Your FREE CPIM Flashcards 2026 – 200+ Cards

CPIM Flashcards

CPIM

Certified in Planning and Inventory Management — ASCM's (formerly APICS) credential for internal manufacturing planning, scheduling, and inventory management.

ASCM

Association for Supply Chain Management — the body (formerly APICS) that owns and administers the CPIM and CSCP credentials.

CPIM 9.0

The current single-exam version (effective June 1, 2026). One comprehensive exam of 150 questions covering 9 content areas, taken in one 3.5-hour sitting.

CPIM vs. CSCP

CPIM = internal operations (planning, scheduling, inventory inside the firm). CSCP = end-to-end, external supply chain (supplier to customer, design and strategy).

CPIM passing score

A scaled score of 300 on a 200–350 scale (200–299 fail, 300–350 pass). Results are equated across forms, so the number-correct cut varies by form.

CPIM exam length

150 questions (130 scored + 20 unscored pretest), with a 3.5-hour (210-minute) time limit. No prerequisites are required to sit the exam.

Nine CPIM content areas

(1) Align the Supply Chain to Strategy, (2) S&OP, (3) Demand, (4) Internal Supply, (5) External Supply, (6) Inventory, (7) Detailed Schedules, (8) Distribution, (9) Quality, CI & Technology.

Independent demand

Demand for an item that is not derived from another item — it must be forecast (e.g., a finished good or a service spare part).

Dependent demand

Demand for a component that is calculated (not forecast) from the demand for its parent item via the bill of materials — the basis of MRP.

Order qualifiers

The minimum characteristics a product must have just to be considered by a customer (the price of entry to the market).

Order winners

The characteristics that actually win the customer's order over competitors (e.g., delivery speed, price, or flexibility) — they dictate where the supply chain must excel.

SCOR model

Supply Chain Operations Reference model — a standard framework with processes Plan, Source, Make, Deliver, Return (and Enable) and benchmark metrics.

Cash-to-cash cycle time

Days of inventory + days of receivables − days of payables. The time from paying for materials to collecting cash from sales; lower (even negative) ties up less cash.

Make-to-stock (MTS)

Finished goods are built to forecast and held in inventory; the customer buys from stock. Short delivery lead time, high finished-goods inventory.

Make-to-order (MTO)

Products are built only after a customer order, from raw materials/components held in stock. Lower finished-goods inventory, longer delivery lead time.

Assemble-to-order (ATO)

Common modules/options are stocked, then assembled into the final configuration after the order — postpones differentiation to manage variety.

Engineer-to-order (ETO)

The product is designed and engineered to a unique customer specification after the order is received — the longest lead time, lowest inventory.

Customer order decoupling point

The point in the value stream where a specific customer order is linked to production. Upstream is forecast-driven; downstream is order-driven.

Postponement

Delaying the point of product differentiation (e.g., dyeing or final assembly) until customer demand is known — cuts finished-goods inventory while keeping variety.

Value chain analysis

Decomposing the firm into discrete primary and support activities to find where value is added and where cost or differentiation advantage exists.

Triple bottom line

Measuring sustainability across three dimensions: People (social), Planet (environmental), and Profit (economic).

S&OP

Sales and Operations Planning — a monthly, cross-functional process that balances demand and supply at an aggregate (family) level over a 3–18 month horizon, tied to the business plan.

S&OP five-step cycle

(1) Data gathering, (2) Demand planning, (3) Supply planning, (4) Pre-S&OP reconciliation, (5) Executive S&OP meeting (decisions).

Aggregate planning

Planning at the product-family level (not individual SKUs) to set overall production, inventory, and workforce levels over the medium-term horizon.

Level production strategy

Hold production and workforce constant; absorb demand swings with inventory (build in slow periods, draw down in busy ones).

Chase production strategy

Match production to demand each period by varying workforce, hiring/firing, overtime, or subcontracting — minimizes inventory but raises capacity-change costs.

Hybrid (mixed) strategy

A blend of level and chase — usually lower total cost than either pure strategy because it balances inventory cost against capacity-change cost.

Demand shaping

Influencing demand to better match supply using levers like pricing, promotions, product mix, and lead-time quoting.

Integrated Business Planning (IBP)

The mature, financially integrated evolution of S&OP — extends the process to a full P&L view and longer strategic horizon.

Production plan

The output of S&OP: aggregate, family-level production rates that the master scheduler later disaggregates into specific end items.

