3D Printing (also known as additive manufacturing) emerged as a technology in the 1980s, and continues to make progress as a viable industrial production process. Before 3D printing, most component parts started as solid blocks of material, and a traditional manufacturing technique such as milling or turning would cut (or ‘subtract’) material. In contrast, 3D printing creates objects by adding successive amounts (usually layers) of material until a fully formed object exists. 3D printing technology continues to advance in many areas for example, more printable materials, higher precision, better repeatability, faster printers, lower cost machines. These advances accelerate the uptake of 3D printing.
A 4PL (Fourth Party Logistics Provider, sometimes also referred to as an LLP or Lead Logistics Provider) is a type of supply chain services company. A 4PL adds additional services compared to a 3PL. A 4PL will take over all the management of a company’s supply chain process, including acting as point of contact for customers. A 4PL will usually offer strategic level supply chain expertise as well as capacity to manage, monitor and improve operations.
Abandonment means stopping, often before completion. In the oil and gas sector, abandonment is the name of an end of life process for an uneconomical reserve. This includes elimination of the extraction capability that removes the oil or gas from the field, attention to environmental and clean-up requirements, and disposal of the residual property and/or resource.
A basic chemical building block, acetic acid is liquid at room temperature, and familiar in the home as vinegar. It is manufactured from methanol and used in a variety of applications including the foodstuffs industries, manufacture of paints, dyes and pharmaceuticals, and the production of PET.
This costing method identifies and estimates the cost of each activity (including use of resources), and allocates costs to each product and service as a direct consumed cost. This enables companies to identify non value-add costs, the profitability for each product and service, and areas for process improvements.
A motor for inducing movement in a mechanism or system. An electronic control system uses actuators to adjust a device or machine, for example, to open or close a valve.
The difference between a product’s final selling price and the costs involved in making the particular product. For a business to survive, the added value of a product or service must be more than the cost. Examples of the expertise which allows companies to make a profit in this way include innovative design, new production processes, efficient ordering and delivery processes, using new technologies or materials, or supplying complementary services.
A integrated network of devices that allow two-way automated communication between a utility smart meter (located at the customer site) and a utility company. Information allows both provider and customer access to real-time data about how much power is being used and at what time of the day. The system also communicates pricing and energy information from the utility company to the consumer.
In manufacturing environments that are subject to fluctuations of demand and supply the APS modules enable companies to better tune their production and distribution facilities to better meet the demands of customers.
Also referred to as Advanced Planning Engines, Advanced Planning Systems are a new generation of planning and scheduling tools, which unlike MRP II, includes constraint models that deal with both materials and capacity. These technologies can be applied along a continuum extending from short-term plant-floor scheduling to strategic planning of supply chains.
A structured method of defining and establishing the steps necessary to ensure that a product satisfies the customer. By moving quality efforts into planning and prevention, this multistage process identifies and anticipates potential problem areas.
The aftermarket is the market for parts used to maintain, repair or enhance purchased goods. For example, accessories such as windscreen wipers or exhaust pipes for cars.
AM shares some concepts with the agile development methods common in high tech industries, such as flexibility and rapid iterations. But AM must also equip and operate production facilities with tools, techniques, and initiatives that enable it to thrive under conditions of unpredictable change. AM enables a plant to achieve rapid response to customer needs, and quickly reconfigure operations and supply chain relationships to respond rapidly to unforeseen shifts in the marketplace.
AOG is a term in aviation maintenance indicating that a problem is serious enough to prevent an aircraft from flying.
Airworthiness defines whether an aircraft is capable of safe flight. When registered, an airworthy aircraft receives a certificate of airworthiness from its national registration authority. This certificate remains valid if specified maintenance procedures are followed. It is illegal to fly an aircraft without an airworthiness certificate.
The albedo is the fraction of light that is reflected by a body or surface, commonly used to describe the reflective properties of planets, satellites, and asteroids. The normal albedo of snow is nearly 1.0 whereas that of charcoal is about 0.04.
The American Petroleum Institute is an organization whose members have a common interest in the Oil & Gas sector, and which provides information on a wide range of environmental, performance, health and safety and other matters of interest to that industry.
An analog signal is any form of data transmission where the pneumatic, mechanical, or electrical energy signal varies continuously in direct proportion to the intensity of the physical quantity, property, or condition represented. This is typical of process Industries like Oil/Gas, Pharma, Food and Chem. Many sensors create analog signals. If required, conversion from analog to digital usually possible.
Analytics is a short form of ‘Data Analytics’. Analytics means the use of data warehousing, data mining and online analytical processing to rapidly analyze large volumes of structured and unstructured data from multiple types of systems. Data analytics is used to interpret data and identify meaningful insights, trends, patterns and information for example, relationships between production machine settings and the quality and quantity of output; or customer buying patterns by category.
An ASIC is an integrated circuit (IC) customized for a specific function rather than general-purpose use. Examples of ASICs can be found in high volume consumer goods as well as specialized equipment.
An ASSP is an ASIC which has sufficiently widespread application that it can be sold as a standard product. Examples include chips to drive USB or Bluetooth interfaces, and chips used to run digital communications inside an automobile.
Association of Southeast Asian Nations. Created in 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand, by 2021 ASEAN had grown to include Brunei, Vietnam, Laos, Myanmar and Cambodia, representing nearly 700 million people. Extended groups have been used for economic development discussions – ‘ASEAN plus 3’ adds China, Japan, South Korea; ‘ASEAN plus 6’ further adds India, Australia and New Zealand.
Assemble to order is a production method that occurs when an item is assembled after receipt of a customer’s order. The key items used in the assembly or finishing process are planned and usually stocked in anticipation of a customer order. Receipt of an order initiates assembly of the customized product.
Asset turnover measures the efficiency of the use of assets to produce sales. It is a ratio which shows how many dollars of sales were generated by each dollar of assets. Calculate by dividing net sales by average total assets.
(1) Use of devices, especially mechanical and electronic, to reduce human activity required for procedures, processes, or operation of equipment. (2) The entire field of investigation, design, development, application, and methods to render or make manual processes or operations partially or fully automatic.
Strictly an Airborne Warning and Control System, the term AWACS is widely used to include the aircraft which carry the radar and control systems, and provide the capability to direct military operations from high altitude hundreds of miles away.
(1) in logistics, backhaul refers to the practice of maximising efficiencies through the use of return truck loads. For example, a factory might use a truck to collect new parts from a supplier after it has completed delivery of a batch of finished products to a distribution center. (2) in telecoms, the backhaul network is the part of the network which connects the ‘core’ (or ‘backbone’) network to the edge networks.
The balanced scorecard is a widely used strategic planning and management system. The original concept identified four perspectives (Customer, Process, Financial, Learning&Growth) as a structure for strategic metrics to cover an entire business. Balanced scorecard systems have built on this concept to help align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals.
Bar Coding uses machine readable patterns to label items. The first barcodes, consisting of varying width bars and spaces, remain very significant in the market, even though new formats have been proposed.
The Barrel of Oil Equivalent is an energy unit that is convenient for expressing the quantity of oil or gas in common terms. It is equivalent to 5.8 million BTU or 6.1 GJ. In terms of oil, a BOE is the energy released (approximately) by burning 42 US gallons (one barrel) of crude oil, and in terms of natural gas is the energy equivalent of about 6000 cubic feet.
Input materials are divided into distinct batch quantities. Each batch is processed and tracked individually to account for variations in recipes and customer attribute requirements. Processing can be through automated systems twenty-four hours a day, or by different steps for each batch.
In batch production, a quantity of ingredients, or a number of identical parts, are grouped into a batch which travels through the plant as one unit. This can improve efficiency and simplify scheduling. The choice of the optimum quantity of materials or number of parts in a batch (the batch size or lot size) is important. It depends on the capacity and machines in the factory, the mix of orders received, and the extent to which parts need to be customized.
The ore from which aluminum is extracted.
Benzene is a colourless liquid used in production of many chemicals including polystyrene. It is a volatile hydrocarbon which can be extracted from coal but since 1950 is mainly extracted from crude oil. It is toxic and a known carcinogen, so there are strict controls on benzene emissions.
The bid-to-win ratio measures the success rate of a company’s attempts to win sales. Bid-to-win is an important metric for businesses where substantial costs are incurred before a contract is awarded. This is often the case for sales of high value capital goods (for example, production machinery), engineer-to-order businesses (for example, power generation equipment), and project oriented businesses (for example, heating and ventilation installation).
The sales cycle can include extensive planning, design and configuration work, often with multiple versions to track changing specifications. To manage risk, selling companies can treat custom design work as a paid service, and can structure products for configuration.
The vast amount of unstructured business data that exceeds convention processing power. Big Data can be characterized by the 3Vs – high-volume, velocity and variety. Volume and velocity refer to the speed at which data is generated in real time from each and every aspect of operations. Variety refers to the diverse sources of this data: sensors on machines and many other assets, unconnected software applications, employee emails, social media etc.
A listing of all the subassemblies, parts, and raw materials that go into a parent assembly. A Bill of Material is held in the organization’s ERP system and provides a link to relevant costing information held by the F&A group. The document is finalised when a new product is released to production at the end of the product development process.
Biobutanol is produced from renewable biomass sources. When produced from oil sources, it is called butanol. Biobutanol has demonstrated potential to reduce automotive carbon emissions, for example, as an additive or blend with gasoline. Recent advances with “”designer microbes”” enable use of lower-cost biomass feedstocks – for example, those with tough cellulose fibers – for biobutanol production at gasoline-competitive costs.
Biofuel is any liquid, solid or gas that is obtained from living (or recently living) materials and that can be processed or ignited to provide energy. In contrast, fossil fuels are ancient organic materials that have built up eons ago and can now be mined as oil, gas or solids (coal).
Biologics are biological products used in medicine. Unlike drugs which are chemically synthesized, biologics are created from natural source materials. Biologics include vaccines, blood, and blood components as well as products based on genetic and other biotechnologies.
The use of biological processes or organisms for human benefit. Genetic engineering and the bacteria used in sewage treatment are two examples.
A bottleneck in a production system is any point where demand exceeds capacity. It is important to identify and maximize use of bottlenecks – but only if the system is producing the right products.
This is a marketing strategy used by CPG companies who seek to extract maximum value from established brands by using the same brand name in a new product category. For example, the Virgin family of companies started as a record shop, then became a record label and now has businesses in a very diverse set of markets from transport to services.
An acronym for Brazil, Russia, India, and China. In 2003, these countries were identified as developing nations with large growth potential. At that time, economic forecasts indicated that BRIC together would become wealthier, and control a greater proportion of global manufacturing and services, than the traditional leading Western economic powers at the time.
A broker is an intermediary between buyer and seller. A broker facilitates and enables a buyer and seller to complete a sales transaction. In strict legal terms, this is different to an agent, who acts on behalf of either buyer or seller. Brokers earn the fees and commissions they charge in many different ways, ranging from research, market knowledge and contacts to promotional programs, product management and sales administration services.
Business Intelligence describes a category of software products that is capable of analysing data sets, that may be very large, and identifying patterns or relationships within the data that would not otherwise be apparent. BI offers significant benefits for manages or executives trying to understand data that describes complex and often changeable behaviour.
Business jet describes an aircraft, usually of smaller size, designed for transporting groups of business people. The more formal terms of corporate jet or executive jet tend to be used by the firms that build, sell, buy and charter these aircraft.
A business consists of a set of interconnected business processes. Each business process is a group of related tasks and activities. Visualization of business processes (for example, as a flowchart) helps management teams analyze, improve and optimize performance, and make changes to support strategic initiatives.
This term describes a very common business model adopted by many manufacturers who sell primarily or exclusively to other manufacturers, rather than to consumers. In contrast, a Business to Consumer (B2C) company sells its products direct to consumers.
A by-product is an incidental or secondary product made in the manufacture of something else. A by-product can sometimes be useful and marketable, or it may be considered waste.
A cache acts as a buffer. In computer systems, ‘cache’ is short for ‘cache memory’, which acts as a buffer for transfers to and from memory systems. By building cache from very fast memory, performance is improved, especially when data or instructions are repeatedly required.
Capacity Utlilization is usually expressed as a percentage which measures how much of a total manufacturing output capacity is being used at a given point in time. It can be used to measure a machine, production line, factory, company, industry or sometimes country.
CAPEX is money spent by a company to acquire or upgrade physical assets, from trucks, to machinery, to whole factory facilities. Capex is recorded separately from day-to-day costs, because tax authorities often encourage this investment with special allowances; and also because it is helpful to view the cost of a capital item as if it is spread over the useful life of the item. See also Capital Purchase.
These are investments in production plants, equipment, buildings, and other fixed assets. These assets are intended to raise the revenue-earning capacity of a company. A capital purchase can be paid for from cash reserves and/or by borrowing money. Either way, accountancy procedures will help show the value of the asset, and its annual cost to the business, spread over its useful life. See also Capital Expenditure.
CCS refers to several technologies and techniques which allow companies to ‘catch’ carbon dioxide gas which would otherwise be emitted into the atmosphere by industrial facilities and power plants. In 2020, the Global CCS Institute identified 59 CCS facilities worldwide with a total capture capacity of 127 million tonnes p.a. (compare 2016 emissions due to human activity of 35 thousand million tons).
A carbon footprint is the total set of GHG (greenhouse gas) emissions caused directly and indirectly by an individual, organization, event or product (UK Carbon Trust 2008). An individual, organisation or national carbon footprint is measured by undertaking a GHG emissions assessment.
Carbon sequestration is achieved when carbon is removed from the atmosphere (as CO2) and stored, or separated from fuels or flue gases and stored. Carbon sequestration is either technological (usually called carbon capture and storage) or biological (biological carbon sequestration). The viability of carbon sequestration depends on the cost of the process and the policy context that determines the value of sequestered carbon.
The company that physically moves freight (the shipper is the carrier’s customer).
Cash-to-cash cycle time measures the time from when a manufacturer pays its suppliers for material to the time it is paid by customers for the products that used those supplies or materials. This cash flow measure can range from many months in complex long lead-time industries to negative numbers for companies such as Dell Computers, which collects money from its customers before it pays suppliers for the parts in those products.
A category in the retail environment is a group of similar products that may require in-depth knowledge and understanding. Management of the retail environment as a series of categories enables retailers to treat the business as a series of strategic business units which can be assigned a set of resources and managed on the basis of profit. Category managers may compete internally for additional resources such as floor area or marketing support for example.
Cellular manufacturing is a manufacturing approach in which equipment and workstations are located in a number of close-proximity groups (‘cells’). Each cell is equipped to make a component or sub-assembly, or complete a standard sequence of process steps. This concept can improve factory efficiency, both by reducing distance travelled by materials, also by making it easier for workers to communicate about problems, changes and plans.
