – Using a resource in a way that increases throughput.
RIGHT SIZE – Matching tooling and equipment to the job and space requirements of lean production. Right sizing is a process that challenges the complexity of equipment by examining how equipment fits into an overall vision for workflow through a factory. When possible, right sizing favors smaller, dedicated machines rather than large, multipurpose batch processing ones.
RIGHT THE FIRST TIME – The concept that it is beneficial and more cost effective to take the necessary steps up front to ensure a product or service meets its requirements than to provide a product or service that will need rework or not meet customer needs. In other words, an organization should engage in defect prevention rather than defect detection.
RISK MANAGEMENT – Using managerial resources to integrate risk identification, risk assessment, risk prioritization, development of risk handling strategies and mitigation of risk to acceptable levels.
ROBUSTNESS – The condition of a product or process design that remains relatively stable, with a minimum of variation, even though factors that influence operations or usage, such as environment and wear, are constantly changing.
ROOT CAUSE – A factor that caused a non-conformance and should be permanently eliminated through process improvement.
RUN CHART – A chart showing a line connecting numerous data points collected from a process running over time.
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SAFETY STOCK – A quantity of inventory used in inventory management systems to allow for deviations in demand or supply. Safety stock calculations will take into account historic deviations and use a required service level multiplier to determine the optimal safety stock level.
SAFETY TIME – The time (inventory) allotted to compensate for the impact of waste on the supplying process.
SARAIMAN – Is a Japanese term for a white-collar worker. It derives from the Japanese pronunciation of the English salary + man. According to dictionaries, English language had recently got this word (salaryman) back from the Japanese.
SEIBAN – The name of a Japanese management practice taken from the words sei, which means manufacturing, and ban, which means number. A seiban number is assigned to all parts, materials and purchase orders associated with a particular customer job, project or anything else. This enables a manufacturer to track everything related to a particular product, project or customer, and facilitates setting aside inventory for specific projects or priorities. That makes it an effective practice for project and build to order manufacturing.
SENSEI – A revered master or teacher.
SET-UP REDUCTION – Reducing the amount of downtime during changeover from the last good piece to the first good piece of the next order; known as SINGLE-MINUTE EXCHANGE OF DIES (SMED)
SEVEN TOOLS OF QUALITY – Tools that help organizations understand their processes to improve them. The tools are the cause and effect diagram, check sheet, control chart, flowchart, histogram, Pareto chart and scatter diagram (see individual entries).
SIPOC DIAGRAM – A tool used by Six Sigma process improvement teams to identify all relevant elements (suppliers, inputs, process, outputs, customers) of a process improvement project before work begins.
SIX SIGMA – A method that provides organizations tools to improve the capability of their business processes. This increase in performance and decrease in process variation lead to defect reduction and improvement in profits, employee morale and quality of products or services. Six Sigma quality is a term generally used to indicate a process is well controlled (±6 s from the centerline in a control chart).
SIX SIGMA QUALITY – A term generally used to indicate process capability in terms of process spread measured by standard deviations in a normally distributed process.
SKU, STOCK KEEPING UNIT – SKU refers to a specific item in a specific unit of measure. For example, if you distributed nylon 6-6 in both gaylords and bags you would maintain the inventory as two SKUs even though they are both nylon 6-6. Also refers to the identification# assigned to each SKU.
STANDARD COST – A costing method used in manufacturing environments that uses the materials costs in the bill of materials combined with the labor costs (based on standard labor hours and rates per operation) and machine costs (burden) in the routing to calculate the cost of the finished or semi-finished item.
STANDARD OPERATIONS – The best combination of people and machines utilizing the minimum amount of labor, space, inventory and equipment.
STANDARD WORK – Pre-determined sequence of tasks for the best way to get the job done in the amount of time available (within takt time) while ensuring the job is done right the first time, every time.
STANDARD WORK COMBINATION SHEET – A document showing the sequence of production steps assigned to a single operator. It is used to illustrate the best combination of worker and machine.
STANDARD WORK LAYOUT – A diagram of a work station or cell showing how standard work is accomplished.
STOP-THE-LINE AUTHORITY – Whenever abnormalities occur, workers have power to stop the process and prevent the defect or variation from being passed along. See Andon.
SUB-OPTIMIZATION – Optimizing each piece of equipment; keeping all machines running, no matter the cost or consequence. Typically this inflates the number-one cost of production: material.
SUPERMARKET – A storage location for inventory authorized by a kanban pull system.