Four characteristics of a good forecast

Forecasts should: be stated with an estimate of error, be more accurate for groups than items, be more accurate for near than far horizons, and (no forecast is perfect) — always include error.

Simple moving average

Average of the demand over the last n periods, used as the forecast. Responds slowly; a larger n smooths more but lags trends.

Exponential smoothing

New forecast = old forecast + alpha × (actual − old forecast). The smoothing constant alpha (0–1) weights recent demand; higher alpha responds faster.

Smoothing constant (alpha)

The weight (0–1) on the most recent demand in exponential smoothing. High alpha = more responsive but noisier; low alpha = more stable but slower.

MAD (mean absolute deviation)

The average of the absolute forecast errors. A common measure of forecast accuracy that ignores the sign of each error.

MAPE (mean absolute percentage error)

The average of the absolute errors expressed as a percent of actual demand — lets you compare accuracy across items of different size.

Tracking signal

Running sum of forecast errors ÷ MAD. It detects bias: if it drifts outside set control limits (e.g., ±4), the forecast is consistently high or low and needs review.

Seasonal index

Average demand for a period (e.g., July) ÷ overall average demand. A value above 1 means above-average; below 1 means below-average.

Time-series decomposition

Breaking a demand series into level, trend, seasonal, and irregular (random) components to forecast each separately.

Bullwhip effect

The amplification of demand variability as orders move upstream in the supply chain, caused by batching, shortage gaming, price fluctuation, and lack of shared demand data.

CPFR

Collaborative Planning, Forecasting, and Replenishment — trading partners share data and jointly create one demand forecast and replenishment plan.

Delphi method

A qualitative forecasting technique: structured rounds of anonymous expert input converge on a consensus — used when no historical data exists (new products/technologies).

Pyramid forecasting

Reconciling forecasts up and down the product hierarchy so item-level and aggregate (family/dollar) forecasts agree.

Master Production Schedule (MPS)

A statement of which specific end items will be built, in what quantity, in which period — the disaggregation of the production plan that drives MRP.

Material Requirements Planning (MRP)

The technique that explodes the MPS through the bill of materials, nets against inventory, and offsets by lead time to plan component orders.

Three primary MRP inputs

(1) The master production schedule, (2) the bill of materials, and (3) inventory records (on-hand and on-order).

Bill of materials (BOM)

The structured list of every component, subassembly, and raw material — with the quantity per — needed to build one parent item.

MRP netting

Net requirements = gross requirements − scheduled receipts − projected on-hand (plus safety stock). Only the net is planned for ordering.

Lead-time offsetting

Scheduling a planned order release earlier than its need date by the item's lead time, so the order arrives exactly when required.

Planned order release

The MRP recommendation to start (release) an order in a given period to meet a future net requirement after lead-time offset.

Projected available balance (PAB)

The running estimate of inventory on hand at the end of each period in a time-phased MRP/MPS record; a negative PAB signals an unmet requirement.

Rough-cut capacity planning (RCCP)

A quick, approximate check that the MPS is feasible against critical (bottleneck) resources, using a bill of resources — done before committing to the MPS.

Bill of resources

The data structure RCCP uses: the key resource hours required per unit of a master-scheduled item.

Capacity Requirements Planning (CRP)

Detailed capacity planning that uses planned and released orders, routings, and work-center data to compute the load on every work center — more precise than RCCP.

Available-to-promise (ATP)

The uncommitted portion of inventory and planned MPS supply that sales can promise to new customer orders without changing the schedule.

Capable-to-promise (CTP)

Goes beyond ATP: checks whether material AND capacity could be obtained to make additional product to meet a request the current schedule can't.

Time fences

Boundaries in the planning horizon (e.g., frozen, slushy, liquid) that govern who may change the schedule and how, balancing stability against responsiveness.

Frozen zone

The nearest, most restrictive time fence where material and capacity are committed; changes are highly discouraged because they disrupt execution.

Final assembly schedule (FAS)

In ATO/MTO, the schedule that plans the final operations combining stocked modules/options into the specific configured end product after the order.

Planning bill / modular BOM

An artificial bill used in ATO to master-schedule common modules and options (with planning percentages) rather than every end-item combination.

Firm planned order (FPO)

A planned order whose quantity and timing a planner has fixed so MRP will not automatically reschedule it (e.g., across a supplier shutdown).