Certification is the procedure which enables a responsible authority to confirm a product, process or service meets relevant standards. In aviation, certification is a regulatory obligation. A Certificate of Airworthiness is issued or validated by the state in which the aircraft is registered, and remains effective only if maintenance is performed according to approved standards.
Changeover time is the time required to modify part or all of a production system to make a different product. Production systems designed for high volume standard products (food, consumer goods) are likely to have larger changeover times than production systems designed for smaller batch sizes and product variants.
Chapter 11 is part of the US Bankruptcy Code which gives time to reorganise to a business facing bankruptcy. The intention is to allow the business to survive and pay creditors according to a reorganisation plan agreed at a confirmation hearing in a federal court.
CCDs are silicon-based light detectors, widely used in astronomy for imaging of visible, ultraviolet and infrared radiation. They are also used in commercial digital cameras. The introduction of CCDs for astronomical imaging in the late 1970s, as replacements for the photographic plate, made possible many of the breakthroughs that have shaped modern astronomy.
Chlorine is a greenish-yellow gas which is toxic and corrosive. It irritates and can damage the respiratory system and the eyes. Used carefully and in suitable amounts, it disinfects drinking water and keeps swimming pools clean. Chlorine chemistry is used to make thousands of products, from plastic foams to contact lenses. Even when not part of the finished item, it is vital in many production processes – for example, titanium is purified using chlorine.
Classified information is sensitive information to which access is restricted by law or regulation to particular classes of persons. A hierarchical system with several levels of sensitivity is used by virtually every national government.
Closed loop control is a method of automation in which part of the output is fed back to the input to achieve a regulatory action. For example, a closed-loop heating controller might measure a room temperature and switch heating on if the temperature is below target. In contrast, an open control would switch heating on for preset time periods without measuring the temperature.
Cloud computing delivers computing services such as servers, databases, networking, and software over the Internet. Providers of cloud computing have built many large data centres around the world, equipped with banks of networked computers. They have developed technology to give customers access via the Internet to buy and use capacity as needed, usually on a ‘pay-per-use’ basis. To access cloud-based systems, all that is needed is a PC or phone and an Internet connection, so businesses can reduce investments in servers and other IT equipment.
A co-product is a product that is usually manufactured together or sequentially with another item because of product or process similarities. For example, an oil refinery produces a number of co-products such as gasoline, kerosene and naptha.
CO2 Equivalent Emissions is a standard which allows comparison of different amounts and types of greenhouse gas and particulate pollution. A figure for CO2 Equivalent Emissions is calculated by determining the global warming impact of each type of emission, and converting this to the amount of CO2 which would have the same impact. Adding these CO2 equivalent numbers gives a single CO2 Equivalent Emissions figure to enable legitimate comparisons between processing facilities, industries, and countries.
Coaxial cable (often ‘coax’) offers high-data rates and high immunity to electrical interference. It is used to connect data and communication devices. It consists of (1) an inner wire surrounded by (2) a layer of insulating material, then (3) a concentric layer of conductive material, then (4) an outer cover. The conductive material (3) shields the wire (1) from interference.
CPFR is a concept which aims to lower costs and improve efficiency by enabling cooperation between participants in a supply chain. Best known in retail environments, CPFR requires shared or networked IT systems to link trading partners. This enables continuous update and visibility of inventory and supports rapid response to changes in demand. Efficiencies come from lower inventory, logistics, and transportation costs for all trading partners.
A commodity is a product that is the same no matter who produces it, such as petroleum, copper or milk.
CSM is an approach in which organized product information supports choice of standard parts and production processes, and reuse of existing designs. Widely used in the high-tech industry, CSM encourages use of parts which have more than one supplier, and helps avoid proliferation of components and suppliers.
Composite materials (or composites for short) are engineered materials made from two or more constituent materials. There are numerous composites, but common composites are advanced thermoset systems, usually incorporating aramid fibre and carbon fibre in an epoxy resin matrix.
CAGR is used both for historic review and future business planning. CAGR converts the up-and-down nature of most investment and market value curves into a single figure. The CAGR is the annual percentage growth rate which, if it occurred every year over the time period being reviewed or forecast, would convert the initial value into the final value.
CFD uses mathematics and software to simulate and visualize the behaviour of gases and liquids. Most practical problems can only be solved by treating the fluid as a large number of connected cells, calculating a small step change for each cell, and repeating the calculation for the next step.
CAD is the use of computer technology to help design engineers develop and specify a component or product. Some CAD systems are specific to particular disciplines, for example, shipbuilding, or process plant. General purpose systems support both two dimensional (2D) and three dimensional (3D) representations, and are often linked to other systems which use product information.
CAE is the use of computer technology for analysis and error-checking of a design. This may include strength performance and manufacturability assessment.
CAM systems use computers to help develop instructions and programs for automated manufacturing equipment. Programs are downloaded to the equipment, and, due to historic pre-network capabilities, are sometimes referred to as ‘tapes’.
Software-based systems that aid manufacturing engineers in creating a process plan to manufacture a product whose geometric, electronic, and other characteristics have been captured in a CAD database. CAPP systems address such manufacturing criteria as target costs, target lead times, anticipated production volumes, availability of equipment, production routings, opportunity for material substitution, and test requirements.
Software used to model the factory, production line or work cell layout to simulate production processes and generate efficient operations plans and train operators.
A variety of approaches in which computer systems communicate or interoperate over a local-area network. Typically, CIM systems link management functions with engineering, manufacturing, and support operations. In the factory, CIM systems may control the sequencing of production operations, control operation of automated equipment and conveyor systems, transmit manufacturing instructions, capture data at various stages of the manufacturing or assembly process, facilitate tracking and analysis of test results and operating parameters, or a combination of these.
CNC allows control of motion of a manufacturing machine in an accurate and programmable manner. Machine controllers with this capability were originally called ‘numerical controls’ and this name persists.
Software-based systems that analyze operating conditions of production equipment (vibration, oil analysis, heat, etc) and equipment-failure data, and also apply that data to the scheduling of maintenance and repair.
Use of computer simulation to facilitate sequencing of production operations, analysis of production flows, and layout of manufacturing facilities.
Concurrent Engineering seeks the optimum way to save time by performing multiple engineering tasks in parallel. Mainly used in product development and production engineering, the potential scope of concurrent engineering is large, covering development, manufacturing planning, maintenance, environmental impact and recycling planning. All these functions can potentially start in parallel with only partial information, especially when the specialists involved are organized into one team.
A discipline applying technical and administrative direction and monitoring to: (1) identify and document the functional and physical characteristics of a product or process as defined in its specification; (2) control changes to those characteristics; and (3) record and report changes to processing and implementation status. This is typically implemented via a Product Lifecycle Management (PLM) system.
A rule-based system which allows the user to specify the configuration of a product required by the customer. Product information is coupled with a set of rules that specify, for instance, which combinations of options are possible. Advanced configurators allow the user to specify only some options, then optimise the remaining options for lowest cost or earliest delivery etc.
Configure to Order (CTO) means assembly of standard products in a way that matches a customer’s specifications. CTO is generally done at the last step of production on the final assembly line. Up until final assembly, products are built to forecast and at final assembly they are assembled to customer order or to a forecast of products with unique configurations.
A Connected Application uses the internet and/or other methods of connectivity to receive and/or send information to sensors on ‘things’ such as devices, products or other equipment.
The Consignee is the company or person with legal and financial responsibility to receive goods being transported from sender to receiver.
In business, consolidation refers to the mergers or acquisitions of many smaller companies into larger ones.
A group of individuals or companies formed to undertake an enterprise or activity that would be beyond the capabilities of the individual members.
Method of planning that takes account of all constraints in the production system, including supplier, material stock, factory capacity, warehousing and transportation. It is used to make plans and schedules as realistic and achievable as possible. Advanced planning Systems usually offer this capability.
This category covers a wide range of products available in packages suitable for the individual consumer or family. The category includes food and drink, health and beauty, household cleaners and many other items. The term is in widespread general use and in some cases the context may imply a more specific definition.
A CMS is a computer application used to create, edit, manage, search and publish various kinds of digital media and electronic text. They are used for storing, controlling, versioning, and publishing industry-specific documentation such as news articles, operators’ manuals, technical manuals, sales guides, and marketing brochures.
CALS is a United States Department of Defense strategy and set of standards for use by the military and their industry partners. CALS is intended to enable more effective generation, exchange, management and use of digital data supporting defense systems.
CFP is achieved when materials move through the production process without stopping. This is often possible for packaging steps in high-volume production, for example, food and beverage. It is almost built-in to many automated production lines. It lowers inventory levels (no materials are waiting for the next process).
Arrangements with supplier companies in which the supplier monitors the customer’s inventory and automatically replaces used materials, eliminating the need for purchase orders and related paperwork.
An organisation to which pharmaceutical companies can sub-contract activities, for example clinical trial work.
Aircraft flying in cold and humid air masses induce contrails that take the form of cirrus clouds which warm the Earth’s atmosphere by reducing terrestrial radiation into space. The clouds also help to cool the Earth by increasing its albedo, but studies have shown that the warming effects dominate.
The processes, functions, and activities in a plant or company that are its lifeblood, namely, the source of its differentiated added-value. Usually, these are the activities for which the enterprise derives the greatest return for its investments or those that intrinsically align the enterprise with its core market.
The set of processes, customs, policies, laws, and institutions affecting the way a company is directed, administered or controlled. Corporate governance also includes the goals for which the corporation is governed including the relationships among the many stakeholders. Stakeholders include the shareholders, the management, the board of directors, employees, customers, creditors, suppliers, regulators, and the community at large.
COGS are the costs directly associated with making or acquiring products for resale. Costs include materials purchased from outside suppliers and used in the manufacture of the product, as well as any internal expenses directly expended in the manufacturing process, e.g. labor costs.
The sum of all costs associated with conformance and nonconformance. Cost of conformance includes prevention costs (employee training, tooling maintenance, planned preventive maintenance, suggestion awards) and appraisal costs (inspection, testing, gages and instrumentation, audit expenses). The cost of nonconformance includes internal costs (unscheduled maintenance, pre-shipment scrap and rework, workers’ compensation) and external costs (warranty, customer complaint investigation, rework of returned goods, and product liability insurance).
Used in the oil and gas sector, crack spread compares the prices of just one or two refinery output products to the cost of the crude oil used to make them. Like Gross Product Worth, crack spread can be used to estimate refining margins, however crack spread is intended as a simple, quick measure.
Crack spread is often based on a single product, typically gasoline, but multiple products can be included. The 3:2:1 crack spread is well known in US oil refineries, which generally produce about 2 barrels of gasoline for every barrel of distillates (distillates include diesel and home heating oil). The 3:2:1 crack spread is calculated by subtracting the price of 3 barrels of oil from the total price of two barrels of gasoline plus one barrel of distillates.
In project management, a critical path is the set of tasks which define the shortest possible time to complete the project. Any delay in critical path tasks will delay overall project completion. To identify the critical path, it is essential to know dependencies between tasks, that is, which tasks must be complete before another task can start. For tasks away from the critical path, there may be room to start late, or take longer than planned, without any impact on the overall project completion.
The logistics practice of transferring materials from an inbound source to outbound transport with little or no storage in between, i.e. across the loading dock.
Teams of employees representing different functional disciplines and/or different process segments that tackle a specific problem or perform a specific task, frequently on an ad hoc basis.
Skill-development practices that require or encourage production workers and other employees to master multiple job skills, thus enhancing workforce flexibility.
Customer churn is a short version of ‘customer churn rate’, or ‘customer attrition rate’, and measures the percentage of customers who stop buying from their existing supplier in a given period. Customer Retention Rate measures the same characteristic by measuring retained rather than lost customers. These metrics are especially important in market segments dominated by subscription sales. Customer churn – the percentage of customers lost – is usually analyzed into those customers lost to competitors, and those who simply stop using a service.
The time elapsed from receipt of an order until the finished product is received by the customer.
A quality measure, expressed in parts per million (ppm), reflecting the number of completed units rejected or returned by external customers. Calculation should include parts reworked by customers. The term applies to all shipped units, including parts.
CRM systems are IT systems which manage customer information. CRM systems may: track orders, analyze sales performance, manage customer details (like contacts, discounts and billing information) and automate many routine aspects of marketing – like customer segmentation, follow-up emails, monthly newsletters, and other promotional mail outs.
The number of customers active at some point in the past and still active, divided by the total number of customers at the same point in the past.
Days of inventory is a measure used by production management teams. It is calculated by dividing inventory on hand by average daily inventory usage. The result is an initial estimate of the number of days production could continue using just materials on hand. Further insights can be obtained by looking at specific types of inventory (raw-materials inventory, work-in-process inventory, and finished-goods inventory).
Days sales outstanding (DSO) measures the speed at which a company collects accounts receivable from those who owe it money. Some companies may have 40 DSO, while others have created ways to collect money almost immediately on shipment of the product and others may not be paid for months by customers.
DACF is used to reduce distortions in cash flow figures. Distortions arise from different financing methods, and the different accounting methods related to these financing methods. DACF is mainly used when there is substantial debt, large cash flows, and significant impact of tax treatment. This is not unusual in oil and gas companies. DACF smooths out the differences, so that DACF figures can be compared across companies to help assess relative performance and valuations. If companies handle exploration costs in very different ways, then an adjustment for exploration is included in the DACF calculation which is: cash flow from operations + financing costs (after tax), and sometimes + exploration expenses (before tax) +/- working capital adjustment.
In the oil and gas sector, definition is the name of an upstream process which determines how a resource (a reserve of oil or gas) can best be recovered and exploited.
A demand flow scheduling system uses customer orders as the basis for calculating production schedules. This is central to demand-based manufacturing strategies, which generally require good cooperation along the supply chain.
The published mission of the DoD is to provide the military forces needed to deter war and to protect the security of the USA. The military consists of seven armed forces (army, marines, navy, air force, space force, coast guard and national guard); eleven combatant commands with regional or functional roles; plus supporting capabilities.
Desalination a set of processes to remove salt and minerals from seawater. The result is water for human consumption or agricultural use. Water from desalination is usually more expensive than other sources, so is generally found in regions with limited water supply, and also on ships and submarines.
The practice in which ease and cost of assembly is emphasized during the product-design stage.
The practice in which physical handling and distribution of a manufactured product are emphasized during the product-design stage.
The practice in which ease and cost of manufacturing, including quality-assurance issues, are emphasized during the product-design stage.
