Lean and Six Sigma Glossary of Terms

As with any specialized field, a vocabulary has developed to speak about process improvement techniques, with some common words acquiring more specialized meanings and many terms from statistics. Please consult this glossary if you get lost in the jargon.




- A -

Affinity Diagram: Organizing individual pieces of information into broader groups or categories.

Andon: A conspicuous signaling device that clearly displays performance information about a process. Andons automatically warn or notify appropriate personnel to respond to a problem, delay, mistake, defect, or fluctuation of a production standard. Examples of andons in daily life include smoke detectors and low fuel indicators.

Attribute Data: Data that has a set of discrete values (Yes/No, Pass/Fail, On/Off)

Average: Also called the “mean,” is the arithmetic midpoint of a population’s value. The average is calculated by adding the values of all members of the population and dividing by the number of members.



- B -
Balanced Production: All operations or cells produce at the same cycle time. In a balanced system, the cell cycle time is less than takt time.

Balanced Scorecard: An analysis technique and management instrument that translates an enterprise’s mission and strategy into a comprehensive set of performance measures to provide a framework for strategic action. The scorecard may gauge organizational performance across several perspectives, such as financial, customers, internal business processes, and learning and growth.

Bar Chart: A graphical method of depicting data by category using horizontal bars.

Batch and Queue: A production method in which material is accumulated into a batch (lot) and then all processed together. The theory behind this methodology is that it maximizes efficiency within each process step, but the value of this gain is counterbalanced by such wastes as waiting, bottlenecks and excess inventory.

Benchmarking: The systematic comparison of process performance, practices, and attributes against those of other leading companies for the purpose of process improvement.

Black Belt: Leader of a team responsible for measuring, analyzing, improving, and controlling key processes that influence customer satisfaction and/or productivity growth. Black Belts may be full-time positions.

Bottleneck: Any resource whose capacity is equal to or less than the demand placed on it. This tends to cause an accumulation of work to build up in front of this point.

Buffer Stock: An amount of inventory accumulated between processes to protect a process from starving due to fluctuations and uneven capacities.

Business Process Change (BPC): A strategy-driven organizational initiative to improve and (re)design business processes to achieve a competitive advantage in performance through changes in the relationships between management, information, technology, organizational structure, and people.



- C -

CTQ: Critical to Quality (Critical "Y"): Element of a process or practice that has a direct impact on its perceived quality. (see also SIPOC)

Capability:A comparison of the required operation width of a process or system to its actual performance width. This is expressed as a percentage (yield), a defect rate or a sigma score.

Cells:The layout of machines of different types performing different operations in a tight sequence—typically in a U-shape—to permit single piece flow and flexible deployment of human effort.

Central Tendency: A measure of the point around which a group of values is clustered. This can be measured in terms of either the Mean or Median.

Chaku-Chaku: A method of conducting single-piece flow, where the operator proceeds from machine to machine, taking the part from one machine and loading it into the next.

Changeover:Adapting any tool to perform a new task.

Coefficient Alpha Analysis: Measures the internal consis­tency of a set of measures or survey questions meant to represent a certain concept and are used to assess the quality of the questions and survey instrument.

Common Cause Variation:Those sources of variation in a process that are truly random, inherent to the process itself.

Constraint: Anything that limits a process from achieving higher performance, or throughput.

Consumer: The person or entity who obtains goods or services produced by some other process.

Continuous Flow:Items are produced and moved from one processing step to the next one piece at a time. Each process makes only the one piece that the next process needs and the transfer batch size is one. Also called "single-piece flow" or "one-piece flow."

Control Chart: A time-series run chart, with statistically determined upper and lower control limits and a centerline.

Control Limits: Upper and lower bounds in a control chart that are determined by the process itself. They can be used to detect special or common causes of variation (usually +/-3 standard deviations from the central tendency).

Cost of Poor Quality (COPQ): The costs associated with any activity not done as well as possible, which are passed on to a later consumer as rework or repairs. This should be compared to the Cost of High Quality, in which the manufacturing costs go up as quality controls are increased. The balance of these two factors is the lifetime cost of the product.