Closed-loop MRP

An MRP system extended with capacity planning and feedback from the shop floor and suppliers, so plans and execution stay in sync.

Vendor-managed inventory (VMI)

An arrangement where the supplier monitors the buyer's inventory and decides replenishment timing and quantity, using shared usage/inventory data.

Supplier relationship management (SRM)

Segmenting suppliers and developing differentiated, often collaborative relationships with strategic ones to capture value beyond transactional price.

Total cost of ownership (TCO)

The full cost of a purchased item over its life — price plus acquisition, logistics, quality, downtime, and end-of-life costs — not just unit price.

Landed cost

The total cost to get a purchased item to the buyer's door: unit price plus freight, duties, insurance, and handling. A low offshore price can carry high landed cost.

Electronic data interchange (EDI)

The computer-to-computer exchange of standard business documents (POs, invoices, ASNs) between trading partners — compresses the order cycle and cuts errors.

Blanket purchase order

An agreement for an estimated total quantity of an item over a period at fixed pricing/terms; releases draw against it — less paperwork than a PO per delivery.

Supplier scorecard

A structured, weighted evaluation of supplier performance across measures such as quality, on-time delivery, cost, and service.

Sole sourcing vs. single sourcing

Sole sourcing = only one source exists (no choice). Single sourcing = the firm chooses to use one of several available suppliers.

Make-or-buy decision

Choosing to produce a component in-house or purchase it externally, weighed on total cost, capacity, capability, control, and strategic risk.

Third-party logistics (3PL)

Outsourcing logistics functions (warehousing, transportation, fulfillment) to a specialist provider.

Intermodal transportation

Moving freight in a single container across multiple modes (truck, rail, ship) without handling the goods themselves at each transfer.

Anticipation inventory

Stock built ahead of a predictable peak in demand (e.g., a seasonal high or a planned promotion) to level production.

Cycle stock

The inventory that results from ordering in batches (lots) rather than one unit at a time; it averages half the lot size.

Safety stock

Buffer inventory held to protect against variability in demand or supply (lead time), reducing the chance of a stockout to a target service level.

Pipeline (transit) inventory

Inventory that exists because goods are physically moving between locations and are not yet available for use.

Carrying (holding) cost

The cost of holding inventory: the largest component for high-value items is usually the cost of capital, plus storage, insurance, obsolescence, and shrinkage.

Economic order quantity (EOQ)

The order size that minimizes total annual ordering plus carrying cost. EOQ = √(2 × annual demand × order cost ÷ unit carrying cost).

EOQ assumptions

Constant, known demand; constant lead time; a fixed order cost and carrying cost; no quantity discounts; the entire order arrives at once.

Reorder point (ROP)

ROP = average demand during lead time + safety stock. When inventory position falls to the ROP, a replenishment order is triggered.

Continuous review (fixed-order-quantity)

A perpetual system that orders a fixed quantity (the EOQ) whenever inventory hits the reorder point — order timing varies, quantity is fixed.

Periodic review (fixed-interval)

Stock is reviewed at set intervals and an order brings it up to a target level; quantity varies. It needs more safety stock (longer protection period).

ABC analysis (Pareto)

Classifying items by annual dollar usage: ~20% of items (A) account for ~80% of value and get tight control; many C items get loose control.

Cycle counting

Auditing a portion of inventory records continuously on a schedule (often by ABC class) rather than one large annual physical count, to keep record accuracy high.

Inventory record accuracy (IRA)

The agreement between recorded and actual on-hand quantities, within a set tolerance; high IRA (e.g., 95–99%) is essential for MRP to work.

Inventory turnover

Cost of goods sold ÷ average inventory (or annual usage ÷ average inventory). Higher turns mean leaner inventory and faster cash conversion.

Days of supply

Average on-hand inventory ÷ average daily usage. How many days current stock will last; the inverse direction of inventory turns.

Lot-for-lot (L4L)

An MRP lot-sizing rule that orders exactly the net requirement each period — no cycle stock, but the most order setups.

Period order quantity (POQ)

A dynamic lot-sizing rule that orders a fixed number of periods of demand at a time, combining several net requirements into one order.

FIFO vs. LIFO

Inventory valuation methods. FIFO expenses oldest costs first; LIFO expenses newest first (lowers taxable income when prices rise). Valuation does not change physical flow.

Two-bin system

A simple visual reorder: when the first bin empties, reorder while drawing from the reserve (second) bin sized to cover the lead time.