A practice in which product designers work effectively with suppliers and sourcing personnel to identify and incorporate components, technologies or designs that can be used in multiple products. This facilitates the use of standardized components to achieve economies of scale and assure continuity of supply.
The practice in which quality assurance and customer perception of product quality are emphasized as an integral part of the design process.
The practice in which ultimate disposal and recycling of the manufactured product are considered during the product-design stage.
Digital Marketing is the discipline of promoting products and services to consumers through various electronic media, including the internet, mobile, and email.
Often called ‘DMU’, these systems generate images of an assembly of parts from various sources and check for fitness for purpose, interference etc. This concept was required by early design systems which handled only individual components. Therefore, to see a complete product, this additional step was required. Now that most design systems handle assemblies and whole products, the emphasis has moved to realistic graphics combined with effective simulation.
Raw materials, components and assemblies that are part of the finished product.
Discrete manufacturing handles components, assemblies and products which are distinct items. Examples include automobiles, machines, and consumer electronics. Discrete manufacturing contrasts with process manufacturing, which uses liquids, gases, and powders to make products which are usually measured by weight and volume, for example, food, gasoline, chemicals and paint.
A disruptive technology or disruptive innovation is an innovation that satisfies a market requirement in unexpected ways, or creates a new market requirement. Examples include cellphones; the compact disc replacing magnetic tape for recording; and digital cameras replacing film-based cameras.
A DCS is a real-time, fault-tolerant control system for continuous and complex batch-process applications. Over time, DCS technology has evolved from proprietary, special purpose hardware and software to more use of standards, although proprietary communication protocols remain common.
A distributor buys and stocks products, and then sells them to other businesses. For manufacturers, this simplifies distribution. For buyers, the distributor may offer more suitable buying conditions such as packaging and delivery. In the retail sector, a distributor may be called a wholesaler.
Allows users to store, search, and manipulate documents electronically and to track and manage document versions, status and distribution.
In the oil and gas sector, downstream starts at the point extracted oil and gas is first delivered to storage or refinery facilities. Downstream operations take these materials, convert them into fuels, chemicals and other products, and deliver these products to motorists, airlines and many other industrial users.
Periods when a computer, piece of equipment, or manufacturing system is not available to perform work.
In transportation and logistics, drayage refers to movement of containers between transport modes, e.g. from ship to rail.
Dual Use Products (sometimes Dual Purpose Products) is the phrase used in UK and US regulations to cover export licensing of products with both civilian and military applications. Examples include radar equipment, heavy road vehicles and civil airliners suitable for reuse as tankers.
Economies of Scale refers to the cost advantages associated with increasing the volume and/or rate of production. Imagine a company’s annual lease on their factory premises is $200,000 per year. If they make 100,000 units, the cost is 200,000 / 100,000 = $2 per unit. If they crank up production to 200,000 units, then the lease component of the cost of goods sold falls to $1 per unit.
Ecotoxicology is a scientific discipline combining the methods of ecology and toxicology in studying the effects of toxic substances and especially pollutants on the environment.
An elastomer is a polymer with the property of elasticity
This phrase originated to describe all devices with interaction between electrical and mechanical elements – for example, a motor, or a switch. Now it means a mechanical device which is triggered or controlled by an electrical or electronic device including, for example, the huge number of products containing electronic microcontrollers, ranging from washing machines to aircraft fly-by-wire controls.
EDI standard data formats were developed in the early 1970s to support business-to-business e-commerce. Refined over the years, and with specific versions for particular industries, EDI is still in use today, for example, as messages attached to AS2 protocol communications, which can use Internet connections and maintain security.
EDA is the class of software tools used for development of integrated circuits, PCBs, and electronic systems. Early EDA software enabled users to manipulate complex connector and device geometry layouts, and generate manufacturing instructions. Current systems have layered many levels of automation on top of this capability – now, users input requirements using diagrams or software-code-like statements. EDA software generates layouts from these inputs, and simulates their performance.
Electronic manufacturing services (EMS) is the name used in the high-tech industry to identify companies that assemble, produce, and test electronic components and assemblies for original equipment manufacturers (OEMs). Typically, OEMs retain ownership of product designs and brand names. Some EMS companies offer design, rapid prototyping and product testing services, and are described as contract electronic manufacturers (CEMs).
EPOS systems are commonly found at retail checkouts, both instore and online. An in-store EPOS terminal supports item identification, pricing, and loyalty card systems as well as payment, in addition to communicating actual sales to finance and supply chain systems. Online EPOS systems are hosted on secure servers and used by an online customer via a web-interface to finalize delivery and payment arrangements.
An embedded system is a special-purpose computer system designed to perform one or a few dedicated functions, often with real-time computing constraints, and usually as a part of – i.e. embedded into – another product.
Employee time-to-productivity, sometimes “Time to full productivity” measures the time taken for a new employee to learn enough to ably complete every aspect of their job. The time taken varies by role and can be work time or calendar time. The judgement about doing the job can be well defined or informal. There may be a framework of local employment law which guides the way the organization must work with the employee.
The EIA is a US Government agency charged with providing official energy statistics. Its stated mission is to provide policy-neutral data, forecasts, and analyses to promote sound policy making, efficient markets, and public understanding regarding energy and its interaction with the economy and the environment.
Energy Intensity is the amount of energy consumed per unit of output. It can be applied at the level of a machine, a production line, a factory or a process plant. It is also used by governments and industry bodies to characterize whole country economies and industry sectors. Industry sectors where energy costs are a significant part of total costs are called ‘energy intensive’ sectors – for example, manufacture of cement, chemicals (including petrochemicals), primary metals and paper. Companies in energy intensive sectors almost always use energy intensity as a key performance indicator.
EROEI is used in energy provider industries as a guide to the viability and profitability of a resource. In oil well development, EROEI is the energy the well will produce as end fuel, expressed as a multiple of the energy required to extract and process it.
ETO products are built to customer specifications. The ETO approach to manufacturing is similar to Assemble to Order (ATO). ETO is often an extension to ATO, where a manufacturer can still accept orders which cannot be built from the components used for ATO – but instead of refusing the order, the manufacturer designs and makes additional components. Other ETO environments are general job-shop operations which offer to build anything a customer has designed. Another important class of ETO is capital equipment such as equipment used in process plants, where design and manufacture of each item is often adjusted for the specific installation.
An ECO is one of the documents which allows a manufacturer to control changes. If a change is necessary, an Engineering Change Request (ECR) is created. This forms the basis of analysis of the feasibility and effects of the change. The decision whether to go ahead with the change uses these results and needs approval by all affected departments. change. When approved, the ECR is converted into an ECO, which will define the changes, and when they will take place.
See Document Management System (DMS). An EDMS is a DMS with additional engineering specific capabilities. These additional capabilities could include ability to handle Bill of Material; ability to handle technical files such as inputs to and outputs from manufacturing or test equipment; automation of workflows such as create a new part number or review an engineering change request; control access to documents such as recipes used for regulatory approval.
EPC companies provide design and build services for industrial facilities ranging from small factories to large oil refineries. Owner-Operator companies commission EPC companies to execute projects.
Enterprise Asset Management (EAM) is a business approach that integrates strategic planning with operations, maintenance and capital investment decision-making. Similar to Maintenance Management Systems.
A broad implementation of information technology to link various functional units within a business enterprise. On a wider scale, it may also integrate strategic partners in an inter-enterprise configuration. In a manufacturing enterprise, EI may be regarded as an extension of CIM that integrates financial or executive decision-support systems with manufacturing tracking and inventory systems, product-data management, and other information systems.
ERP is an umbrella term for a suite of software modules used to control a firm’s processes. ERP is considered the ‘core’ business system and underpins all of the company’s business activity, including materials management, supply-chain management, production, sales and marketing, distribution, finance, field service, and human resources.
A system to allow an organisation to demonstrate compliance with appropriate laws and regulations through both internal actions and by certification by a third party. The detailed requirements are covered in ISO14001 Environmental Management.
Ethernet, first standardized in 1983, remains the standard for local communications networks. It was developed jointly by Digital Equipment Corp., Xerox, and Intel. The first Ethernet, based on coaxial cable, supported data at 3 megabits per second. In 2017 a standard using optical fiber for 400 gigabits per second Ethernet was approved – an increase in speed by a factor over one hundred thousand in 35 years.
Ethylene is a colorless flammable gas derived from petroleum and natural gas and used as an organic chemical raw material in plastics and specialty chemical products.
The European Economic Community (EEC) was a forerunner of the European Union (EU). The EEC organization was absorbed into the European Union (EU) in 1993.
XML is a document and data markup standard. The concept of markup is to annotate a document with information which can be recognized as separate from the document content. This allows easier transfer of documents and data between applications. XML is important for Enterprise Application Integration, and for data transfer in e-commerce.
FMCG is another term that is widely used but whose meaning is not particularly standardised. In some uses it may be almost synonymous to CPG and include all non-durable consumer goods. In other uses it may be more specific and refer for example to predominantly for food or drink products.
The basic raw materials that are the input to and requirement for an industrial process. Oil and gas are feedstocks for the manufacture of a wide range of fertilizers, plastics, fuels and other products.
A Fieldbus is a digital, two-way communication link which can connect multiple intelligent measurement and control devices. It serves as a Local Area Network (LAN), in particular for the machines, controllers and sensors which are directly involved in production processes.
Software to implement finite capacity scheduling uses actual production capacity as a key parameter for its scheduling calculation. This is different from the original production scheduling method, MRPII. MRPII assumes infinite capacity, and creates schedules by working back from customer due date. This allows an MRPII schedule to be unachievable, because it assumes no limit on the number of items a workcentre can process in a day. There are many different approaches to finite capacity scheduling, including, for example, constraint based scheduling, and also MRPII add-ons which adjust an MRPII schedule to match actual capacity.
FEA is a mathematical method which is at the heart of simulation software. FEA uses 3D meshes of millions of cells to represent the complex geometry of an item. By performing calculations for every single point or cell in the mesh, then combining the results, FEA determines the overall result for the item. FEA based simulation is used in product-design software to conduct graphical on-screen analysis of structural loads, thermal behaviour, and fluid flows.
FIFO is a strategy used in material handling. In the FIFO model, items that have been ready and available the longest are the first to be used. FIFO, for example, is appropriate when goods are perishable. FIFO is the opposite of Last In First Out (LIFO).
The percentage of finished products that meet all quality-related specifications at a final test point without being scrapped, rerun or reworked. In process industries, yield often is calculated as the percentage of output that meets target-grade specifications (this excludes output which is off-grade, even when it is still saleable).
The FMS concept prioritizes automated manufacturing equipment and/or cross-trained work teams that can make a variety of product or part configurations. From an equipment standpoint, an FMS is typically a group of computer-based machine tools with integrated material handling that is able to produce a family of similar parts.
A flight simulator is a system whose purpose is to copy, or to simulate, the experience of flying an aircraft, but without leaving the ground. The different types of flight simulator range from video games up to full-size cockpit replicas mounted on computer controlled actuators. Flight simulators are extensively used for aerospace design and development and in aviation for the training of pilots and other flight deck crew in both civil and military aircraft.
A Fluid Flow Sensor measures the rate or amount of liquid, gas or vapor which goes past it. The same name is sometimes used for sensors which measure the flow rate of powdered solids.
Fly by wire is a method used to connect an aircraft pilot’s control inputs to the control surfaces and equipment of the aircraft. In a fly by wire system, control movements by the pilot are measured by sensors. The sensor readings are used by software running on flight control computers to calculate optimum adjustments to the aircraft’s control surfaces and systems. The flight control computers signal actuators to make the calculated changes.
A company recognised by the US government as one allowed to bid for US defense contracts, despite being foreign owned. To achieve this status, such US subsidiaries are generally incorporated in the US and have a local board of directors which is predominately composed of US citizens. An example is BAESystems North America, headquartered in Maryland.
The general shape of a unit or object.
A free trade agreement is a contract between participant countries to eliminate restrictions such as tariffs, quotas, and trade taxes. The goal is to encourage imports and exports across their borders.
A fuel cell consumes fuel in order to generate electricity. A hydrogen fuel cell uses hydrogen as fuel and oxygen (usually from air) as oxidant. Fuel cells are very common as power sources in remote locations, such as spacecraft, remote weather stations and in certain military applications.
Gas hydrate is a widespread combination of water and natural gases (often methane). It can be a source of problems for oil and gas drilling and production. It has potential as an energy reserve and as a basis for carbon sequestration. It is known to occur on every continent, and in large quantities in marine sediments. Its appearance and properties are like ice. There can be a layer several hundred meters thick just below the sea floor near permafrost in the Arctic. The worldwide amounts of carbon bound in gas hydrates is conservatively estimated to total twice the amount of carbon to be found in all known fossil fuels on Earth.
The General Agreement on Tariffs and Trade (GATT) covers international trade in goods. The workings of the GATT agreement are the responsibility of the Council for Trade in Goods (Goods Council) which is made up of representatives from all WTO member countries. The Goods Council has 10 committees dealing with specific subjects (such as agriculture, market access, subsidies, anti-dumping measures and so on). Again, these committees consist of all member countries.
Also known as the ‘Millennial Generation’, Generation Y is a term for the demographic group born between 1980 and the early 2000s (though there are no precise dates).
Generics is a term for generic drugs. A generic drug is a pharmaceutical substance which contains an active ingredient which was originally protected by chemical patents. In most cases, generics are brought to market to replace a successful, branded drug after its patent protections expire. The availability of a generic alternative usually causes significant reduction in the price of the drug.
A GIS integrates hardware, software, and data for capturing, managing, analyzing, and displaying all forms of geographically referenced information. GIS data is used as the basis for location based services such as routing information.
The Global Data Synchronisation Network (GDSN) was created as an industry endorsed initiative to overcome product data inaccuracies and increase efficiencies among trading partners and their supply chains. GDSN is a network of certified data pools that enable product information to be captured and exchanged in a secure environment conforming to global standards. The standards body that governs the GDSN is GS1
A GPS receiver uses signals from a set of US satellites to calculate its geographic location, and establish the reference time. GPS receivers are built into a wide variety of devices, including cell phones, navigation devices, vehicle tracking systems. Similar global systems have been established by the EU (Galileo), China (BeiDou) and Russia (Glonass), and regional systems by Japan (QZSS) and India (IRNSS); however GPS is more widely used.
Globalization is a widely used term. When used in an economic context, it refers to the reduction and removal of barriers between national borders in order to facilitate the flow of goods, capital, services and labour. An example is harmonization of standards). When used in relation to manufacturing and supply chain, it often refers to outsourcing and offshoring production to low cost regions.