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TAKT TIME – The pace of production synchronized with the rate of sales. It is calculated based upon the total net daily operating time divided by the total daily rate of sales.
THEORY OF CONSTRAINTS (TOC) – A lean management philosophy that stresses removal of constraints to increase throughput while decreasing inventory and operating expenses. TOC’s set of tools examines the entire system for continuous improvement. The current reality tree, conflict resolution diagram, future reality tree, prerequisite tree and transition tree are the five tools used in TOC’s ongoing improvement process. Also called constraints management
THROUGHPUT – The rate at which the entire system generates money.
TOTAL PRODUCTIVE MAINTENANCE (TPM) – An integrated set of activities aimed at maximizing equipment effectiveness by involving everyone in all departments at all levels, typically, through small group activities.
TOTAL QUALITY – A strategic integrated system for achieving customer satisfaction that involves all managers and employees and uses quantitative methods to continuously improve an organization’s processes.
TOTAL QUALITY CONTROL (TQC) – A system that integrates quality development, maintenance and improvement of the parts of an organization. It helps a company economically manufacture its product and deliver its services.
TOTAL QUALITY MANAGEMENT (TQM) – A term first used to describe a management approach to quality improvement. Since then, TQM has taken on many meanings. Simply put, it is a management approach to long-term success through customer satisfaction. TQM is based on all members of an organization participating in improving processes, products, services and the culture in which they work. The methods for implementing this approach are found in the teachings of such quality leaders as Philip B. Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa and Joseph M. Juran.
TOYOTA PRODUCTION SYSTEM – The behavior of one of the world’s most successful companies. The foundation of TPS is production smoothing, the concepts which support it are just-in-time and jidoka.
TRADITIONAL MANUFACTURING – (Mass Production) Grouping like processes together (paint, welding fabrication, etc.) and then making large batches of a part and holding them in queue waiting for the next process. Also called “Batch and Queue”.
TURNAROUND MANAGEMENT – In a Business Turnaround situation Valucurve Management Systems will work with the company, its bank and auditors to develop and implement a strategic business plan. We will develop a business system that is project specific with appropriate strategies put in place to restore profitability and further to ensure that metrics are in place to maintain it.
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UP-TIME – The percent time a resource is actually available for production i.e. net available resource time divided by the gross available resource time.
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VALUE ADDED – A term used to describe activities that transform input into a customer (internal or external) usable output.
VALUE ANALYSIS – Analyzing the value stream to identify value added and non value added activities.
VALUE ENGINEERING – Analyzing the components and process that create a product, with an emphasis on minimizing costs while maintaining standards required by the customer.
VALUE STREAM – All activities, both value added and nonvalue added, required to bring a product from raw material state into the hands of the customer, bring a customer requirement from order to delivery and bring a design from concept to launch. Also see “information flow” and “hoshin planning.”
VALUE STREAM LOOPS – Segments of a value stream with boundaries broken into loops to divide future state implementation into manageable pieces.
VALUE STREAM MANAGER – Person responsible for creating a future state map and leading door-to-door implementation of the future state for a particular product family. Makes change happen across departmental and functional boundaries.
VALUE STREAM MAPPING – A pencil and paper tool used in two stages. First, follow a product’s production path from beginning to end and draw a visual representation of every process in the material and information flows. Second, draw a future state map of how value should flow. The most important map is the future state map.
VISUAL CONTROLS – Creating standards in the workplace that make it obvious if anything is out of order and by displaying the status of an activity so every employee can see it and take appropriate action.
VISUAL MANAGEMENT – System enabling anyone to quickly spot abnormalities in the workplace, regardless of their knowledge of the process, i.e. manage by exception.
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WASTE – Any aspect of a task or activity that does not add value.
WATER SPIDERS – Employees who deliver materials exactly on demand, at the frequency requested, in the right quantity with 100% reliability.
WORK-IN-PROCESS (WIP) – The inventory that is currently being processed in an operation, or inventory that has been processed through one operation and are awaiting another operation. WIP is actually an inventory account that represents the value of materials, labor, and overhead that has been issued to manufacturing but has not yet produced a finished product that has moved into Finished Goods Inventory.
WORK SEQUENCE – The correct steps the operator takes, in the order in which they should be taken. See Standard Work.
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X-BAR CHART – Average variable data chart.
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ZERO DEFECTS – A performance standard and method Philip B. Crosby developed; states that if people commit themselves to watching details and avoiding errors, they can move closer to the goal of zero defects.