Min-max system

When stock falls to the minimum, order enough to reach the maximum. The order quantity varies with how far below the minimum stock has fallen.

Kanban

A visual pull signal (card, bin, or electronic) that authorizes replenishment of exactly what was consumed — replenishment is triggered by actual use, not a forecast.

Throughput (Theory of Constraints)

The rate at which the system generates money through sales — revenue minus truly variable cost — not the rate of production.

Theory of Constraints (TOC)

A method that maximizes system throughput by managing the single bottleneck (constraint), since the constraint governs the output of the whole system.

Five focusing steps (TOC)

(1) Identify the constraint, (2) Exploit it, (3) Subordinate everything else to it, (4) Elevate the constraint, (5) Repeat — don't let inertia create a new constraint.

Drum-buffer-rope (DBR)

TOC scheduling: the constraint is the drum (sets the pace), the buffer protects it (and shipments) with time, and the rope ties material release to the drum's rate.

Input/output control

Comparing planned vs. actual input and output at a work center to manage queue and lead time; releasing more input than output grows the queue.

Takt time

Available production time ÷ customer demand for that time. The pace at which units must be completed to exactly meet demand.

Cycle time vs. takt time

Cycle time is how long a process actually takes to make a unit; takt time is the rate demand requires. Cycle time must be at or below takt time to keep up.

Line balancing

Assigning tasks (respecting precedence) to workstations so each station's time is close to takt time, minimizing idle time and the number of stations.

Bottleneck

The resource whose capacity is less than the demand placed on it; it limits the throughput of the entire system.

Forward scheduling

Scheduling that starts from today (or the start date) and computes the earliest completion date by moving forward through operations.

Backward scheduling

Scheduling that starts from the due date and works back to find the latest start date for each operation that still meets the date.

Production activity control (PAC)

Managing the execution of shop orders through priority control (sequencing jobs) and capacity control (input/output) on the shop floor.

Dispatch list

A prioritized list of jobs to run at a work center, regenerated frequently so the sequence reflects the latest priorities and due dates.

Operation (manufacturing) lead time

Made up of queue, setup, run, wait, and move time. Queue is usually the largest element, so reducing lot sizes and queues cuts lead time most.

Little's law

Work-in-process = throughput rate × flow time (in a stable system). To cut flow time you must cut WIP or raise the throughput rate.

Finite vs. infinite capacity scheduling

Finite loading never exceeds a resource's available capacity (it pushes work out); infinite loading assumes unlimited capacity and may overload a work center.

Lot splitting / overlapping

Moving part of a lot to the next operation before the whole lot finishes (overlapping) to shorten manufacturing lead time.

Distribution Requirements Planning (DRP)

Applies time-phased MRP logic to the distribution network: it explodes each location's demand and lead time up the network to plan replenishment to central supply.

DRP vs. reorder-point distribution

DRP is time-phased and forward-looking (it anticipates future needs network-wide); a reorder-point system reacts only when stock at one location hits a trigger.

Push vs. pull distribution

Push allocates inventory to locations from central forecasts; pull lets each location order based on its own demand. DRP coordinates network replenishment.

Risk pooling

Consolidating inventory (e.g., centralizing distribution centers) reduces total safety stock because aggregated demand variability is proportionally smaller.

Distribution network design trade-off

More distribution centers shorten delivery distance and improve service but raise total inventory and facility cost; fewer centers lower inventory but lengthen transport.

Enterprise Resource Planning (ERP)

Integrated software giving every function one shared, real-time database — extending closed-loop MRP across finance, sales, HR, and the supply chain.

MRP II

Manufacturing Resource Planning — extends closed-loop MRP to translate the operating plan into financial terms and simulate the whole business; ERP's predecessor.

Six Sigma

A data-driven methodology to reduce process variation and defects toward 3.4 defects per million opportunities, run through the DMAIC cycle.

DMAIC

Six Sigma's improvement cycle: Define, Measure, Analyze, Improve, Control — Improve follows Measure/Analyze so changes target the verified root cause.

Value stream mapping (VSM)

A lean tool that maps the material and information flow of a process — first the current state — to make waste (especially wait time) visible.

Cost of quality

Prevention + appraisal (cost of good quality) and internal + external failure (cost of poor quality). Spending on prevention reduces far costlier failure costs.