Greenhouse gases are gases in the atmosphere that absorb and emit radiation within the thermal infrared range. This process is the fundamental cause of the greenhouse effect. Common greenhouse gases in the Earth’s atmosphere include water vapour, carbon dioxide, methane, nitrous oxide, ozone, and chlorofluorocarbons.
Used in the oil and gas sector, GPW is the value of all refined products which are produced from a barrel (or sometimes tonne) of crude oil. GPW can be used to assess historic performance. It can also be used to help plan oil refinery operations, by reconfiguring processing to maximize estimated GPW.
HACCP stands for Hazard Analysis and Critical Control Points, which is a way of managing food safety standards. HACCP starts by scoping the food handling operations, then lists the hazards capable of causing injury or illness if not controlled. Next, critical control points are identified; these are steps at which control can be applied and is required to reduce a hazard to an acceptable level. This structure enables food safety management across production, procurement and handling, manufacturing, distribution and consumption of the finished product.
HVAC stands for Heating, Ventilating and Air Conditioning. This is one of many specialist areas in the construction industry.
Although the exact definition may vary slightly from region to region, heavy commercial vehicles tend are those trucks, vans and pickups with an allowed gross vehicle weight (GVW) above a certain weight. For example, to meet this description in Europe the maximum total weight of the vehicle and its full permitted load will exceed 3.5 tonnes.
Horizontal Integration involves bringing together business activities which support the same level of the value chain in similar or different industries. This can be achieved by internal expansion or acquisition. Horizontal integration can create opportunities for economies of scale and cost savings from rationalization.
A transport hub or transport interchange is a central location where passengers and cargo are exchanged across one or more modes of transport. In air transport, the term hub-to-hub is used to describe travel between large airports using large aircraft. Hub to hub capacity must be complemented with hub and spoke – or ‘regional’ services – to link origins and destinations to the hubs.
Hybrid manufacturing is a combination of continuous and discrete manufacturing. An example is beverage manufacturing where a continuous process for production of the liquid is linked to a bottling or canning line to package the liquid for distribution and sale.
Hydrochloric Acid is a solution of hydrogen chloride mixed with water. This has many commercial applications and is used as a chemical reagent (to cause specific chemical reactions). A major application is use as a cleaning or dissolving agent for industrial processes. It is also used in domestic household cleansers.
In a production environment, identification describes the process of labelling goods for put-away, including their intended storage location. RFID tags can be used to help automate later retrieval.
This is the international standard for electrical, electronic and programmable electronic safety related systems. It sets out the requirements for ensuring that systems are designed, implemented, operated and maintained to provide the required safety integrity level.
In-licensing means obtaining a license to use some other party’s technology/IP. Generally this involves payment of a license fee usually an up-front payment plus a monthly/quarterly/yearly license fee.
Inorganics are chemicals whose molecules do not contain a carbon-hydrogen bond. This means there are some carbon compounds which are inorganic, for example, carbon dioxide, also all carbonates such as calcium carbonate. But most carbon compounds for example proteins, carbohydrates, sugars, vitamins, plastics, and alcohols contain the carbon-hydrogen bond, so are considered ‘organic’.
Instrumentation is a general term to describe the sensors, devices, interconnections, and systems used to observe, measure, and communicate what is happening or what has happened in some physical environment. Control systems use data from instrumentation to choose future actions.
An integrated circuit (also known as IC, microcircuit, microchip, silicon chip, or chip) is a miniaturized electronic circuit manufactured in a thin layer of semiconductor material. The technology to make electronic circuits this way was developed in the 1960s. Since then, the capacity and speed of these circuits has grown enormously, and yet the cost and physical size has gone down. This combination has been the driving force behind dramatic growth of the computer and communications industries.
An integrated defense system typically combines two or more of the following: weapons and aircraft, intelligence and surveillance systems, and communications and IT. These systems are usually provided by large scale prime contractors, such as Boeing, Lockheed Martin or BAE Systems.
IDEF is a family of modelling languages used in systems and software engineering. The family covers a range of uses from function modelling to information, simulation, object-oriented analysis and design and knowledge acquisition.
Intellectual property refers to creations of the mind. Intellectual property regulations seek to protect the value of these creations. There are two main parts to intellectual property regulations: Patents address inventions, trademarks, industrial designs, and geographic indications of source. Copyright addresses literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures.
Intercontinental Exchange ICE) is a company which operates in the arena of regulated global futures exchanges and over-the-counter (OTC) markets for agricultural, energy, equity index and currency contracts, as well as credit derivatives. It provides clearing, market data and risk management services. It is one of the largest futures and options exchanges in the world. It operates the former International Petroleum Exchange as ICE Futures.
Intermodalism is the coordinated use of multiple modes of transport (i.e. road, rail, ship, air) to move containerized freight from source to destination.
The International Energy Agency (IEA) is an intergovernmental organization which acts as energy policy advisor to 28 countries including the US, the UK, Canada, S Korea, Japan Australia, New Zealand and many European countries. It structures its role into three areas: energy security, economic development and environmental protection.
The International Petroleum Exchange is now known as ICE Futures by virtue of its acquisition in 2001 by ICE. It was one of the world’s largest futures and options exchanges.
An international (or integrated) oil or gas company spans exploration and production, transportation, refining, and marketing. This is essentially everything – starting with exploration, leading to the point of use of oil and gas.
The Internet of Things (IoT) is (1) the set of all devices (but excluding traditional computer systems) which are connected to the Internet (2) the technology which enables advanced interconnectivity of ‘smart’ devices to the Internet and each other. The scope of the IOT ranges from fridges that send messages to your smartphone when you run out of milk, to factory machines that can ‘talk’ to each other, follow instructions from computer systems, and run entire production process with virtually no human input.
An Internet Protocol address (IP address) identifies a device connected to the Internet. There are two formats – the widely used version 4 (IPv4) and the newer version 6 (IPv6). Both are numerical labels which are used by network connection electronics to enable communication between devices, even though many devices are sharing the same cables and other communication links.
Interoperability is the capability of two or more systems (especially computer systems) to work together.
An intranet is a computer network for use only by people and systems within an organization.
Inventory is the aggregate of all the goods and materials used and held by a company to make, or incorporate into, its products. The main types of inventory are raw-materials inventory, work-in-process inventory, and finished-goods inventory.
Inventory carrying cost is the cost of owning inventory and having it available. Costs depend on the inventory’s value, and also on storage space, obsolescence, spoilage, taxes and insurance. Higher inventory levels drive higher inventory carrying costs, but can also improve customer service (product available to ship today) and reduce risk of disruption due to events such as supplier delays or the breakdown of critical machine.
This measures the average amount of inventory on hand, expressed as how long it would take to use it all. The assumption is no more inventory comes in, and production usage will be average. The volatility of supply and demand determine what is required. Companies with stable demand and reliable suppliers can operate with very low inventory days of supply.
The business metric of inventory turns measures how quickly a business sells through its inventory. It is calculated by dividing the Cost of Goods Sold by the average inventory level for a chosen time period. A high number usually implies sales are strong and the business is not holding excessive inventory. (see Cost of Goods Sold)
ISO 14000 is a set of standards known as the Environment Management System, produced by ISO (the International Organization for Standardization which is often called the International Standards Organization). ISO 14000 standards ask companies to treat environment management like an ongoing project, subject to its own processes, monitoring and IT support. The aim is to help companies limit the environmental damage caused by their activities.
ISO 9000 is a set of standards for quality-process audit. ISO 9000 is produced by ISO (the International Organization for Standardization which is often called the International Standards Organization). Compliance with ISO 9000 enables manufacturing plants to receive internationally recognized certification to confirm that stated quality processes are adhered to in practice.
A jig is a device that both holds an item in place and guides a machine tool such as a drill.
(1) In logistics, a Joint Operating Model is the logical extension of the 4PL, with tight-knit integration between the service provider, the customer, and the customer’s supply chain. (2) In oil and gas, the JOM is defined by a Joint Operating Agreement, a common basis for exploration and production companies to cooperate.
A joint venture is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. The venture can be for one specific project only, or for a continuing business relationship.
A methodology where inventory movements are controlled by real-time demand, rather than stacking materials up in piles according to a forecast. JIT sees materials, parts, sub-assemblies, and support items delivered to the production line at the exact moment they are needed, and neither sooner nor later. This can control costs by reducing inventory, and also by encouraging production only when needed, not simply because a production machine is idle.
Kaizen is the business concept of continuous improvement. The term originated in Japan (the word Kaizen means improvement). It became widely known globally when Toyota publicized its production philosophy and management methods, which include systematic, organized improvement of processes by those who operate them, using straightforward methods of analysis.
Kanban, which means signboard in Japanese, is workflow management system. The most widely used implementation is Kanban cards. A Kanban card is a colored card which is attached to the container used to move the output of one process to the next process. When the next process consumes that material, the kanban is returned to the producer process, authorizing the producer process to make the next container load of output. The aim is make sure each part of the factory stocks only the inventory that is needed no more, no less. This eliminates ‘stock outs’ and reduces inventory carrying costs.
KPIs are metrics tracked by an organization to help it evaluate how successful it is, and to help it define and achieve its long-term goals. KPIs can cover both financial and non-financial aspects, including estimation of difficult-to-measure activities like leadership development, service, and customer satisfaction, as well as more measurable activities such as production efficiency and energy use.
LIMS are computer systems which help manage activity in laboratory, including the flow of samples, connectivity to automated instruments, the data related to samples, and results reporting. LIMS can be used both in laboratories closely connected to production, for example regular sample testing in food production, and also in more independent laboratory environments.
In aviation, the landing gear or undercarriage is the structure (usually including wheels equipped with shock absorbers) that supports an aircraft on the ground and allows it to taxi.
LIFO is a strategy used in material handling and storage. In the LIFO model, the most recently stored items in a location are the first taken out. LIFO can be efficient and practical in transportation (trucks, rail cars, containers), and can be used in storage if goods do not deteriorate over time, and it saves time or cost to store and retrieve an item from one side of a storage location. LIFO is the opposite of First In First Out (FIFO).
A launch system is a vehicle designed to carry a payload into space. The vehicle typically consists of several rocket stages, discarded one by one as the vehicle gains altitude and speed. The earliest launch systems were treated as expendable, but from the time of the space shuttle (first launched in 1981), there has been interest and some development of launch systems which can be reused.
LLP (sometimes also referred to as a 4PL or Fourth Party Logistics Provider) is an integrator that assembles the resources, capabilities, and technology of its own organization and other organizations to design and deliver supply chain solutions. A typical LLP uses a 3PL to supply service to customers, owning only computer systems and intellectual capital.
Lead time is the period between a customer’s order and delivery of the final product. A small order of a pre-existing item may only have a few hours lead time, but a larger order of custom-made parts may have a lead time of weeks, months or even longer. Lead time may change according to seasons or holidays or overall demand for the product.
Lean Manufacturing is a technology and business process-driven strategy for reducing unnecessary activity in the manufacturing environment. The concept involves deliberate, continuous and if possible systematic identification and elimination of unnecessary activities and inefficiencies. These are referred to as ‘wastes’ and include: poor job scheduling (leaving staff waiting around between job), performing too much work on components (more than the customer needs) and unnecessary movement of inventory around the facility (wasting time and resources).
Less than Truck Load, also known as Less-Than-Load, is a type of shipping service for small to medium quantities of freight. LTL providers fill the gap between parcel services and large-scale transportation providers. LTL companies combine loads from several different companies onto one truck, and often operate a hub-and-spoke model to reduce shipping costs.
Although the exact definition may vary slightly from region to region, light commercial vehicles are those trucks, vans and pickups which have a gross vehicle weight (GVW) below a certain weight. For example, to meet this description in Europe the maximum total weight of the vehicle and its load must not exceed 3.5 tonnes.
LNG is a clear, colorless liquid made by cooling natural gas to about -163 degrees centigrade. Natural gas is composed mainly of methane and ethane, and can be used as a fuel. It is extracted from oil and gas wells, and is also found in wetlands and from anthropogenic sources that include landfills and agricultural operations. When cooled and liquefied, it takes up only a tiny fraction of the volume of the gaseous form, so can be transported efficiently.
Logistics is the management of the flow of resources from source to destination to meet the needs of in-house operations, customers, and consumers. Logistics is usually seen as part of supply chain management, and is often separated into inbound logistics (obtaining supplies) and outbound logistics (distribution of products).
Logistics providers are third parties who provide a range of services to manufacturers, wholesalers and retailers that includes transport, storage and distribution.
Logistics Service Providers are companies that provide transportation and/or storage capabilities and sometimes associated services such as freight forwarding. When Logistics Service Providers expand their offer to include broader supply chain responsibility, they become known as 3PL or 4PL providers.
A lost time accident is an incident that has resulted in an employee needing to miss work due to sustaining an injury while working.
The formula for calculating LTIR is:
(LTI / Total # of Hours in Measured Period) x 200,000
Divide the total amount of lost time injuries in a specific period by the total number of hours worked in that same period. Then multiple by 200,000 – this represents 100 employees working a 40 hour week for 50 weeks per year (this is the generally accepted baseline of LTI established by OSHA).
The percentage of time that production equipment is available for use, divided by the maximum time it would be available if there were no downtime for repair or unplanned maintenance.
A Machine Tool is a specialist type of production equipment. It can cut, bend, drill, press or stretch metal and other materials in a factory environment. The earliest machine tools were controlled by hand – an operator used wheels and levers to control the position of the workpiece and the movement of the toolhead (which can be a cutter or other device). Modern machine tools are computer-controlled, and can take instructions about what dimensions or geometries are required from computer-aided design systems. This automation creates high accuracy levels and speed.
Machine Vision uses technology similar to a cell-phone camera to gather images which are used by a computer system to achieve a vision-like function. The range of functions is constantly growing, and includes guidance for robotic or automated equipment; and visual inspection for quality control.
An MMS is a software system for handling maintenance scheduling, maintenance work orders, as well as associated inventory, purchasing, accounting, and human-resources functions. In some industries, particularly process-production, manufacturers use MMS to optimize the use of capital-intensive equipment, by finding maintenance schedules which minimize disruption to production. Some MMS have their own financial and purchasing functions. In other cases, integration with ERP is used to provide these functions.
MRO services provide after-sale engineering support, replacement parts and mid-life product upgrades. Companies may maintain MRO organizations for their own in-house equipment, and/or to offer maintenance services for equipment sold to customers. Computer systems known as MRO support these activities.
(MTO / BTO / ATO)
MTO, BTO and ATO describe slight variations on the same manufacturing concept – make a product after receiving a confirmed order. This is in contrast to the make-to-stock concept, in which production is scheduled to achieve target stock levels. MTO/BTO/ATO is most common for products which are customized, but may also be important to reduce waste or handle fluctuating demand. In general, customer lead times are higher for MTO/BTO/ATO compared to make to stock.