Core Processes: These are the essence of most businesses: the value-added activities that directly support the value that customers pay for.

Correlation Analysis: Identifies the statistically significant relationship between variables. A “0” means no relationship and “1.0” means a perfect relationship. The closer a correlation is to 1, the stronger the relationship.

Covariance: The impact of one variable upon others in the same group.

CP: A capability measure defined as the ratio of the specification width to short term process performance width.

CPK: An adjusted short-term capacity index that reduces the capability score in proportion to the offset of the process center from the specification target.

Current State Map: A visual representation of a process as it exists before any efforts have been made to improve it. In a continuous improvement exercise, the current state map forms a benchmark against which improvements can be measured. See also Value Stream Map.

Cycle Time: The time elapsed from the beginning of a work process until that process is completed.



- D -

DFSS: (Design for Six Sigma) is a systematic methodology utilizing tools, training, and measurements to enable us to design products and processes that meet customer expectations and can be produced at Six Sigma quality levels.

DMAIC: (Define, Measure, Analyze, Improve, and Control) is a process for continued improvement at the heart of Six Sigma. The DMAIC model is represented as continually cycling through these five steps, such that the control phase of an exercise forms the basis of defining new problems.

Defect: The output of a process that fails to meet the required specification or performance standard.

Defect Measurement: Accounting for the number or frequency of defects that cause lapses in maintenance/service quality.

Design for Six Sigma (DFSS): The use of Six Sigma tools and methods in the process of designing new products and services to improve their initial release performance, rather than using the tools to improve existing products or services.

Document Tagging: The physical attachment of a form to a process unit to document dates and times.

Downstream (in the supply chain network): Closer to the marketplace.

DOWNTIME: Acrostic device for remembering the Eight Wastes: Defective product, Overproduction, Waiting, Non-utilized people, Transportation, Inventory, Motion, and Extra processing.

DPMO (Defects Per Million Opportunities): The total number of observed defects divided by the total number of opportunities, expressed in events per million.

DPU (Defects Per Unit): The total number of defects detected in some number of units, divided by the total number of units.



- E -

Economies of Scale: Applying the principles of mass production, large batch sizes, and consolidated control strategies to achieve minimum unit processing costs.

Efficiency:The optimization of a process that results in producing the desired output with minimal resource use.

Enabling Processes: Processes that are key to the achievement of critical business goals, but do not necessarily translate directly to the production of goods or services.

Enterprise: Any corporate or business-unit organization with a distinct mission, market segment, suite of products or services, customer base, profit/loss responsibility, and set of competitors. The purpose for the organization’s existence is to perform its mission and achieve associated goals.

Entitlement: The best demonstrated capability of a particular process in its existing configuration. The entitlement can be thought of as an empirical benchmark showing the process’ true capability.
Error Proofing (Poka Yoke): Designing a process in such a way that it is impossible for a defect to be passed on to the next process step. A common example of a poka yoke is the use of incompatibly shaped diesel and unleaded fuel nozzles, making it impossible to put diesel fuel into a non-diesel car by mistake.

Excessive Travel: Unnecessary movement, repetitive travel routes and long distances that are not necessary if the sub-processes were established closer together or in the proper order.

Extended Enterprise: All businesses along the value stream that contribute to providing value to a customer.

Extended Supply Chain: Extending outward beyond company boundaries to customers and suppliers and connecting with them by use of Internet technologies supporting integrating practices.



- F -

Failure Mode Effects Analysis (FMEA): A procedure used to assess and mitigate risks to a particular processing by assessing the likelihood of a problem occurring, the potential severity if it does occur and the ability to predict a problem in advance.

Finished Goods: An inventory of completed products awaiting sale or shipment.

First In First Out (FIFO): A system in which the oldest work upstream currently waiting to be processed is the first to be processed by the next process step. This is most relevant in work situations where it is particularly important to minimize the waiting period for every individual order, such as the accrual of job requests.

Fishbone Diagram: A visual representation of the critical factors influencing a process, arranged in such a way that the overall chart resembles a fish skeleton.