Statistical process control (SPC)

Using control charts to separate common-cause (random) variation from special-cause (assignable) variation so only special causes are acted on.

Control chart out-of-control signal

A point beyond the control limits, or a run of points (e.g., seven in a row) on one side of the center line, indicates a special (assignable) cause.

PDCA

Plan-Do-Check-Act — the iterative kaizen improvement cycle; the Do step is run on a small/trial scale before full rollout.

Poka-yoke

Mistake-proofing — designing a process or part so an error is impossible or immediately obvious (e.g., a connector that fits only one way).

5S

A workplace organization method: Sort, Set in order, Shine, Standardize, Sustain — Sort removes unneeded items; Set in order arranges what's left for efficiency.

Kaizen

Continuous improvement through many small changes, engaging frontline workers who know the process best.

Total quality management (TQM)

An organization-wide approach to continuous quality improvement built on customer focus, fact-based decisions, and engaging every employee.

Just-in-time (JIT)

A lean philosophy of producing and delivering only what is needed, when needed, in the quantity needed — exposing and eliminating waste and excess inventory.

Lean (seven wastes)

Overproduction, waiting, transport, over-processing, inventory, motion, and defects (often plus unused talent) — the targets of lean elimination.

Capacity

The amount of work a resource can accomplish in a given time. Capacity must be planned at each level: resource (production plan), rough-cut (MPS), and detailed (CRP).

Available capacity

= number of work centers/machines × hours × utilization × efficiency. The realistic output a resource can deliver, not its theoretical maximum.

Load vs. capacity

Load is the work assigned to a resource; capacity is what it can do. When load exceeds capacity, the schedule is infeasible and must be re-leveled.

Master scheduler's job

Keeps the MPS realistic and stable: disaggregates the production plan into buildable end items, manages time fences, and reconciles demand against capacity.

Service level (inventory)

The probability of not stocking out during the lead time; higher service levels require disproportionately more safety stock (driven by the demand standard deviation).

Quantity discount decision

Compare the savings from a price break against the extra carrying cost of the larger order; order the discount quantity only if total cost is lower.

Obsolescence / dead stock

Inventory that can no longer be sold or used; a carrying-cost risk that ABC review, demand planning, and FEFO rotation aim to minimize.

Forecast vs. demand vs. order

A forecast is an estimate of future demand; demand is what customers actually want; an order is a committed request. MPS consumes forecast with actual orders.

Demand consumption / netting

As real customer orders arrive, they consume the forecast in the MPS so total demand is not double-counted.

Order point vs. MRP

Order-point (reorder-point) systems suit independent-demand items with steady usage; MRP suits dependent-demand components with lumpy, derived requirements.

Decoupling inventory

Buffer stock placed between operations so a problem at one step doesn't immediately starve the next — it lets stages run more independently.

Hedge inventory

Stock built to protect against a specific anticipated event such as a price increase, a strike, or a supply disruption.

Fill rate

The fraction of demand met immediately from on-hand stock without a backorder — a customer-service measure distinct from inventory accuracy.

Mean time between failures (MTBF)

The average operating time between failures of a repairable item — used to plan service-part inventory and maintenance.

Setup (changeover) reduction

Cutting the time to change a resource from one product to another (SMED) lowers the economic lot size, enabling smaller lots and lower inventory.

Mixed-model scheduling

Sequencing several models in small repeating lots on one line (e.g., A-B-A-C) to level output and smooth component demand, rather than big batches.

Critical-ratio sequencing

A dispatching rule = time remaining ÷ work remaining. A ratio below 1 means the job is behind schedule and should be expedited.

Earliest due date (EDD) rule

A sequencing rule that runs jobs in order of due date — minimizes maximum lateness when the goal is to meet every deadline.

Slack-per-operation rule

A dispatching rule dividing each job's slack (time until due minus work remaining) by its remaining operations; the lowest value runs first.

Aggregate vs. detailed planning levels

Top-down: business plan → S&OP (production plan, families) → MPS (end items) → MRP (components) → PAC (shop floor). Each adds detail and shortens horizon.

Demand time fence

The nearest fence inside which the MPS is driven by actual customer orders only (the system stops adding forecast), protecting near-term commitments.

Sustainability in operations

Designing processes and supply chains to reduce environmental and social harm (the People/Planet legs) while remaining profitable — increasingly an order qualifier.