MTS production involves building finished product to a forecast. The forecast is based on historical sales and expected changes in demand. Finished products are stored in warehouse inventory, and can be shipped as soon as a customer order is received.
US GAAP accounting rules require external financial statements to assign all manufacturing costs to units produced. The resulting unit costs are used for both inventory valuation, and to calculate the cost of goods sold. Manufacturing costs are the costs of direct materials, plus the cost of employees directly involved in production, plus manufacturing overhead (such as depreciation of equipment, factory rent and utility bills, maintenance and repair costs, costs of supervisory staff). For internal management accounts, production costs are usually all costs incurred in the manufacturing facilities, and are sometimes also called manufacturing costs.
The manufacturing cycle time assumes an order exists for a product and measures the amount of time from the start of production until the product is shipped. The cycle time includes actual time for production processing, inspection, material movement and queuing times. Only processing time adds value. The others are non value-add activities that can be reduced or eliminated in continuous improvement, Lean and Six Sigma programs.
An MES is an information system which helps convert production plans for the whole plant into coordinated and tracked operations for each individual production process. MES encompasses such functions as planning and scheduling, production tracking and monitoring, equipment control, maintaining product histories (verifying and recording activities at each stage of production), and quality management. The growing scope of MES is recognized in development of its name (1) to Manufacturing Enterprise System (quite rare) and (2) to MES/MOM, where the MOM refers to the whole scope of Manufacturing Operations Management (quite common).
The first widely used production planning software had the same acronym but with a different meaning. The original MRP meant material requirements planning. This takes target dates for finished products, and works backwards to determine a production plan and raw material purchasing plan. MRP II (spoken as “”MRP-two””) extended MRP by handling at least financial and forecast data, and sometimes engineering and human resources. MRP II translates forecasts into master production schedules; maintains bills of material (lists of product components); creates work orders for each step in the production routing; tracks inventory levels; coordinates materials purchases with production requirements; and generates reports. The progression from MRP to MRP II continued, and the next generation gained the name ERP (Enterprise Resource Planning).
Market Capitalization is one measure of the value of a company. It is calculated by multiplying the current share price by the number of shares.
Market share is calculated as a company’s sales in a market segment expressed as a percentage of the total sales in that market segment. The easiest way to define a market segment is to list a company’s competitors, and use sales figures for these competitors to estimate the total sales into the market segment. The choice and definition of the target market segment is key to obtaining meaningful market share figures. Investors monitor changes in market share, particularly in mature and stable market segments, as an indicator of a company’s competitiveness.
An MPS is a plan which defines which products must be produced in a given time period. MPS generally operates an aggregate level (not too much detail), and aims to meet requirements at a minimum cost. To do this, it handles people costs for regular shifts and overtime, how these relate to production capacity, the possibility of using subcontractors, forecast demand, and inventory costs.
MRP was the first widely used production planning software and focused on materials (not production capacity or cost). MRP takes target dates for finished products, and works backwards to determine a production plan and raw material purchasing plan. The MRP process expands each bill of material, adjusts for inventory quantities on hand or on order, and offsets the net requirements by the appropriate lead times. The result is a list of recommendations to release replenishment orders (purchase orders) for materials.
In manufacturing and production, the word ‘materials’ is used to describe a manufactured product in all states of transformation, including raw materials. ‘Handling’ includes both movement and storage. Materials handling means the techniques and equipment used to move and store materials within and between manufacturing facilities and storage facilities such as warehouses.
MTBF is a mathematical calculation created by design engineers for new products that predicts the average expected amount of time a piece of equipment is in operational condition.
Mean Time To Repair represents the average time taken to put a defective component or system back in working order. It is a measure of the maintainability of a system and predicts the average amount of time required to get the system to work again in case of a failure.
Consumer industries often recognize the importance of the customer perspective, and may use alternative names and definitions for this ‘time to fix’ parameter, for example, utility companies may refer to the out-of-service restoration interval.
MCAE software is used to analyze and simulate mechanical parts, assemblies and products. Early MCAE systems were limited by the technical complexity of software, and the computer capacity required. So they focused on one type of analysis (such as stress, kinematics, vibration, failure, thermal, fluid etc.) and also imposed part complexity limits. However, these limitations are being removed, and, as more products combine mechanical parts with electronic and software controls, and also network connectivity, there is increasing integration of MCAE with other types of analysis and simulation.
MEP is an industry classification used extensively in the construction sector which often puts these three areas of facility design and maintenance into the single MEP category.
Mercosur is the name of a trading zone set up in 1991 between Argentina, Brazil, Paraguay, and Uruguay. In 2012, Venezuela also joined, but its membership was suspended in 2017.
Merge in transit allows a customer to order from multiple suppliers, and receive a single delivery of the products as ordered. This service is often offered by logistics providers. Merge in transit requires streams of goods from multiple sources to be matched at points between source and destination to form sets to match customer orders. It is used, for example, for automotive assemblies, and also in retail.
M&A is the name given to the business activity of buying and selling companies and parts of companies. M&A departments in companies handle strategy, corporate finance and management to buy, sell and combine businesses which can aid, finance, or help a company to grow. Growth without M&A is called ‘organic growth’.
Methanol is a liquid chemical used in the production of plastics, paints, and cosmetics. It can also be used as a fuel in automotive, electricity and marine applications. It is sometimes known as wood alcohol due to an early production method. Now, it is usually manufactured industrially by combining hydrogen and carbon monoxide.
A metric is a measurable characteristic of a business activity. Metrics can quantify both physical characteristics (for example, the number or weight or volume of products made today) and less tangible characteristics (for example, customer satisfaction). Metrics can be used individually (for example, machine set-up time) and multiple metrics can be combined to make a single value (for example profit per employee). Management teams select and sometimes develop metrics to use as key performance indicators (KPIs) to help monitor, analyze and improve the processes in their business.
The metric system is a consistent set of units to measure physical quantities. It is based on meters (for length), kilograms (for mass), and seconds (for time).
Midstream is an Oil & Gas industry term used to describe the ‘gathering’ of the raw oil or gas from thousands of different wells into a central hub, and the eventual transportation of the raw materials to the refinery for processing.
Both MMBTU and MMBtu are abbreviations for ‘Million British Thermal Units’. One British Thermal Unit (BTU and Btu) is the amount of heat required to increase the temperature of one pound of water by one degree Fahrenheit. The BTU and the MMBTU are recognized as units of energy in the United States system of customary units. The BTU is often used to quantify the cooling capacity of an air conditioning system. A wooden kitchen match produces approximately 1 BTU, and the cooling capacity of household air conditioners is typically between 5,000 and 15,000 BTU per hour.
Mixed Mode Manufacturing describes a manufacturing facility which combines more than one type of manufacturing. The types can be discrete and process, but the term also applies to multiple types within discrete (for example, engineer to order and continuous flow); and to multiple types within a process environment (continuous and batch). Production scheduling, product traceability, and labelling may need specialist software in a mixed mode manufacturing environment.
Modular design describes components or other independent units which fit together using standard interfaces. This simplifies creation of alternative configurations to extend or customize a range of products. Examples range from buildings to farm machinery to automobiles.
The term monopoly is used to describe a market in which a single firm controls the vast majority of the market for a given product or service. A monopoly is characterized by a lack of competition (so reduces customer choice) and this can lead to higher prices and sub-standard goods or services.
Moore’s Law estimates the growth of component density on an integrated circuit. It was proposed in 1965 by Gordon Moore, a semiconductor pioneer. In 1975, Moore refined the estimate to a doubling – that is, twice as many components – every two years. Doubling every two years was a good predictor between about 1970 and 2015. Since about 2015, advances in performance, cost and miniaturization have depended less on component density per integrated circuit, and more on other techniques. Even so, the improvement is often still referred to as Moore’s Law.
Nanotechnology is science, engineering or technology at the nanoscale, which is about 1 to 100 nanometers. It originated with the goal of being able to manipulate one atom or molecule at a time. Semiconductor manufacturing processes now routinely operate in this range. Nanotechnology has potential applications in healthcare, personal care, biomaterials, medicine, electronics, chemicals and areas yet to be explored. An example is the improvement of solar cell efficiency using ‘nanopillars’ – a nanoscale material type which can be used for bulk applications.
NCO is a term used in military activity. It describes the provision of robustly networked, collaborative armed forces capabilities. NCO covers the complete command, control and communication infrastructure. The objective is to enable soldiers, commanders and equipment to have immediate secure controlled access to every relevant asset. Real-time information sharing across surveillance systems, and land, sea & air weapons, integrated with command-and-control IT systems is needed to implement NCO.
A type of organization that markets its products through a multi-level network marketing structure. This usually means consumers selling to consumers, but success often depends on identification of local and regional managers, together with central control of promotional materials and initiatives. This has proven to be a successful business strategy for companies selling personal care, vitamins, weight loss and household products.
A confidentiality or non-disclosure agreement limits the use of information provided by a discloser to a recipient. It is an important way to protect confidential information. As the value of the confidential information increases, so does the relative complexity of the agreement. An NDA is a document signed by both the discloser and the recipient.
Non-Productive Time (NPT) is the time when drilling operations are interrupted for whatever reason, for example unpredictable weather or technical issues, and is a key measure of cost-effective and successful drilling operations.
NAFTA is an abbreviation for North American Free Trade Agreement. This agreement establishes the rules for tariff- and quota-free trade between Mexico, Canada and the United States.
A numerical control system enables control of the motion and action of a machine tool or similar equipment using coded instructions. These coded instructions are often referred to as ‘tapes’, because the earliest NC systems read their instructions from holes punched in paper tapes. Now, NC systems can receive instructions through connected computer networks.
Nutraceuticals are foodstuffs which provide health benefits in addition to their basic nutritional value. These may include fortified foods as well as dietary supplements that can be sold in capsules, tablets or powders.
On Time Delivery Rate is the percentage of products ordered which are received by customers on or before the specified time or date.
An online order entry system is a computer bases system which eliminates paper from the order-taking process. It also enables distributors, field-sales representatives, and even customers to place orders directly, over the Internet or a corporate intranet, without intervention by an inside salesperson. The software often includes a product configurator and pricing; and may offer delivery scheduling.
Operating costs, also referred to as operating expenses, operational costs and OPEX, are the costs required for the day-to-day running and administration of a business. This excludes capital expenditure (CAPEX), but includes costs such as payroll and other employee benefits, sales commissions, office supplies, advertising costs, machinery depreciation, rent, utility bills, and cost of raw materials.
(1) optochemicals are used in the development and manufacturing of products for treatment of optical devices (2) optochemicals are all chemicals associated with sight and vision (3) optochemicals produce or react to light and can be used as sensors and to control chemical reactions.
Also known as customer order fill rate and demand satisfaction rate, the order fill rate is an inventory management metric. It is the number of customer orders which are fulfilled immediately (for example, from available stock), expressed as a percentage of the total number of customer orders. It can be measured over any chosen time period.
(1) As a general business metric, for example in an engineer to order environment, the order fulfillment cost is the overall cost of meeting the customer’s order. (2) To compare alternative logistics providers, a manufacturer will obtain estimates for each provider’s order fulfillment cost. This is the total fee paid to a provider for product storage together with costs to pick, pack and ship an order.
Order fulfillment lead time is the elapsed time from the receipt of a customer order until the finished product is received by the customer.
The time taken from the initial order for goods and services, to the moment the company receives payment from the customer. This metric is used mainly by manufacturers with a traditional process flow in which they must pay for materials and make/deliver a product before they can send an invoice. However, in some environments, this metric is widely used, for example, consumer online and in-store sales. In these environments, the consumer customer pays when or even before goods are made or delivered. Many retail cash flow models assume they can be paid before they have to pay suppliers.
The time from when a specific customer order is received by the plant until product is delivered to customer, including any warehousing, cross-docking and transportation time.
The time from when a specific order is released to the shop floor until that order is shipped to the customer, including any storage time in finished goods inventory.
OPEC is an international organization of countries which export large quantities of oil. OPEC acts as a cartel, coordinating its members’ decisions on oil production and pricing. This is not illegal because, as countries, its members benefit from the international law doctrine of state immunity. OPEC’s decisions used to be the single most important factor in international oil markets. However, its influence declined, partly because US oil and gas production more than doubled between 2008 and 2019 to exceed those of OPEC leader and largest producer, Saudi Arabia.
An OEM is the organization responsible for the design, manufacture, sale and in some cases in-service support and recycling of a finished product. Boeing and Airbus are examples of OEMs in the aerospace sector; BMW and Ford are automotive examples. OEMs purchase components and sub-assemblies for use in the final product, and may subcontract substantial amounts of design and manufacturing (for example, Apple is an OEM which performs very little manufacturing of Apple products). OEMs oversee the product lifecycle from design to shipment for quality assurance. Sometimes, they also manage the lifecycle until end of life and provide tracking of equipment from as-designed, as-built, as-changed, as-shipped and as-serviced.
An oscilloscope is a piece of equipment used to measure electrical signals. After connecting it to the signal to be measured, an oscilloscope displays the characteristics of the signal on a screen similar to a television screen.
Out licensing occurs when a company offers their technology/IP to another company for a license fee.
An outage is a planned or unplanned interruption to a service, or availability of a resource. In utilities, this means an interruption to the electricity, gas or water supply. In production, a machine breakdown is an unplanned outage; whereas routine maintenance of a machine is a planned outage.
Outsourcing means subcontracting a process, such as product design or manufacturing, to a third-party company. The management concept of ‘focus on core competence’ has encouraged outsourcing everything which is not core competence. The ability to make use of lower cost resources (for example, land and labour in lower cost countries) has also been a driver of outsourcing.
OTA update is the use of a network connection to update the software of a remote device. Benefits include fault-fixing and upgrades. Typical examples are games consoles and smart phones.
OEE is usually interpreted as Overall Equipment Effectiveness. It measures the percentage of manufacturing time during which a manufacturing asset is truly productive. To score 100%, this means no down time, no parts made which do not conform to specification, and a production rate which is the full potential of the asset. OEE is also expanded to Overall Equipment Efficiency – specialists will say this is Overall Equipment Effectiveness achieved with minimum resources, but in many environments the two versions are used interchangeably.
OFE is OEE (Overall Equipment Effectiveness) but applied to a whole production plant or factory, comparing theoretical output with actual output. To calculate OFE, an intermediate metric Overall Throughput Effectiveness (OTE) is needed to handle the many possible permutations of material flow through a factory.