Five S + 1: Five terms plus safety utilized to create a workplace suited for visual control and Lean production (sort, simplify, scrub, standardize and sustain). 5S is usually used as a verb, for example, "I'm going to go 5S my toolbox."

  • Sort means to separate needed tools, parts and instruction from unneeded materials and to remove the latter.
  • Simplify means to neatly arrange and identify parts and tools for ease of use.
  • Scrub means to conduct a cLeanup campaign.
  • Standardize means to conduct Sort, Simplify and Scrub at frequent intervals to maintain a workplace in perfect condition.
  • Sustain means to form the habit of always following the first Ss.
  • When the other five Ss are accomplished, Safety permeates everything that takes place in the organization.

Flow: The movement of materials or information along the value stream.

Flowchart: The graphical representation of a process, showing each process step as a bubble or box connected by arrows. Different shapes are used to represent different kinds of process steps. Value Stream Maps are a very sophisticated form of flowcharts.
Flow Days: The number of days from induction until the time the asset is sold. Flow days are often divided and measured as 24 hours, 1,440 minutes or 86,400 seconds, where appropriate.

Flow Minutes: 1. The total quantity of minutes required for one product to flow completely through a particular work process. This includes Process, Set-up, Queue/Sleep and Travel Time. 2. The total minutes available for the product to flow in a given production interval, shift, day. Example: 420 flow minutes per shift, two shift operation = 840 flow minutes or three shift operation = 1,260 flow minutes.

Frequency Chart: The visual representation of the number of times that an event occurs over a given period of time.

Functional Alignment: A production/repair facility that has its work areas arranged by function of process. For example, all welding functions are done in a welding shop and nowhere else. All machine work is performed in a central machine shop.

Functional Layout: The practice of grouping equipment or activities by type of operation performed.

Future State Map: A blueprint for transformation implementation. It reflects how the process should operate after it has been optimized. The future state map can be compared to the Current State or As Is process map.



- G -

Gap Analysis: The difference between a current state or position and a desired state or position.

Gauge R and R: The quantitative assessment of how much variation (repeatability and reproducibility) exist within a measurement system, compared to the actual variability of the process being measured.

Gemba: The place where the action occurs.



- H - 

Heijunka (load leveling):  A method of leveling production at the final assembly line that makes just-in-time production possible. This involves averaging both the volume and sequence of different model types on a mixed-model production line.

Histogram: A bar chart that depicts the frequency of occurrence of numerical or measurement categories of data.



- I -

Input: A resource consumed, utilized, or transformed by a process.

Inspection: The act of comparing a performance to a pre-defined performance standard. Although some form of work verification is often necessary to avoid passing on defects, inspection processes are inherently non-value adding activities.

Integrated Supply Chain: A seamless supply chain of close collaborative relationships with integrated data and business processes. These are internal integration, customer integration, relationship integration, technology and planning integration, measurement integration, and supplier integration.

Integrating Practices: Integrating mechanisms within a company and with supply chain partners that included co-habitation, shared employees, shared information, and shared secrets. Integrating practices can be further divided into practices that extend outward to suppliers and practices that extend outward to customers.

Interaction Costs: The money and time expended whenever people and companies exchange goods, services or ideas.

Inventory: The raw materials, components, WIP and unsold finished goods involved in a process. Inventory that exceeds the amount necessary to keep the production line running is a form of waste.

Inventory Turns: Financial measure of the Cost of Goods Sold (COGS) in a given period, divided by the average inventory for that period. Inventory turns are a measure of how often the process cycles through its inventory.  



- J -

Just-in-Time (JIT): Principles that are fundamental to Time-Based Competition ­ waste elimination, process simplification, set-up and batch-size reduction, parallel processing, and layout redesign are critical skills in every facet of the Lean organization. JIT is a system for producing and delivering the right items at the right time, in the right amounts. The key elements of Just-in-Time are Flow, Pull, Standard Work, and Takt Time.



- K -

Kaizen: Continuous, incremental improvement of an activity to create more value with less waste. The term Kaizen Blitz refers to a team approach to quickly tear down and rebuild a process layout to function more efficiently.

Kanban: A signaling device that gives instruction for production or conveyance of items in a pull system. A Kanban in a production environment often takes the form of a card on a container.