Process choices (job/batch/line/continuous)

Job shop (high variety, low volume) → batch → repetitive line → continuous flow (low variety, high volume). Volume and variety drive the right process.

Product-process matrix

Aligns product volume/variety with process type; a mismatch (e.g., a job shop for a commodity) raises cost or limits flexibility.

Competitive priorities

Cost, quality, delivery (speed/reliability), and flexibility — the capabilities a firm chooses to compete on, which shape the operations strategy.

Five Forces (Porter)

Industry attractiveness analyzed by: threat of new entrants, supplier power, buyer power, threat of substitutes, and rivalry — shapes supply-chain strategy.

SWOT analysis

Examining internal Strengths and Weaknesses against external Opportunities and Threats to set strategy and prioritize actions.

Key performance indicator (KPI)

A quantifiable measure tied to a strategic objective. Good KPIs are aligned to goals, balanced, and drive the intended behavior.

Supply chain risk types

Routine variability (everyday demand/supply swings) vs. disruption risk (rare, high-impact events). Different responses: buffers for variability, resilience/redundancy for disruptions.

Risk mitigation strategies

Accept, avoid, transfer (insurance/contract), or mitigate (safety stock, multi-sourcing, redundancy). Match the response to the risk's probability and impact.

Vertical integration

Owning more of the supply chain — backward (toward suppliers) or forward (toward customers) — to gain control, at the cost of flexibility and capital.

Core competency

A unique capability central to a firm's competitive advantage; activities outside it are candidates to outsource.

Functional vs. innovative products (Fisher)

Functional products (stable demand) need an efficient supply chain; innovative products (uncertain demand) need a responsive one. Match the chain to the product.

Demand planning vs. demand management

Demand planning forecasts future demand; demand management also shapes and prioritizes demand (allocation, lead-time quoting) to fit available supply.

Resource planning (resource bill)

The long-range capacity check tied to the production plan — validates aggregate, family-level plans against key resources before the MPS exists.

Pre-S&OP (reconciliation) meeting

The step where demand, supply, and finance reconcile plans and frame decisions/scenarios so the executive meeting can decide quickly.

Executive S&OP meeting

The final step where leadership approves one integrated demand/supply/financial plan and resolves the gaps the pre-S&OP meeting raised.

Product family

A group of products planned together in S&OP, usually grouped by how they consume capacity or by market, so aggregate planning is manageable.

Financial reconciliation (S&OP)

Translating the operating plan from units into dollars so the S&OP plan can be checked against the business plan and budget.

Subcontracting

Hiring an outside firm to produce output during demand peaks — a chase-strategy lever that flexes capacity up without permanent hiring.

Weighted moving average

A moving average that gives more weight to recent periods, so the forecast responds faster to recent demand than a simple moving average.

Trend-adjusted exponential smoothing

Double exponential smoothing that adds a trend term so the forecast keeps pace with sustained growth or decline (plain smoothing lags a trend).

Forecast error (bias vs. accuracy)

Bias is consistent over- or under-forecasting (caught by the tracking signal); accuracy is the size of error (measured by MAD/MAPE). Both matter.

Mean squared error (MSE)

The average of squared forecast errors; it penalizes large errors more heavily than MAD, so it flags methods with occasional big misses.

Qualitative vs. quantitative forecasting

Qualitative (Delphi, market research, sales-force estimates) suits new products with no data; quantitative (time series, causal) suits items with demand history.

Causal (associative) forecasting

Forecasting demand from related variables (e.g., regression on price or economic indicators) rather than only past demand.

Sales-force composite

A qualitative forecast built from estimates by salespeople close to customers; useful but prone to optimism or sandbagging bias.

Demand sensing

Using near-real-time signals (POS data, orders) to update short-term forecasts faster than traditional statistical methods.

Lumpy / intermittent demand

Demand with many zero periods and occasional spikes (e.g., spare parts); needs special methods (e.g., Croston's) rather than simple smoothing.

Gross requirements (MRP)

The total demand for a component in a period before any supply is netted — the top row of the time-phased MRP record.

Scheduled receipts (MRP)

Open orders already released to a supplier or the shop, due to arrive in a future period — netted against gross requirements before planning new orders.

Planned order receipt (MRP)

The quantity MRP plans to receive in a period to cover a net requirement; offsetting it back by lead time gives the planned order release.

Low-level coding

Assigning each item the lowest level at which it appears in any BOM so MRP nets all its requirements before exploding it.