Overcapacity is a situation in which a production system, or even a whole industry, can make more than is needed. Overcapacity causes problems for all producers. However, most management teams feel it is their competitors who own the excess production capacity.
PMA is an aviation industry term used to describe official approval for supplying replacement aircraft parts. PMA approvals are given by national authorities, like the US Federal Aviation Administration (FAA), and give 3rd party manufacturers clearance to produce and sell these parts for installation on certificated aircraft.
Perfect order fulfillment measures the percentage of orders where everything is shipped exactly as ordered, and arrives to the customer on the promised date.
A petrochemical is the term given to any chemical derived from crude oil, crude oil components, or natural gas, but usually excludes fuels. These chemicals have made an enormous impact on the way we live today and appear in things as wide-ranging as: candles, medical equipment, vitamins, dyes and inks, consumer electronics, plastics, food additives and packaging, acrylic paints and detergents.
Phase Gates appear on project plans. They define an intermediate target, and the process to check the target is achieved. They are used in project management to establish that a group of project activities has been completed to the satisfaction of the project leader or phase gate owner, before proceeding on the next phase. Phase gates usually have two assessed criteria: a) have all required deliverables been achieved and b) has formal approval and an action plan been agreed for the next phase.
A Physiochemical is a chemical which is active or of interest to both chemistry and physiology (the study of life, specifically, how cells, tissues, and organisms function).
Picking is the process of retrieving goods from a storage location.
A P&ID is a schematic drawing which documents connectivity of piping, equipment, instruments and controls. Widely used in process, power and marine industries, a modern P&ID acts as the user interface to a database which defines the names and logical relationships between the equipment and pipes used in each process, and the components that sense, control and display the status of the network of processes and operations.
Point to Point means a direct connection between two locations. (1) In transportation, especially aviation, this refers to a system where a vehicle travels directly from its start point to its destination. This is in contrast to the use of hubs. (2) In electronic communications, point to point refers to a permanent communication link between two locations. In telecoms, the abbreviation P2P can mean either point to point, or peer to peer.
The petrochemical PET is a thermoplastic polymer resin used to make fibers for textiles, plastic containers and other materials. Of these, fiber production accounts for about 60% of production, and bottles about 30%. The polymer has a formula (C10H8O4) and is solid at room temperature.
The plastics used in everything from food packaging to children’s toys are polymers, but the term encompasses a much wider group of materials than that. Other polymers include polystyrene, and the thickeners in shampoo which give them their gel-like consistency. The technical definition of polymer also includes natural materials such as wool, silk, natural rubber, and cellulose.
POSC-Caesar Association is a non-profit global member organization targeting the development of open specifications to be used as standards for enabling the interoperability of data, software and related matters. The Association was responsible for the initiation of ISO 15926, Integration of life-cycle data for process plants including oil and gas production facilities
Postponement involves delaying the final assembly, configuration, and/or packaging of a product. The goal is to delay incurring this cost, and committing use of materials to a specific configuration to as late as possible in the production process. This will generally be after an order has been received, and often just before a product ships to the customer.
The Powertrain is the group of components that generate power in motor vehicles and enable movement. For manufacturers and maintainers this includes the engine, transmission, suspension, exhaust system and the wheels. A powertrain warranty will usually cover some not all of these components.
Predictive Maintenance is an approach to equipment service and repair which seeks to prevent unscheduled downtime, and avoid costs of unnecessary maintenance. The approach involves collection of equipment data, analysis of this data to predict future maintenance needs, then planning maintenance in advance of any loss of performance. Predictive maintenance systems typically measure parameters such as vibration, heat, pressure, noise, and lubricant condition. In conjunction with computerized maintenance management systems (CMMS), predictive maintenance enables repair-work orders to be released automatically, repair-parts inventories checked, and routine maintenance scheduled.
Air or other expedited shipment method that increases the standard cost of filling a customer order.
Maintenance activities, often performed by machine operators at regularly scheduled intervals, to keep equipment in good working condition.
The Price – Earnings (P/E) ratio expresses a company’s share price as a multiple of its Earnings Per Share (EPS). P/E ratios are used by investors and analysts to compare relative value of shares across several companies or sectors.
The prime contractor is the contractor possessing a contract with the owner of a project, and has the full responsibility for its completion. A prime contractor undertakes to perform a complete contract, and may employ (and manage) one or more subcontractors to carry out specific parts of the contract.
A PCB is a thin plate which provides mounting points for electronic components, and electrical connectivity between them.
Private Label, also called own label goods, are CPG products in a retailer’s own brand livery. Originally these were lower cost alternatives to familiar market leading branded products. As retailers have pursued and developed their Private Label strategies this has changed and many large retailers also have premium private label products.
Process Capability is a specification of facilities within a production plant, with special emphasis on accuracy and consistency of manufacturing processes. In other words, how much product output falls within acceptable tolerances? In process industries, characteristics might be acidity, viscosity, temperature. In discrete industries perhaps shape, size, surface finish are key. In all industries, processing time can be significant.
Process Control is the monitoring and control of a process. The term generally excludes direct manual control, and describes use of an instrument or computer programmed to respond appropriately to feedback, and implement operator commands.
In process manufacturing, input materials or products or both are generally measured by weight or volume because they are agricultural products, powders, liquids or gases which can’t be counted. There are two main categories of process manufacturing. (1) Continuous production processes involve non-stop production of chemicals, petrochemicals, and other high volume standard product that seldom varies in formulation. (2) Batch production processes in which materials are divided into batches which undergo operations such as heating, mixing, and chemical reactions to produce products such as food, beverages, and paint.
(1) In management consultancy, business processes are the groups of activities which govern how resources are used to create products and services that meet the needs of customers and markets. Process Reengineering aims to improve business performance by analysis and redesign of an organization’s business processes. (2) In process manufacturing, rework of a production process is called process reengineering.
A processor or central processing unit (CPU) is an electronic circuit that can execute computer programs.
A product configurator enables selection of options for a product. A typical example is the way computer manufacturers allow online configuration of a PC – selecting memory, disk size etc. Product configurators normally check that the selections are valid. Advanced configurators allow the user to specify only some options, then optimise the remaining options for lowest cost or earliest delivery etc.
PDES describes a set of international standards to support the establishment of digital enterprises, through enabling model-based engineering, manufacturing, and sustainability across an extended enterprise. The standards are developed, tested and published by an industry/government consortium called PDES Inc.
PDM is a business process which ensures version, access and integrity control over all product information across the whole product lifecycle. Product Lifecycle Management (PLM) systems are often used to support PDM, handling specification data, CAD files, simulation results, manufacturing data, and other documents to ensure access to consistent information for both current and old products; and improve information flow and cross-functional communications.
Product Extension (also Product Line Extension) is a business growth strategy in which a new product is created by making a small change to an existing product; and the two products are sold as independent but related. This strategy is widely used in consumer goods, and can be found in other sectors. The addition of ‘Diet Coke’ as a new member of the established Coke beverage family is an example.
The concept of Product Lifecycle helps plan and run a product related business. Between initial concept and end of life there are four phases which every product passes through: introduction, growth, maturity, decline. Revenues and marketing strategies change in accordance with each phase.
(1) PLM is the process of managing the entire lifecycle of a product from its conception, through design and manufacture, to servicing and disposal. (2) PLM is a category of software which provides a product information backbone for companies and their extended enterprises.
Product-as-a-Service gives a customer an alternative – instead of buying the product, buy the result provided by the product. PaaS is a development of product rental or leasing, and transfers more responsibility to the provider.
Online connectivity enables remote access to a product and surrounding instrumentation. Using this connectivity, a provider can offer to operate and maintain a product to deliver outcomes defined in a service level agreement (SLA). For example, instead of buying air compressors, a factory owner may be able to buy compressed air as a service. To deliver this, the provider will need floor space and power connections in the factory. The provider will then install, monitor, control and maintain the compressors to deliver whatever is written into the SLA (for example, 25 psi between 06:00 and 18:00).
Sometimes called Time to Market, this is the period of time from the start of design/development work to commercial product availability. The Product Development Cycle is sometimes presented as one of the big-four cycles in a manufacturing organization – the other three are the Production Cycle, the Order Cycle, and the Supply Chain Cycle.
Production Planning seeks to maintain optimum plans to access and use materials, facilities, and resources to make products to satisfy business objectives. Production planning in the manufacturing environment involves the implementation, integration and monitoring of four major elements: scheduling, labour planning, equipment planning, and cost planning. The usual objective is to set and achieve the right production targets using as little resource consumption as possible.
Productivity is a measure of output per hour worked. In national and global level economics, increases in productivity are considered critical to raising living standards.
A programmable logic controller (PLC) is a digital computer used for automation of electromechanical processes, such as control of machinery on factory production lines. PLCs were developed in the 1970s to offer a more flexible option compared to the hard-wired automation controllers based on relay racks which were dominant at the time.
A Proprietary Format is the design or layout of a data source such as a database when the format is the legal property of one party. If other parties wish to use this format, they need to agree contracts or licenses with the owner. This is in contrast to open format, which follows a published specification and can be used by anyone.
Propylene (also known as propene) is a colorless flammable gas derived from petroleum and used as a raw chemical compound to make plastics, fibers, specialty chemicals and isopropyl alcohol.
Propylene Oxide is a basic chemical used to make polyurethane plastics. Polyurethane is found in appliances, upholstery, seat cushioning, foam products, insulation, construction materials, coatings, adhesives, sealants, antifreeze, footwear and even cosmetics.
Proven reserves are those oil reserves which, based on the available evidence, are virtually certain to be technically and commercially feasible production sources. They have been estimated to have a better than 90% chance of entering production if the decision is made to develop them for that purpose.
A system for controlling workflow and priorities. In a pull system, a process initiates a signal if its inputs run low. This signal goes to the processes which provide those inputs, and triggers them to make or provide more inputs. This concept ensures components and materials are only replaced once they have been consumed. A kanban system is an example of a pull system.
PTA is a petrochemical used to make PET (Polyethylene terephthalate). PET is a multitude of products including polyester fiber for textiles, and containers for liquids and foods.
Put Away is the process of moving inbound goods to a final storage location, perhaps in a high-bay warehouse.
A Quick Changeover Method is any technique which reduces setup time of production equipment. One example is SMED (single-minute exchange of dies). These techniques permit more frequent setups, thus improving flexibility and reducing lot sizes and lead times.
R&D Intensity is a company’s R&D expenditure expressed as a percentage of its revenue. As well as company level, it can be monitored at a country level to help inform industrial policy development.
RFID is the set of technologies which enable the identity of an item to be transmitted by radio to a receiver. It is an example of the broad category of automatic identification technologies. RFID usually involves two components (1) a tag or smart label which includes a unique ID and a wireless transmitter and (2) a receiver. There are many RFID applications for example access control (tags in personnel badges, readers in door entry mechanisms); and retail checkout (tags on each item are read when cart passes the reader).
A variety of techniques for quick conversion of CAD-generated product designs into useful, accurate physical models, typically using computer-controlled systems, such as 3D printers.
(1) Raw Materials are primary materials or substances that form the basis of manufactured goods, and include natural resources from mining, forestry, agricultural and fishing sources. (2) From the point of view of a manufacturer, Raw Materials are the materials it buys to convert into products – for example, a metal furniture manufacturer will see sheet metal as a raw material.
Raw Materials Turn Rate is also named raw materials turnover, raw materials inventory turnover, commodity turnover and raw materials turnover ratio. It measures the rate at which raw material inventory is used and replaced. It helps characterise a company’s forecasting and inventory management. It is the ratio between cost of goods sold (COGS) in a time period, and the average cost of raw materials inventory in that period.
REACH is a European Union regulation concerning the Registration, Evaluation, Authorisation and restriction of Chemicals. It came into force on 1st June 2007. REACH covers both production and use of chemical substances, and replaces a number of earlier European Directives and Regulations with a single system.
Real Time Feedback requires Instantaneous (or nearly instantaneous) communication of sensor data to process operators or equipment. This enables rapid or automated adjustments that keep production processes operating within quality parameters.
A Real Time System is a computer system designed to receive, process, and respond to data within a time frame set by outside events. Many industrial control systems are real time systems. The events which establish the required time frame can be both on the input side of the computer (for example, sense the position of an elevator) and on the output side (apply the brakes, announce the floor, open the doors).
In logistics and material handling, receiving is the process of accepting incoming goods for storage or use. Receiving may involve a decision to accept or reject goods based on condition or related documentation.
In transportation, ‘Reefer’ means refrigerated. A reefer truck is usually a standard semi cab pulling a refrigerated trailer.
Regional Aircraft (also regional airliner, commuter airplane, feederliner) is the term for aircraft used for short flights which allow passengers and cargo to travel between a hub airport and final start and destination points. The use of regional aircraft is driven partly by airport facilities (not all airports can handle large aircraft), and partly to balance capacity (and cost) to demand.
Remote Sensing Equipment is used to obtain information about an object from a distance, and, almost always, with no contact with the object. The term is widely used for earth observation data from aircraft and satellites. The sensing technology may detect available light, sound, infrared, magnetic, gravity or other signals, or actively scan with radar, lidar or ultrasound. A few applications require contact with the object being measured, for example, sea temperature at depth usually needs a submerged sensor in contact with the water.
In the energy industry, Renewables refers to all the sources and fuels which can be used to generate energy without being depleted. For example, unlike coal, oil and gas, energy from rivers, wind, waves, tides and solar sources are essentially inexhaustible. Because biofuels can be ‘renewed’ by growing new plant material, these are also considered renewables.
An RFP is an invitation for suppliers, often through a bidding process, to submit a proposal to solve a specified problem, or meet a specified requirement. By sending the same RFP to a number of possible suppliers, the RFP process helps to bring structure to a company’s procurement decision and allows an objective comparison of supplier responses.
A company’s procurement department sends out an RFQ to invite suppliers to bid to supply them with goods or services. As well as price, the customer looks at things like delivery schedules, quality, and technical ability.
R&D is the discipline responsible for applying science and technology to create new (or improve existing) products, and improve the processes used to make them.
Used in the oil and gas sector, RRR measures new proven reserves, expressed as a percentage of the oil or gas extracted for production. Investors prefer RRR to be 100% or more, because this demonstrates that the company can maintain or increase existing extraction and production levels. RRR of less than 100%, particularly if sustained for an extended time period, makes investors worry that the company will run out of oil and gas.
Residual Value is the estimated value of an asset after it has lost part of its original value (i.e. depreciated) over a period of time. For example, a car that is five years old has not got the same value as it did when it was brand new.