Kitting: Gathering together all of the materials necessary for a process step in a logical sequence so that the person operating the process 1) does not have to hunt for materials or tools and 2) cannot accidently skip a process step by forgetting to get materials for it.



- L - 

Lead Time: The total time a customer must wait to receive a product after placing an order. When a scheduling and production system is running at or below capacity, lead-time and throughput time are the same. When demand exceeds the capacity of a system, there is additional waiting time before the start of scheduling and production and lead time exceeds throughput time.

Lean: An improvement methodology based on defining value as anything the customer will pay for and eliminating any part of the production process that does not contribute to that. This is accomplished through the elimination of waste and the engagement of the workforce behind the idea of improvement.  

Level Loading: The act of investigating the time that all the sub-processes take to complete within a process, then determining the best common denominator of Takt Time, flow days, sub-process times, available manpower, WIP, and un-resolvable constraints. Using this common denominator, try to establish sufficient workstations and manpower, batch quantities, Kanbans for the best asset flow.

Long Term Variation: The observed variability displayed by a process over that has had the opportunity to experience the majority of variation effects that influence it. Long term variation is always wider than short term variation.

Lower Control Limit (LCL): For control charts, the LCL is often defined as three standard deviations below the center point of the process. The lowest above which a value must remain to be in control.

Lower Specification Limit (LSL): The lowest value of a characteristic that is acceptable.



- M -

Main Supply Chain Thread: The primary route of a product’s physical flow through a supply chain network.

Master Black Belt: First and foremost teachers. They also review and mentor Black Belts. Selection criteria for Master Black Belts are quantitative skills and the ability to teach and mentor. Master Black Belts are typically full-time positions.

Mean: Also called the “average,” is the arithmetic midpoint of a population’s value. The mean is calculated by adding the values of all members of the population and dividing by the number of members.

Measurement: The act of obtaining information about an event or object by quantifying it in terms of units (usually time, distance or weight).

Metric: A specific number that is utilized to measure improvement initiatives. Any numerical value related to the performance of a process can be a metric.

Midstream (in the supply chain network): Close to the transformation (make) process.

Monument: A unit or piece of equipment that cannot be moved due to process constraints.

Muda: Anything that interrupts the flow of products and services through the value stream and out to the customer is designated Muda, or waste.



- N -

Non-Value Added (NVA): Any activity that does not contribute to the value of a process as defined by that process’ customer.



- O -

One-Piece Flow: The concept of moving one piece of work at a time between operations within a work cell. This is an ideal state in which parts are manufactured one at a time and flow throughout the manufacturing and supply chain as single units.

Opportunities:The number of characteristics, parameters or features of a product or service that can be classified as either acceptable or unacceptable.

Overproduction: Producing more, sooner or faster than is required by the customer.



- P - 

PDCA (Plan, Do, Check, Act):Cycle of continuous improvement at the heart of kaizen, also known as the Shewhart or Deming Cycle. This cycle revolves around defining the issues and a possible solution, implementing this plan as a trial, observing how it actually behaves, and implementing it.

Paradigms: A paradigm is a state of mind or predisposition to an accepted idea that forms a mental image of how the world or any system in it works, providing the model that allows us to make predictions while also inhibiting freethinking or the recognition of truly new ideas. The term “paradigm shift” refers to the inevitable breakdown of older models based on the accumulated weight of new data that does not fit into that model. A classic example of a paradigm is the pre-Copernican idea that the sun orbits the Earth, which was later replaced by the current heliocentric model.

Pareto Diagram:  The visual representation in a bar chart format listing issues in descending order of importance. This focuses on efforts or the problems that have the greatest potential for improvement by showing relative frequency and/or size in a descending bar graph.

Performance Measure: A dimension of an activity or process—quality cost, cycle time, or other characteristic—that can be used to judge the effectiveness or efficiency of the process against a target or standard value.

Poka-Yoke (mistake proofing): Designing a process in such a way that it is impossible for a defect to be passed on to the next process step. A common error-proofing device is the use of incompatibly shaped diesel and unleaded fuel nozzles, making it impossible to put diesel fuel into a non-diesel car by mistake.