Pegging

Tracing a component's requirement back up to the parent order or end item that caused it — used to assess the impact of a change.

Net change vs. regenerative MRP

Regenerative MRP re-plans everything periodically; net-change MRP re-plans only items affected by a change — faster but can accumulate error.

Engineering change order (ECO)

A controlled change to a product's design or BOM; planners manage effectivity dates so the new configuration phases in without scrapping good stock.

Utilization vs. efficiency

Utilization = hours worked ÷ hours available. Efficiency = standard hours earned ÷ hours worked. Both scale theoretical capacity down to realistic available capacity.

Rated (calculated) capacity

Available time × utilization × efficiency — the realistic capacity used in capacity planning, versus demonstrated capacity from actual output history.

Master schedule grid rows

Forecast, customer orders, projected available balance, available-to-promise, and the master production schedule (MPS) line.

Two-level master schedule

In ATO, master-scheduling common modules and a planning bill at one level and the final assembly schedule (specific configurations) at another.

Request for quotation (RFQ) / proposal (RFP)

RFQ asks suppliers to price a defined item; RFP asks suppliers to propose a solution. Both are competitive-bidding tools in supplier selection.

Supplier segmentation

Classifying suppliers (e.g., by spend and risk) so strategic suppliers get partnership while routine ones are managed transactionally.

Early supplier involvement (ESI)

Bringing key suppliers into product design early to improve manufacturability, cost, and lead time before the design is locked.

Incoterms

Standard international trade terms (e.g., FOB, CIF, DDP) that define where risk and cost transfer between buyer and seller in a shipment.

Advance shipping notice (ASN)

An EDI message a supplier sends before a shipment arrives, listing its contents so receiving can prepare and reconcile.

Spend analysis

Reviewing what is bought and from whom to find consolidation, standardization, and savings opportunities — the start of strategic sourcing.

Consignment inventory

Stock the supplier owns and stores at the buyer's site; the buyer pays only when it consumes the item — frees the buyer's working capital.

Cost-based vs. price-based supplier eval

Price-based compares quoted prices; cost-based (TCO) compares total cost including quality, logistics, and risk — the better basis for strategic items.

Stockless purchasing / JIT II

Supplier delivers small, frequent quantities directly to the point of use (sometimes with an on-site rep), minimizing buyer-held inventory.

Lot-size inventory

Another name for cycle stock — the inventory created by ordering or producing in batches larger than immediate need.

Inventory turns vs. days of supply

They are inverses: days of supply = 365 ÷ annual turns. Eight turns ≈ 45 days of supply; more turns means fewer days of stock on hand.

Quantity discount / price-break analysis

Recompute total cost (purchase + ordering + carrying) at each price-break quantity; choose the quantity with the lowest total cost, not just the lowest price.

Period order quantity interval

POQ first divides EOQ by average demand to find how many periods of demand to combine per order, then orders that many periods' net requirements at a time.

Service-part inventory

Spares stocked to support installed equipment; justified by uptime/criticality (and MTBF) even when usage is rare and slow-moving.

FEFO (first-expired-first-out)

Issuing inventory by earliest expiration date first to minimize spoilage/obsolescence of dated stock.

Inventory accuracy vs. inventory value

Record accuracy is the agreement of recorded vs. counted quantity (within tolerance) per item; inventory value is the total dollar amount on the books.

Tolerance (cycle counting)

The allowable difference between recorded and counted quantity for a record to still count as accurate; tighter for high-value A items.

Inventory position

On-hand + on-order − backorders. The figure a reorder-point system compares against the ROP (not just on-hand) to decide when to order.

Distribution inventory

Finished goods held in the distribution network (DCs, field warehouses) to serve customers quickly — planned by DRP.

Returns / reverse logistics

The process of handling returned, recalled, or end-of-life product — including disposition (restock, repair, scrap) — now part of the inventory module.

Number of kanban cards

Cards = (average demand during lead time × (1 + safety factor)) ÷ container size. Removing a card deliberately exposes problems (continuous improvement).

Constraint buffer (DBR)

Protective time placed before the constraint so it never starves; the shipping buffer protects the due date. Buffers are sized in time, not units.

Buffer management (zones)

Dividing a DBR buffer into green/yellow/red zones; penetration into red signals the constraint may starve and triggers expediting.

Queue time

Time a job waits before an operation; usually the largest part of manufacturing lead time, so cutting queues (smaller lots, less WIP) cuts lead time most.