RoHS is the acronym for Restriction of Hazardous Substances. RoHS originated in the European Union and restricts the use of specific hazardous materials found in electrical and electronic products. All applicable products in the EU market after July 1, 2006 must pass RoHS compliance. Electrical and electronic manufacturers whose products are sold in the EU or some additional countries which have adopted RoHS must achieve RoHS compliance. They must also comply with the related WEEE directive, which defines disposal and recycling conditions for this equipment.
Return on Assets Employed (ROAE) is the ratio that shows how many dollars of net income a company gets from every dollar of assets used in the business. ROAE is generally based on fixed assets. This is very similar to Return on Net Assets (RONA), except RONA usually adds inventory, accounts receivable and working capital into the pool of assets.
Both ROAE and RONA are particularly important in asset intensive industries (for example, oil refining and bulk chemical production) where the efficient choice and use of expensive production equipment is key to profitability. Two other similar measures, Return on Capital Employed (ROCE) and Return on Assets (ROA) take a broader view of the assets and capital against which the return should be calculated.
ROE shows a company’s efficiency in making profits from shareholders’ equity. It is equal to net profits divided by shareholders’ equity.
ROIC is a measure of how effectively a company uses the money (borrowed or owned) invested in its operations. It is the ‘return’ expressed as a percentage of ‘invested capital’. In most situations ‘return’ is the net operating profit after taxes (NOPAT); and the ‘invested capital’ is (total assets less excess cash) but excluding non-interest-bearing liabilities.
the ROI metric allows an investor to quantify the success of an investment. A reliable figure can be calculated after the investor has sold their investment, but ROI is used extensively as an estimated forecast based on plans and expectations. ROI is usually expressed as a percentage increase in the value of an investment per year, or over the lifetime of the investment. Inside companies, projects and initiatives are often judged as investments with ROI. But in this case, cost savings and revenue growth are the main return.
For outside investors, and therefore for top management, positive revenue growth is one of the important indicators of the value of a business. Revenue growth is measured as the percentage change in revenue between two comparable time periods. Organic growth is the component of revenue growth which is achieved by the underlying business from the first time period. Further revenue growth may be achieved by acquisition of other organizations.
In automotive, ride quality is generally expressed as the subjective estimate by transported passengers of the vehicle’s comfort rating and its effect on their overall acceptance of the journey. In air transport, passenger comfort has been shown to depend on the design characteristics of the aircraft but also air turbulence and flight manoeuvres.
A Risk Sharing Partnership is similar to a joint venture. However, in a joint venture, the partners all help define the scope for the venture. In contrast, a risk sharing partnership generally occurs after an owner or prime contractor has established the scope. The partners agree to join the project and bear some or all of the costs of their part of the project in return for a share of profits from the result. This is a concept used by both Boeing and Airbus in their respective developments of the 787 and A380.
Robotics is the study of the design and use of robots, particularly for use in manufacturing and related processes. The dividing line between automated machine and robot is not precise. Automated machines which are likely to classified as robots usually have at least one of the following characteristics (1) be mobile (2) carry their controller with them (3) perform tasks originally designed for people or animals (4) have a physical form incorporating some element of human or animal layout.
S&OP is a management discipline which aims to align production volumes with an accurate sales forecast. Stakeholders work together to create a unified view of the market, and to predict demand by looking at data from ERP systems and other IT applications. For many companies, S&OP means a weekly in-house meeting of sales, marketing, manufacturing and distribution to confirm the plan for next week. However, S&OP can grow to incorporate suppliers and distributors, and look at longer term and strategic topics.
Sampling is part of a statistical approach to quality control in production. It involves taking a measurement at regular or random intervals. The measurement can be the reading of a sensor which is built into a production machine, or it may involve taking a sample of material, and diverting it to a testing station or laboratory to take measurements.
In the aerospace sector, a satellite means an artificial satellite, which is an object placed into orbit, usually around the Earth, by human endeavour. The majority are communication and navigation devices. Other important satellite categories are earth observation, weather, and astronomical instruments. The largest artificial satellite currently orbiting the Earth is the International Space Station.
Number of units produced that must be scrapped because of product defects or errors, divided by the total number of units produced by the manufacturing group over the same period, as a percentage. Given the long production cycles in the aerospace industry, it is important to minimize the scrap rate to increase the efficiency of day-to-day operations and meet tight delivery schedules.
Scrap/Rework Costs are the costs of fixing defective products so they pass quality checks including final inspection, plus the costs of parts and materials wasted during the production process.
Secondary Distribution is the transportation of goods and materials from distribution centers to retailers, other businesses and direct to consumers.
A semiconductor is a substance with conductive properties which can be altered with electricity; it can be both a conductor and an insulator. Silicon performs as a semiconductor when chemically combined with other elements. Complex electronic circuits can be built into the surface of a thin layer of silicon-based semiconductor. The continuing development of semiconductor technology is a foundation for the electronics and high-tech industry sectors.
Sequence Control is (1) The control of a series of machine movements, with the completion of one movement initiating the next. The extent of movements is typically not specified by numerical input data. (2) Control of the logic of machine operations, such as the start-up sequence of a complex machine, which may require lubrication and cooling systems to be running before a main motor is started.
A servomechanism includes a controller which drives a motor to move a mechanism so that the position, speed or some other characteristic of the mechanism matches an input signal. The distinctive feature of a servomechanism is that it uses feedback from the mechanism, so it is classified as a closed loop control.
A servomotor is the electrical motor used in a servomechanism. Control inputs such as rotation speed and angular position are typical.
Commonly confused with sewerage, sewage is waste from domestic households (and in some areas industry and commerce) that is carried away by a network of pipes.
Shale gas extraction is the process of extracting natural gas from geological rock formations known as shale. In the 20th century, shale gas extraction was not profitable. In the 21st century, fracking, new horizontal drilling technologies, and new extraction methods, coupled with higher energy costs, have together made shale gas extraction a reasonable commercial proposition.
In logistics, a shipper is the company or person who owns or controls the freight and arranges for its transportation.
A Shop Floor Control System is designed to schedule, execute and track work orders through manufacturing. It may be part of a larger enterprise system or standalone. It will provide methods for shop floor based personnel to receive work orders and schedules, then apply predefined manufacturing procedures (called routings), and some local decisions about scheduling, to execute the work orders.
SFDC gathers, stores and communicates data from plant equipment and instruments. It is usually automated, but can be manual. SFDC often focuses on tracking progress of materials through the plant, but its scope can include performance, maintenance, quality and operator data.
A Silicon Chip consists of an integrated circuit inside a protective covering with electrical connectors. A very common arrangement is a gray, rectangular protective case, with metal connector legs. This type of silicon chip can be pushed into a suitable socket on a PCB.
Used mainly in the automotive sector, SILS can expand to Sequenced In Line Supply, Supply In Line Sequence, and Synchronized in Line Supply, and is often used to mean the same as Just in Sequence (JIS) and In Line Vehicle Sequencing (ILVS). The SILS concept is that messages are generated as the vehicle moves along the production line. These messages trigger demand for the components which will be needed for the next several assembly steps. A successful SILS system will deliver the components just in time, presented to machines and operators in the order they will be used.
A Simulation system mimics certain characteristics of one or more physical objects, even when the objects exist only as a concept or specification. In industry, computer systems are used to simulate a diverse range of characteristics and objects, for example (1) strength of a mechanical component (2) airflow to cool an electronic circuit (3) throughput of a set of production machines (4) behaviour of a mechanism in motion. Engineers use simulation to help design and improve products and systems without having to build and test prototypes. Operators use simulation for training, for example, to learn how to operate machinery.
Widely referred to as ‘Six Sigma’, the six sigma method started in production and has been developed as a business management strategy. Six sigma enjoys widespread application in many industries. It seeks to ensure that every process delivers stable and predictable results by removing the causes of errors. It recognises that every process has a degree of variation, and expects the variation to be measured, and the causes of variation to be understood. The method quantifies the allowed variation using the statistical term sigma – six sigma in effect means 3.4 defects per million opportunities.
Software as a Service means the software being used is running on servers which belong to someone else. So a key benefit of SaaS is that a user organization does not have to invest in computers and system administration to be able to use the software. Many SaaS applications are available through any web browser. They often are priced on a pay-per-use basis. The application is usually run in the cloud, but in all cases the provider takes responsibility for server hardware and software support and maintenance.
Solid Modelling (also 3D solid modelling) is a software technology which allows computer systems to handle data which represents a 3D object. Solid modelling enables software applications to create, manipulate, visualize and analyze objects which only exist as computer data, including objects with curved surfaces and complex internal structures. Applications can use data from the real world (such as photos or Lidar scans) to create solid models; and they can translate solid model data into instructions for production machines (including 3D printers) to make physical representations of the models.
Solid Modelling (also 3D solid modelling) is a software technology which allows computer systems to handle data which represents a 3D object. Solid modelling enables software applications to create, manipulate, visualize and analyze objects which only exist as computer data, including objects with curved surfaces and complex internal structures. Applications can use data from the real world (such as photos or Lidar scans) to create solid models; and they can translate solid model data into instructions for production machines (including 3D printers) to make physical versions of the models.
Space vehicles are designed to carry people in space. The Space Shuttle, the International Space Station, the Soyuz spacecraft and the Chinese Shenzhou craft are primary examples of space vehicles.
A special purpose acquisition company (SPAC), is a shell corporation listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process.
A Spot Market is a commodities or securities market in which goods are sold for cash and delivered immediately. Sellers and buyers of oil, gas and electricity generally structure their business using (mainly) long term contracts, then use the spot market to make day-by-day or hour-by-hour adjustments. In this way, spot markets help balance supply and demand, even though spot market prices can be volatile.
STEP is a term used to describe standards in the ISO 10303 family. The objective of STEP is to enable the use of neutral product data throughout the life cycle of a product, independent from any particular system. Typically, STEP is used to exchange data between CAD, Computer Aided Manufacturing, Computer Aided Engineering and Product Lifecycle Management systems.
Established in the US in 1937, SIC codes are used to classify types of industry. Other countries and regions have adopted and adapted SIC. The US replaced SIC with NAICS (North American Industry Classification System) in 1997. The EU uses NACE (nomenclature statistique des activités économiques dans la communauté européenne) and there is an international version maintained by the UN (ISIC). The codes have changed over the years, largely to ensure new industries have a place in the scheme (software development did not exist in 1937). Concordance tables allow users of the various systems map between them. Governments generally require companies to self-classify on tax returns.
SPC is a data driven approach for monitoring and controlling a process or production method. It involves collecting and analyzing data about a process. By using statistical techniques, the analysis can go beyond a simple pass/fail test, and identify drifts in a process before the drift is large enough to produce non-compliant results. SPC is often implemented using charts for operators to check. In advanced systems, adjustments are made automatically when readings indicate that a control limit is being approached.
SQC applies probability and statistical techniques to ensure products conform to requirements. It is essential when destructive testing is the only way to check a product, and it can improve cost effectiveness of inspection and testing in many environments.
Used universally in consumer goods and retail industries, an SKU is an identifier for every item that is maintained on stock or may be ordered. Multiple SKUs are used to cater for all the variants of the products and the different package size in each range.
SADT is a method to define and describe a system. It originated as a software engineering methodology in the 1970s. It defines a graphical notation for data models and activity models, and can be used for organization and workflow systems as well as technical systems. The IDEF0 method was derived from SADT.
Styrenics is a group name for all polymers based on styrene, which is made from benzene. Polystyrene is well known example, with applications in industrial, consumer and food packaging, as well as small and large electrical appliances, building insulation, fiberglass, electrical and electronic devices, household appliances, car components and toys.
A subsidy is a benefit given to an individual, business, or institution, usually by the government. It is usually in the form of a cash payment or a tax reduction. The subsidy is typically given to remove some type of burden, and it is often considered to be in the overall interest of the public, given to promote a social good or an economic policy.
(1) As a general term, Supervisory Control means the use of microcomputers and workstations to accomplish operator interface, data acquisition, process monitoring, and some degree of production control. (2) In chemical processing, Supervisory Control is the next step in automation after Regulatory Control (RC). RC maintains a process parameter (for example, temperature) when an operator sets the required value. In Supervisory Control, a computer may change the required value over time, for example for a reaction which needs a smooth change of temperature over a time period.
SCADA is a system architecture for high level control of manufacturing processes. SCADA systems consist of a network of computers and Human Machine Interfaces (HMIs). SCADA systems use factory networks to communicate with devices such as programmable logic controllers (PLCs) and other remote items such as sensors to perform their Data Acquisition and Control functions.
A Supply Chain transforms and moves a product (and/or service) from the initial source of raw materials (and/or capability) to the final customer. It involves a complex network of organizations, people, technology, activities, information and resource.
SCE is the optimized process of fulfilling demand for highest customer satisfaction with minimal cost. This function plans, schedules and controls the flow of goods and information from point of demand to customer delivery by tightly integrating channel demand, distribution and warehousing operations and inbound and outbound transportation.
The term SCM brings together business processes including procurement, supply chain planning, supply chain execution, logistics, and order management. Its operational goal is to balance supply and demand. SCM teams try to improve the visibility of materials and incidents up and down the chain, so that they can react quickly and ensure maximum demand fulfillment and minimal excess inventory throughout the chain.
Supply Management is also referred to as purchasing or procurement. This function oversees corporate buying of materials both for use in production and other items. It may also handle purchasing of equipment assets, and coordinate inbound logistics and inventory management. Software applications known as Supplier Relationship Management systems are used by Supply Management teams to handle supplier performance and contracts (including costs, quality, on-time delivery, documentation and standards).
Supply Chain Optimization is a management process to identify the best strategy for relationships among the various elements of the supply chain including manufacturing plants, distribution centers, points of sale. Sources of demand, sources of raw material, relationships across product families and other factors must also be considered.
A class of manufacturing software designed to optimize scheduling and other activities throughout the supply chain – or value chain – including transportation and distribution functions.
SAW devices (including SAW filters) can be built using semiconductor manufacturing processes. They integrate a loudspeaker-like device and a microphone-like device into a piezoelectric layer. Electric signals to the ‘loudspeaker’ generate waves in the material. The waves travel through the material and are detected by the microphone-like device. The difference between the input and output signals can measure mass and other mechanical properties of materials in contact with the SAW device. SAW devices designed as filters are widely used in cellphones and garage door opener remote controls.
SMT allows silicon chips to be built without the widely recognised metal legs as connectors. Instead, the chip is given flat contacts or short pins. The result is mounted directly onto a PCB, which is designed with solder pads to match the contacts on the chip.
System availability quantifies the extent to which a system is available as required, when required. The concept applies to all systems, from IT systems to production systems to communications systems.