Problem Statement: A concise statement defining the scope of a problem intended to be addressed by a Six Sigma project.

Process: A specific ordering of activities across time and space that is designed to produce a specific outcome. Processes have a beginning, an end, and clearly identified inputs and outputs.

Process Control: The difference between process targets and the variation (range) around these targets.

Process Flow: The order in which a product or asset moves to its sub-processes as it flows through its entire process. Ideally, sub-processes are located in a logical arrangement that follows the order of the entire process, maximizing flow and transparency, while minimizing movement.

Process Flow Diagram: Tool used for defining the steps of a process in order to better understand the importance and value of each step to the customer and identify potential fail points.

Process Hierarchy: A hierarchical decomposition from core business processes to the task level. The number of levels in a hierarchy is determined by the breadth and size of the organization. A large enterprise process hierarchy may include: Core Business Processes, Processes, Sub-Processes, Process Segments, Activities, and Tasks.

Process Kaizen: Improvements made at an individual process or in a specific area. Sometimes called “point kaizen.”

Process Management: Viewing the operation as a set of interrelated work tasks with prescribed inputs and outputs. Provides a structure and framework for understanding the process and relationships and for applying the process-oriented tools. This involves establishing control points, performing measurements of appropriate parameters that describe the process and taking corrective action on process deviations. (Melan, 1985)

Process Mapping: Illustrated description of how things get done, which enables participants to visualize an entire process and identify areas of strength and weaknesses. It helps reduce cycle time and defects while recognizing the value of individual contributions.

Processing Time: The time an item is actually being worked on in a machine or work area.

Product Delivery Process: The stream of activities required to produce a product or service. This activity stream encompasses both planning and execution activities to include demand planning, order management, materials procurement, production, and distribution.

Production Cell: A collection of personnel with various required skills, techniques, machinery, tooling, support, material and sub-processes in a convenient geographical location; committed to the process of a product with a similar function or manufacturer or model, item, part, assembly or asset.

Pull: One of the three (3) elements of JIT. A system in which nothing is produced by an upstream process until the downstream process signals the need for it. Downstream processes usually signal that need by consuming the products of upstream processes.

Push: A production methodology based on the idea of minimizing costs by maximizing productivity, regardless of the capability of downstream processes to absorb the products. Lean practitioners refer to this approach as “pushing” the product at the customer.



- Q -

Quality Function Deployment (QFD): A visual decision-making procedure that develops a common understanding of the voice of the customer and a consensus on the final engineering specifications of the product that has the commitment of the entire team. QFD integrates the perspectives of team members from different disciplines, ensures that their efforts are focused on resolving key trade-offs in a consistent manner against measurable performance targets for the product, and deploys these decisions through successive levels of detail.

Queue Time: The amount of time a product spends awaiting the next design, order processing, or fabrication step.



- R - 

R-squared, or the coefficient of determination: A number produced in regression analysis that indicates the goodness of fit of a linear model. In this case it indicates the fit of the linear relationship between the questions that were above 0.5 correlation and the performance questions. R-squared also indicates the proportion of the variation in the dependent variable explained by the model.

Regression Analysis:A general statistical technique used to analyze the relationship between a dependent variable and independent variables. The objective is to predict a dependent variable from one or more independent variables.

Repeatability: The extent to which repeated measurements of a particular object with a particular instrument will yield consistent results.

Resource Utilization: Using a resource in a way that increases throughput.

Reverse Stream (in a supply chain network): The flow from the customer to the supply chain network—return, repair, refurbishment.

Rework: Activities that are required to correct a defect produced by a process.

Root Cause Analysis: A study to determine the true origin or source of a problem. One tool for root cause analysis is the “Five Whys” process.

Run Chart: A graphical tool for plotting the performance of a characteristic over time.



- S -

Scatter Plot: A diagram in which one attribute of a system is plotted against another to determine if the two are related.

Sequential Changeover: Also sequential set-up. When changeover times are within Takt time, changeovers can be performed one after another in a flow line. Sequential changeover assures that the lost time for each process in the line is minimized to one Takt beat. A set-up team or expert follows the operator, so that by the time the operator has made one round of the flow line (at Takt time), it has been completely changed over to the next product.