Backflushing

Deducting component inventory automatically based on the count of finished units produced, rather than reporting each issue — common in repetitive/lean lines.

Gantt chart

A bar chart of scheduled vs. actual job timing across resources — a basic visual scheduling and load-tracking tool.

Input/output control purpose

Keeps queues and lead times under control by matching released input to a work center's output capacity; releasing more input than output grows the queue.

Shortest processing time (SPT) rule

A sequencing rule that runs the quickest jobs first — minimizes average flow time and WIP, but can starve long jobs.

First-come, first-served (FCFS)

A sequencing rule that processes jobs in arrival order — simple and fair but ignores due dates and processing time.

Available-to-promise vs. shipping buffer

ATP is the uncommitted supply sales can promise; the shipping buffer is protective DBR time before shipment. Don't confuse the two.

Bill of distribution

The DRP structure showing how distribution centers source from central supply (the distribution analogue of a bill of materials).

Time-phased order point (TPOP)

Using DRP/MRP time-phasing logic on an independent-demand item so future needs are anticipated rather than waiting for a reorder-point trigger.

Cross-docking

Moving received goods directly from inbound to outbound with little or no storage — speeds flow and cuts handling and inventory in distribution.

Hub-and-spoke network

Consolidating flows through a central hub before fanning out to regional spokes — lowers transport cost per unit through consolidation.

Available-to-promise in distribution

Coordinating DRP across the network so a customer order can be promised from the location best able to fill it on time.

Order management / order fulfillment

Receiving, allocating, and shipping customer orders against available inventory and promised dates — the customer-facing side of distribution.

Total transportation cost vs. service trade-off

Locating DCs closer to customers improves service but raises facility/inventory cost; network design balances transport, inventory, and service.

Cause-and-effect (fishbone) diagram

An Ishikawa diagram organizing potential root causes of a problem into categories (e.g., the 6 Ms) — a core quality (B7) tool.

Pareto chart

A bar chart ranking causes/defects by frequency with a cumulative line — applies the 80/20 rule to focus improvement on the vital few.

Seven basic quality tools (B7)

Check sheet, histogram, Pareto chart, cause-and-effect diagram, scatter diagram, control chart, and flowchart/stratification.

Common vs. special cause variation

Common cause is inherent, random process variation; special (assignable) cause is an external, identifiable event. Act only on special causes.

Control limits vs. specification limits

Control limits come from the process's own variation (what it does); spec limits come from the customer (what's required). They are not the same thing.

Process capability (Cp, Cpk)

How well a process fits within spec limits; Cpk also accounts for centering. Higher capability means fewer defects relative to the spec.

Prevention vs. appraisal vs. failure costs

Cost of quality = prevention + appraisal (good quality) + internal failure + external failure (poor quality). Investing in prevention lowers total cost of quality.

SMED (single-minute exchange of dies)

A lean method to cut changeover time, often by converting internal setup (machine stopped) into external setup (done while running) — enables smaller lots.

Heijunka (level scheduling)

Leveling production volume and mix over time to smooth flow and downstream demand, instead of producing in large, uneven batches.

Gemba

The lean idea of going to the actual place where work happens to observe and understand a problem firsthand before deciding.

Andon

A visual/auditory signal (often a cord or light) that lets any worker flag a problem and, if needed, stop the line so defects are fixed at the source.

Value-added vs. non-value-added time

Value-added time changes the product toward what the customer wants; everything else (wait, move, inspect) is waste targeted by VSM and lean.

Internet of Things (IoT) in operations

Networked sensors on equipment and inventory that stream real-time data for tracking, predictive maintenance, and tighter planning.

Robotic process automation (RPA)

Software bots that automate repetitive, rule-based transactions (e.g., order entry, invoice matching), freeing planners for analysis.

Additive manufacturing (3D printing)

Building parts layer by layer from digital models — enables on-demand, low-volume, and spare-part production closer to the point of use.

Advanced Planning and Scheduling (APS)

Software that uses finite-capacity, constraint-based logic to plan material and capacity simultaneously — more powerful than infinite-loading MRP.

Voice of the customer (VOC)

Capturing customer requirements and translating them into measurable specifications and CTQs that drive quality and design decisions.

Critical to quality (CTQ)

The measurable product/process characteristics that most affect the customer's perception of quality — the focus of Six Sigma improvement.