The simplicity of this availability metric – essentially, the percentage of required time during which the system is functioning as required – is in stark contrast to the complexity of managing service and maintenance. For example, the elevator system in a hotel must be available at all times. However, when there are multiple elevators, not all elevators need to be available during periods of low usage. So a rolling program of maintenance can maintain 100% availability even though it takes some elevators out of service at certain times.
SAIDI is the average number of hours of service interruption experienced by each customer in one year. Widely used by electricity distribution organizations, it is often used alongside System Average Interruption Frequency Index (SAIFI) to distinguish many short interruptions from a few longer interruptions.
The US Energy Information Administration collects SAIDI and SAIFI data for three categories of electricity distributor – municipals (owned by cities), co-ops (owned by members); and investor owned (owned by shareholders). In 2016, municipals’ customers experienced the lowest SAIDI and SAIFI of the three categories.
SOC is a type of integrated circuit where all of the components of a system (such as a computer) have been combined on a single chip. This may include distinct functions and technologies such as analogue, digital and radio frequency circuitry.
SI is the discipline of combining separate computer (and physical) systems to act as a single co-ordinated whole. In Aerospace and Automotive, for example, OEMs are called systems integrators because their expertise is less and less in research and development (R&D), and more in assembling pre-built supplier systems using highly efficient manufacturing processes in their own factories.
Tax inversion is a mainly American term for the movement of a company HQ to a lower tax region, whilst still maintaining operations in their home nation. The US imposes income tax on the foreign earnings of American companies. So, by setting themselves up as ‘foreign companies’ by law, these firms can lower their tax obligations but still reap the benefits of access to the US market. The way companies achieve this is to buy an overseas competitor and then make the competitor’s HQ represent the entire legal entity.
Telematics describes the integration of telecommunications and information technology, where information is sent or received through a telecommunications device and then used for monitoring or control. In industry, the automotive sector makes most use of the term telematics for capabilities such as vehicle tracking, trailer tracking, fleet management, mobile data, vehicle safety communications, car sharing and usage based insurance.
In manufacturing, Throughput is the quantity of materials flowing through a system or process in a given time. It is often used to measure the output of a production facility, but it can also apply to a single machine, or a work cell.
Time to volume is the time taken to achieve target production volume. An estimate of time to volume, based on prior experience, is used to plan the launch of new products, and the changeover to introduce a new manufacturing process for an existing product.
Time to volume is particularly important for mass production environments (for example, cars, electronics and food; and also the parts and materials used to make them). The transition from small quantity to high volume production (often called ‘volume ramp-up’) can involve new production facilities, new supplier and distribution arrangements, and new service organizations.
Full Truck Load
Toluene can be extracted from pine oil, but is mainly manufactured as a petrochemical in a gasoline refinery. It is a widely used solvent, and is used in the synthesis of trinitrotoluene (TNT), benzoic acid, perfumes, saccharin, dyes, and pharmaceuticals.
The TOE is a measure of energy. It is the quantity of energy released by burning one tonne (which is 1000 kilograms) of crude oil. Like BOE (Barrel of Oil Equivalent), TOE is used to quantify oil or gas in common terms. Because the energy content of crude oil varies, it is an approximate measure.
TCO is an upfront estimate of all costs associated with an asset over its entire life cycle, including acquisition costs, operating costs, and insurance, security and financing costs. As well as IT systems, TCO can apply to products from all sectors – in the automotive industry, for example, it outlines the cost of owning a vehicle from the purchase, through its maintenance, and finally its sale as a used car.
TCQ is the total cost of three classes of quality processes – Prevention, Inspection, and Failure. Prevention largely happens in design and manufacturing process design. Inspection (or appraisal) covers all checks between raw material inspection and finished goods delivery. Failure costs can be quantified through warranty costs, but many businesses see reputation damage as the larger cost. Quality initiatives are justified on the basis that TCQ is less than the Cost of Poor Quality.
TLC helps capture both obvious and hidden costs in the supply chain. It includes item cost, transportation, warehousing, tariffs and taxes. In some environments it also includes inventory carrying costs, currency exchange costs, financial impact of carbon footprint and other cost categories such as corporate taxes and grants. From a seller’s point of view, TLC is the sum of all costs associated with making and delivering products to the point where they produce revenue (usually the customer’s doorstep). From a buyer’s point of view, it makes sense to use TLC to compare purchase of goods from different countries.
To calculate Total Logistics Costs, a manufacturer will consider costs for inbound delivery and storage of material and parts, the total cost to store, transport and deliver (and possibly set up) product to the customer following final manufacture and assembly. Manufacturers which calculate and monitor total logistics costs are focusing not only on in-house operations, but also on the total order-fulfillment process.
TPM is a holistic approach to maintenance which sets goals of (1) no breakdowns (2) no slow or reduced running (3) no product defects (4) no accidents. TPM shares responsibility for maintenance between equipment operators and maintenance technicians and engineers. The scope of TPM includes unscheduled maintenance prevention (through design or selection of easy-to-service equipment), equipment improvements, preventive maintenance, and predictive maintenance (determining when to replace components before they fail).
TQM aims for long term success through customer satisfaction. To implement TQM, all members of an organization try to improve not only processes, products and services, but also the culture and style of the way they work. A TQM strategy highlights eight aspects (1) customer focussed (2) process centered (3) engagement of all staff (4) strategic and systematic approach (5) integrated system (6) evidence based decisions (7) communication (8) continuous improvement. TQM implementation uses a variety of quality tools, such as QFD, Taguchi methods, SPC, corrective-action response teams, cause-and-effect analysis, problem-solving methodologies, and making operations fail-safe.
Total Recordable Incident Rate was developed in the US as a measure of occupational safety. Some recordable incidents lead to an employee being unavailable for normal work duties for one or more days, and these incidents are counted in both TRIR and Lost Time Incident Rate (LTIR). Both metrics, are calculated as the equivalent number of incidents if 100 people working full time for one year had been monitored.
Some organizations outside the US (for example, the International Marine Contractors Association, IMCA) normalize the rate to ‘per one million hours worked’ rather than the two hundred thousand hours implied by the US definition (40 hours for 50 weeks for 100 people). In the US specification, if local first aid allows immediate return to work, then the injury will be noted in safety logs, but not classified as a recordable incident.
Total Shareholder Return is the total of two quantities (1) payments received by a shareholder due to owning one share (e.g. dividends) and (2) the change in the price of the share between the start and end of the time period. The result is expressed as the equivalent annual percentage growth in the original share price.
Toxicological means related to toxicology. Toxicology is the study of the adverse effects of chemicals on living organisms. It is the study of symptoms, mechanisms, treatments and detection of poisoning, especially the poisoning of people.
Traceability is the ability to track the history, location, condition and use of materials, component and products. For finished products, the priority is the ability to recover the history, from raw material origin to current status. This information, using batch and serial numbers for identification, helps find the root cause of a problem, and recognise if other products might be affected. In logistics, the goal of traceability is to identify the location and condition of all goods in the supply chain. In some sectors, for example pharmaceuticals, proof of a documented chain-of-custody is a vital element of traceability, because security is critical.
Track and Trace means the same as traceability but recognises two distinct applications. Tracking is knowing where products are at each stage of the supply chain, so emphasizes the flow of goods from origin to destination, including all the handling and production processes they go through. Tracing usually operates in the reverse direction, for example, tracing the source of a faulty component that ends up in a finished product.
Trade Funds are the monies set aside by CPG companies to support the activities of their retail partners very often associated with promotional activities. It can be a very significant activity, representing as much as 10-20% of CPG company revenues. Trade funds include a very diverse set of activities undertaken by CPG companies in support of retail sales efforts e.g. discounts, signage, samples and competitions
The term Transhipment (also spelt Transshipment) can be used in a general sense to mean transportation of goods to an intermediate point and handover from one carrier to another. In global trade, transhipment is an important concept, because there may be letters of credit provided by banks related to goods in transit. In some cases, a letter of credit may ban transhipment. However, banks do not usually intend to ban normal hub-and-spoke operations.
A TMS is a software tool which helps a shipper see what options at what cost are available to the shipper. A TMS will handle timings associated with each route; the order in which to load transport; optimisation of multi-segment deliveries; and compliance with documentation required for customs and shippers.
In general discussion, Transportation Planning relates to roads, railways, public transport and so on. For manufacturers and logistics organizations, it covers strategic and operational business processes to develop, optimize and use the transport links in their supply and distribution networks. Examples include choice of warehouse locations, decisions about logistics providers, matching transport and warehousing equipment to product and package profiles, delivery service levels such as out of hours and pallet unloading as well as operational processes such as load and route planning.
Turnaround is a scheduled stoppage of part or all of a plant’s operations to allow maintenance and upgrade. The term is used mainly in process, particularly continuous process, production facilities (refinery, petrochemical plant, power plant, etc.). A turnaround has large costs and production implications, and can require weeks, months or sometimes years of elapsed time. It may involve external health, safety and environmental review. So turnarounds are planned as major projects headed by a senior manager.
A TEU is the capacity of the standard shipping container used for intermodal transport, which is twenty feet long and eight feet wide. No single height is defined for the container – 8.5 feet and 9.5 feet are the most common heights – so the TEU is regarded as an inexact measure.
Universal Product Code is a barcode designed to conform to a globally accepted standard and provides a mechanism for recognising products. The 12 digit number in the UPC defines a product according to one part of the Global Trade Item Number (GTIN) – a set of standards that enable a wide range of products to be identified.
A UAV is an aircraft (such as a drone) with no pilot on board. UAVs come in two varieties: (1) controlled from a remote location and (2) flying autonomously. Autonomous flight continues to develop from pre-programmed flight plans towards flight and decisions derived automatically from specification of a task or objective. Military UAVs perform reconnaissance as well as attack missions. UAVs are also used in a small but growing number of civil applications, such as firefighting and crop spraying.
An unmanned combat air vehicle or “”combat drone”” is an experimental class of UAV. A UCAV differs from ordinary UAVs, because it is designed specifically to attack targets. Current UCAV concepts call for an aircraft which would be able to operate virtually autonomously. It would be programmed with route and target details, and would be able to conduct the mission without help from human controllers
In the oil and gas sector, upstream operations is the term for all activities needed to find reserves, and bring them to the surface. This involves, exploration, securing leases and permits, developing the reserve into a productive field, and operating the field.
‘Value Added’ is the difference between an item’s price and the cost of producing it. The sources of value added are diverse, and include, for example, adding a brand name label, processing raw material into products, and offering service alongside a product. In Europe, value added is used as one basis of taxation. This is charged on the sale of goods and services, but intermediate consumers (such as a manufacturer buying raw materials) can reclaim value added tax paid on their inputs.
Value Added Productivity is a business metric. It is usually calculated as total value added, divided by the number of employees. It also can be used to monitor equipment, in which case it is value added divided by asset value. In both cases, it helps judge how well resources (inputs) are used to create output.
A VBE is an automotive company which owns and operates multiple automotive brands.
A vehicle platform is the basis for multiple vehicle models. It incorporates all of the structural subsystems (such as floor and powertrain layout, axles, and suspension) of the relevant class of vehicle (hatchback, saloon, SUV, truck etc). Vehicle platforms help car companies control cost, because development costs, and to some extent manufacturing costs, of the platform are shared across all the models based on the platform.
VMI is a type of supply arrangement between a buyer and a seller. The vendor is the seller, and in VMI agrees to take full responsibility for the inventory of items sold to the buyer. The buyer identifies space for the inventory, and specifies the maximum and minimum number of items, and then is free to use or sell the items. The vendor monitors the inventory, and replenishes it so that it never falls below the specified minimum number of items in good condition. When the buyer is a retailer, the space identified for the inventory can be retail store display and shelf space.
A version control system (or revision control system) is a combination of technologies and practices for tracking and controlling changes to files and documents relating to products and processes.
Vertical Integration describes merger or cooperation of multiple organisations in a supply chain to focus on a specific product or market area. The result is coordination of purchasing, production, marketing and distribution which can help reduce costs.
Virtual Testing is the capability to provide, through simulation, predictions of real world physical behaviour. In aerospace, it is seen as a vital move to reduce the hugely expensive ground and flight testing of a new aircraft and its constituent parts and assemblies.
Visibility Systems is a general term for visual indicators which enable staff to understand work status and condition at a glance, and to respond to priorities. This can be done with standard layouts, signal lights, kanban systems, or other methods. The distinguishing feature is that communication is rapidly executed by line of sight. Visibility systems are widely used in production, maintenance and distribution areas.
Voice recognition/Response systems recognize and/or synthesize human voices. Such systems capture verbalized data for quality-control or inventory-tracking purposes (often when operators’ hands are busy), recognize spoken commands that activate equipment, and convert computer data into audible information.
A Wafer Fabrication Plant prepares slices (‘wafers’) of pure, defect-free materials for use in semiconductor manufacturing. A Semiconductor Fabrication Plant (also known as a semifab or just fab) uses specialized machinery to etch and layer material on a wafer to create integrated circuits – usually tens or hundreds of integrated circuits per wafer.
The Waste Electrical and Electronic Equipment Directive (WEEE Directive) is an EU directive which set targets for reuse and recycling. The related Restrictions on Hazardous Substances (RoHS) directive limited the materials allowed in new electronic equipment. WEEE requires manufacturers to register with national authorities, report on amounts sold, and organize or finance collection and recycling. Consumers, local authorities and waste processors must handle WEEE products in a separate hazardous waste stream.
Whole Life Projects are projects or work packages which include research, design, manufacture and continuing support for products or systems for their whole life; from concept through to disposal/recycling.
WIP Turn Rate is a business metric focused on production. It measures the speed of work-in-process through a plant by quantifying the value of shipments in terms of the value of WIP. It is calculated by dividing the value of total shipments at plant cost (for the time period being measured) by the average WIP value at plant cost (for the same time period).
Work-In-Process (Work in Progress) Inventory (WIP)
The amount or value of all materials, components, and subassemblies representing partially completed production. Raw material and purchased components are usually classified as raw materials inventory; and similarly finished goods are counted separately, but WIP inventory is everything between these two. Value is calculated at plant cost, including material, direct labor, and overhead.
A workflow is a depiction of a sequence of operations. Examples include the work of a person, work of a mechanism, work of a group of persons, work of an organization of people and machines. By visualizing the network of connected operations in a business, management can guide change towards more efficiency and more focus on customer added value. For example, a workflow diagram can help optimize use of multi-function product teams and functional departments.
Production yield is the sellable output from a manufacturing operation that passes full inspection. The higher the yield of every manufacturing operation, the more cost-effective product is produced, and the less waste is created. The level of yield is important in all production operations, especially semiconductor manufacturing.