Set-up Time: The time required to switch over a process from producing one product to another.

Seven Wastes: Taiichi Ohno’s original catalog of the wastes commonly found in physical production. These are overproduction ahead of demand, waiting for the next processings, unnecessary transport of materials, over-processing of parts due to poor tool and product design, inventories more than the absolute minimum, unnecessary movement by employees during the course of their work, and production of defective parts.

Shewhart Cycle: Plan-Do-Check-Act (PDCA) or Plan-Do-Study-Act (PDSA).

Short Term Variation: The amount of variation displayed by a system over a short period that has not had the opportunity to express all of the sources of variation to which it is subject. The variability over a long term, by definition, is wider than a process’ short term variation.

SIPOC (Suppliers Inputs Process Outputs Customers): A visual representation of a process or system showing the inputs and outputs of the process (rather than the process itself).

Single Minute Exchange of Dies (SMED): Tools and techniques utilized to dramatically reduce the time required to complete the changeover of production and support from one product to another. The long-term objective is always Zero Setup, in which changeovers are instantaneous and do not interfere in any way with continuous flow.

Sigma Score: A measure of process capability defined as the number of standard deviations between the process center and the nearest process limit (see also Z Score).

Six Sigma: A vision of quality that equates with only 3.4 defects per million opportunities for each product or service transaction. The term “six sigma” is a statistical measurement indicating that there are six standard deviations between the process center and the nearest process limit. Actually achieving six sigma performance levels is not optimal for every process.

Sleep Time: The actual time a product, material, or parts of the product are in queue, sit, lay idle, or do not receive value-adding attention. This includes, but is not limited to, time of storage between work areas, storage in work areas, awaiting/queue time competing, for material, parts, resources, personnel and/or equipment, and/or non-duty/non-work hours. Sleep time does not include the time that the material/product is in a sub-process.

Sleeping Material: See Sleep Time. Materials that are sitting idle, not being directly worked on by an employee or machine. Materials sleep when they are idle during working hours or non-working hours.

Spaghetti Charts: A map of the work or production area with lines demonstrating where and how the asset flows or an employee travels. This provides a graphical presentation of necessary and/or unnecessary movement within the process. The lines draw paths that can make the process flow look like spaghetti. Spaghetti Charts also presents an AS IS and TO BE view of the process sorting all movement in a consecutive order as it actually occurs.

Special Cause Variation: Non-random causes of variation that extend beyond the expected normal fluctuations of a process (see also Noise and Common Cause Variation).

Specification Limits: The upper and lower bounds of an acceptable quality for an attribute of a product or service.

Standard Deviation (sigma): A common measure of variability in a process, the standard deviation is the square root of the variance. In a normalized statistical distribution, the standard deviation can also be thought of as the inflection point of the curve, where it shifts from convex to concave.

Standard Work: A precise description of each work activity specifying cycle time, takt time, the work sequence of specific tasks, and the minimum inventory of parts on hand needed to conduct the activity. Deviations from standardized work (variations) are abnormalities whose sources can be quantified and tracked. This information is the basis for continuous improvement activities.

Statistical Management: Collecting numerical history of occurrence factors on optional repairs or processes. Using these statistics to determine the need for accurate quantities of materials to smooth out parts and delays during production fluctuations. Improving forecasting of material shortages by processing historical data that demonstrates trends and warning signs. Using these statistics to determine the need for personnel to fulfill the man-minutes needed to produce the product within the Takt Time (the allowed flow time). Developing measuring and managing tools that add low variable tasks to collectively forecast production time, planning, and completion.

Statistical Process Control: The application of statistical methods to analyze data, study and monitor process capability and performance.

Storyboard: A visual representation of a Lean or problem-solving project that displays critical information.

Sub-Optimization: A condition where gains made in one activity are offset by losses in another activity or activities, created by the same actions creating gains in the first activity.

Supplier: An individual or entity that provides an input to a process (resources or information).

