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CANCELLATION CHARGES. A fee charged by a seller to cover his costs associated with a customer's cancellation of an order. If the seller has started any engineering work, purchased raw materials, or started any manufacturing operations, these changes would also be included in the cancellation charge.
CAPACITY. The time available for work at work centers expressed in machine-hours (minutes, etc.) or in man-hours (minutes, etc.).
CAPACITY BUYING. A purchasing practice whereby a company commits to a vendor for a given amount of his capacity per unit of time. Subsequently, schedules for individual items are given to the vendor in quantities to match the committed level of capacity. (See VENDOR SCHEDULING.)
CAPACITY CONTROL. The process of measuring production output and comparing it with the capacity requirements plan, determining if the variance exceeds pre-established limits, and taking corrective action to get back on plan if the limits are exceeded. (See INPUT/OUTPUT CONTROL, CLOSED LOOP MRP.)
CAPACITY PLANNING. (See CAPACITY REQUIREMENTS PLANNING.)
CAPACITY REQUIREMENTS PLANNING (CRP). The function of establishing, measuring, and adjusting limits or levels of capacity. In this context, it is the process of determining how much labor and machine resources are required to accomplish the tasks of production. Open shop orders and planned orders in the MRP system are input to CRP, which "translates" these orders into hours of work by work center by time period. (See RESOURCE REQUIREMENTS PLANNING, INFINITE LOADING, CLOSED-LOOP MRP.)
CAPACITY SMOOTHING. (See LOAD LEVELING.)
CARRYING COST. Cost of carrying inventory, usually defined as a percent of the dollar value of inventory per unit of time (generally one year). Depends mainly on cost of capital invested as well as the costs of maintaining the inventory such as tax, insurance, obsolescence, spoilage, and space occupied. (See ECONOMIC ORDER QUANTITY.)
CELLULAR MANUFACTURING. Developing the manufacturing flow around the processing of a product so that operators are trained on all processes of a particular product. It is bringing the processes together to build the entire product as opposed to setting up an assembly line or using a job shop layout.
CENTRALIZED DISPATCHING. Organization of the dispatching function into one central location. This often involves the use of data collection devices for communication between the centralized dispatching function, which usually reports to the production control department, and the shop manufacturing departments. (See CONTROL CENTER, DECENTRALIZED DISPATCHING.)
CHANGE ORDER. (See ENGINEERING CHANGE ORDER.)
CHANGEOVER COSTS. The sum of the setup cost and the tear-down cost for a manufacturing operation. Syns: turnaround costs, shut-down costs, start-up costs.
CLASSIFICATION. A systematic and orderly analysis of items, grouping like things together by their common features and subdividing them by their special features. (See CODING.)
CLOSED LOOP MRP. A system built around MRP including the additional planning functions of production planning, master production scheduling, and capacity requirements planning. The term "closed loop" implies that there is feedback from the execution functions to update the planning. (See MANUFACTURING RESOURCE PLANNING.)
CODING. The assignment of alphanumeric identification symbols to classified descriptions. (See CLASSIFICATION.)
COMMODITY BUYING. Grouping like parts or materials under one buyer's control for the procurement of all requirements.
COMMON PARTS BILL OF MATERIAL. A type of planning bill which groups all common components for a product or family of products into one bill of material. (See PLANNING BILL OF MATERIAL, MODULAR BILL OF MATERIAL, SUPER BILL OF MATERIAL.)
COMPETITIVE BIDDING. The offer of estimates by firms or individuals competing for a contract, privilege, or right to supply specified services or merchandise.
COMPONENT. A raw material, ingredient, part, or subassembly that goes into a higher level assembly, compound or other item.
CONCURRENT ENGINEERING. Designing the product simultaneously with the processing and inspection procedures.
CONFIGURATION CONTROL. Ensuring that the product being built and shipped corresponds to the product ordered and designed. This means that the correct features, customer options and engineering changes have been incorporated.
CONFIRMING ORDER. A purchase order issued to a vendor listing the goods or services and terms of an order placed verbally, or otherwise, in advance of the issuance of the usual purchase document.
CONSIGNED MATERIAL. Component parts, usually as raw material, provided by the customer to a supplier for use in filling an order for the next level part number. This is used where the customer needs to control quality, schedule, or proprietary process issues.
CONSIGNED STOCKS. Inventories generally of finished products which are in the possession of customers, dealers, agents, etc., but which remain the property of the manufacturer by agreement with those in possession.
CONTRACT PEGGING. (See FULL PEGGING.)
CONTROL CENTER. The place at which the dispatching is done in a centralized dispatching operation. (See CENTRALIZED DISPATCHING.)
COSTED BILL OF MATERIAL. A bill of material that extends the quantity of every component by the component costs.
CPIM. Certified in Production and Inventory Management. A certification awarded by The American Production and Inventory Control Society. CFPIM denotes the highest level of certification, the fellow level.
CRITICAL PATH METHOD (CPM). A network planning technique used for planning and controlling the activities in a project. By showing each of these activities and their associated time, the "critical path" can be determined. The critical path identifies those elements that actually constrain the total time for the project. (cf. PERT.)
CRITICAL RATIO. A dispatching rule which calculates a priority index number by dividing the time remaining until due date by the expected time required to finish the job. From the critical ratios, it is possible to determine the orders that are behind (less than 1.0), the orders that are ahead (greater than 1.0), the orders that are on schedule (equal 1.0), the orders that should be processed next, and whether processing rates should be increased. (See DISPATCHING RULE.)
CRP. (See CAPACITY REQUIREMENTS PLANNING.)
CUMULATIVE LEAD TIME. The longest length of time required to accomplish the activity in question. Syns: aggregate lead time, stacked lead time, composite lead time, critical path lead time.
CUSTOMER ORDER. An order for a particular product or a number of products from a customer. Often referred to as an "actual demand" to distinguish it from a forecasted demand.
CUSTOMER SERVICE. Delivery of product to the customer at the time which the cutomer or corporate policy specifies. (See PERCENT OF FILL.)
CUSTOMER SERVICE RATIO. A measure of delivery performance usually in the form of a percentage comparing the units or dollars shipped on time to the units or dollars shipped late.
CYCLE COUNTING. A physical inventory procedure in which inventory is counted on a periodic schedule other than once a year. A cycle count may be taken when an item reaches its reorder point, when new stock is received, or on a regular basis usually more frequently for high-value, fast-moving items than for low-value, slow-moving items. Most effective cycle counting systems require the counting of a certain number of items every work day.
CYCLE STOCK. One of the two main components of any item inventory, the other being safety stock. The cycle stock is the most active component depleting gradually and replenished cyclically. (See LOT SIZE, SAFETY STOCK.)
CYCLE TIME. The time the product is at each work station on an assembly or production line.
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