Glossary

Machine Availability Rate is 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.

A Maintenance Management Systems (MMS) is a software system for handling maintenance scheduling and 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.

Maintenance Repair and Overhaul (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.

Make to Order (MTO), Build to Order (BTO), and Assemble to Order (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 more 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.

Make to Order / Build to Order / Assemble to Order (MTO / BTO / ATO).

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.

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.

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.

The manufacturing cycle time (Throughput 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.

A Manufacturing Execution System (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 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),

(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.

A Master Production Schedule (MPS) is a plan which defines which products must be produced in a given time period. The 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.

Material Requirements Planning (MRP) was the first widely used production planning software 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.