Supply Chain: The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution and cash. (Source: the APICS Dictionary)

Supply Chain Event Management: The process of simulating, responding to, and controlling exceptions to planned and unplanned events in the supply chain. SCEM moves from a single enterprise controlling multiple processes to multiple enterprises that control a single process distributed across trading partners.

Supply Chain Management: The process of developing decisions and taking actions to direct the activities of people within the supply chain toward common objectives.

Supply Chain Management (integrated): Involves designing, managing, and integrating a company’s own supply chain with that of their suppliers and customers. Integrated supply chain management encompasses all activities associated with the flow and transformation of products from the raw materials stage through delivery to the end customer.

Supply Chain Management (traditional): Focused on the management of the supply chain for a single company. Often just the management of suppliers, often by use of coercion, by the large companies that dominant the chain. Management’s objective was to work with a supplier who could provide low cost, high quality, and on-time delivery.

Supply Chain Management Costs: All costs related to management of the supply chain including Material Acquisition Costs, Order Management Costs, Finance and Planning Costs, Supply Chain IT and Admin Costs (Inventory carrying costs included in asset management). (SCOR Model version 5.0 – Supply Chain Council)

Supply Chain Networks (SCN): Groups of supply chains that are voluntarily connected and cooperating for the purpose of serving a specific market or set of customers.

Supply Chain Network Integration: The close coupling of all activities associated with the flow and transformation of products from the raw materials stage through delivery to the end customer.

Supply Chain Operations Reference (SCORÔ): A model, developed by the Supply Chain Council (www.supply-chain.org) that breaks the supply chain into the core processes of Source, Make, Deliver, and Plan (with further defined by more detailed process models within each component area).

Supply Chain Power (Inter-firm): The ability of one firm (the source) to influence the intentions and actions of another firm (the target).

  • Reward – the ability of the source to mediated dividends to the target.
  • Coercion - the ability of the source to mediated punishments to the target.
  • Expert – the perception that one firm holds information or expertise that is valued by another firm.
  • Referent – one form desires identification with another for recognition by association.
  • Legitimate – the target believes in the inherent right of the source to wield influence.
  • Legal legitimate - the target believes in the legal right of the source to wield influence.

Supply Chain Performance Metrics:Standard measures that indicate how well a supply chain performs in terms of performance attributes, such as delivery reliability, flexibility and responsiveness, cost and asset management.



- T -

Takt Time:The available production time divided by the rate of customer demand. For example, if customers demand 240 widgets per day, and the factory operates 480 minutes per day, takt time is two minutes. If customers want two new products designed per month, takt time is two weeks. Takt time sets the pace of production to match the rate of customer demand and becomes the heartbeat of any Lean system.

Task: A single event or step within a process.

Throughput Time: The time required for a product/service to proceed from concept to launch, order to deliver or raw materials into the hands of the customer. This includes both processing and queue time.

Total Productive Maintenance (TPM): A series of methods, originally pioneered to ensure that every machine in a production process is always able to perform its required tasks so production is never interrupted.

Toyota Production System (TPS): A production system developed by Toyota based on the idea that the ideal condition for production is a coordination of all component parts adding value without creating waste. This was popularized in the book “Lean Thinking” and forms the basis of Lean Manufacturing. TPS is based on Just-in-Time and jidoka.

Trading Partner: An independent organization that plays an integral role within the supply chain network and whose business fortune depends on the end-to-end success of the supply chain network. Tier one distributors, manufacturing centers, contract manufacturers, and 3PL logistics organizations are good examples of trading partners.

Travel Distance & Time: The distance between two points (induction and sale) of an asset. The distance an asset and all of its parts collectively move within its processes and the time required completing the entire journey. Goal: Reduce travel, thus reducing travel time.

Transaction Cost Theory: Suggests that firms organize exchanges internally that might otherwise be conducted in markets due to the costs associated with an exchange (transfer) of a good or service in the market (costly negotiating and monitoring costs that may accompany exchanges conducted within the market).

Tree Diagram:Graphically shows any broad goal broken into different levels of detailed actions. It encourages team members to expand their thinking when creating solutions.

Turn-Back Analysis: Examination of the flow of a product through a set of production operations to see how often it is sent backwards for rework or scrap.



- U -

Upper Specification Limit (USL): The highest value of a characteristic from a process that is acceptable.

Upstream (in the supply chain network): Closer to the supply base.



- V -

Value: The worth placed on a particular good or service, as defined by the customer. Generally speaking, value refers to any property of a good or service that a customer is willing to pay for.

Value Adding: Shaping material into something a customer will buy by performing actions on it. Value adding time is anything that contributes to this through actually touching a product.

Value-Added Analysis: With this activity, a process improvement team strips the process down to it essential elements. The team isolates the activities that in the eyes of the customer actually add value to the product or service. The remaining non-value adding activities ("waste" are targeted for extinction.

Value Stream: A sequence of activities that connect to one another, moving a specific product or service from beginning to end: from concept to launch, order to delivery or raw materials into the hands of the customer. Value streams extend outside of specific organizations. For example, the value stream involved in creating a can of soda includes mining and refining aluminum, transportation networks, processing corn syrup, etc.

Value Stream Mapping (VSM): The process of breaking down a process into all of its component steps, detailing the Value Added and Non-Value Added time for each step, as well as the support facilities necessary for that process step to function. VSMs the sources of waste and eliminates them by implementing a future state value stream that can become reality within a short time.

Variable Data: Data where values are continuous rather than discreet (or binary). Variable data can be meaningfully subdivided into smaller units.

Variance: A specifically defined mathematical measure of variability in a data set or population. The variance is the standard deviation squared. Variance should not be confused with variability, which refers to the characteristic of a process to take on different values when it is repeated.

Vendor Managed Inventory (VMI): A just-in-time technique whereby a supplier of goods is able to access the inventory records of a customer to determine whether to make a shipment to that customer. The vendor may be able to replenish the inventory stock and update the customer’s inventory records accordingly.

Vertically Integrated Businesses: Companies organized to minimize the total costs of transformation and interaction through the ownership of suppliers and sometimes customers.

Vertical Organization: An organization whose members look up to bosses instead of out to customers. Loyalty and commitment is given to functional fiefdoms, not the overall corporation and its goals.

Visual Control: The use of visual indicators to ensure that a process is operating as expected. This can function either for a single process operator (such as the dashboard indicators in your car) or as a process monitoring device that helps keep a group coordinated (such as a sports scoreboard).

Voice of the Customer (VOC): The needs, wants and desires of the recipient of a process output. This is usually expressed as specifications, expectations or requirements

Voice of the Process (VOP): The performance and capability of a process to perform in relation both to customer and business needs. This is usually expressed as an efficiency or effectiveness metric.



- W -

Waste: Anything that uses resources, but does not add value to the product or service. Taiichi Ohno originally defined the seven primary types of waste as: Overproduction, Waiting, Transport, Overprocessing, Inventory, Motion, and Defects. In more recent formulations (such as the DOWNTIME model), an eighth waste of “under-utilizing people” has been added.

Work in Progress (WIP): Product or inventory in various stages of completion along the process steps, from raw material to completed product. Any material that is no longer raw materials, but is not yet finished goods is WIP.

Work Standard Document: A Work Standard Document defines the interaction of man, materials, tools, equipment and machines in the construction of the product. A detailed written record of the motion of the employee/operator in the sequence of the steps used in making the product according to the technical data. Work Standard Document usually contains the true value mapping of the process of the product that includes information on cycle time, sleep time, ownership changes, value vs. waste, travel time and distance.



- X -

X: An input characteristic of a process. This is usually expressed as Y = f(X), meaning that the output (Y) is a function of the inputs (X).



- Y -

Y: An output characteristic of a process. This is usually expressed as Y = f(X), meaning that the output (Y) is a function of the inputs




- Z -

Z-score: The Z-score is defined as the number of standard deviations from the center point of a normalized process to the nearest specification limit. A process’ Z-score is equivalent to its sigma level. For example, if Z = 1.67 for a process, then this can also be expressed by saying that: 1) there are 1.67 standard deviations from the process center to the nearest limit, 2) the “sigma level” of the process is 1.67 and 3) it is a “1.67 sigma process.”