GLOSSORY OF MANUFACTURING TERMS

Activity-based costing system—A system that tracks costs based on the activities that are responsible for driving costs in the production of manufactured goods.

Advanced planning and scheduling system -- Planning and optimization tool that balances demand with plant capacity, thus allowing manufacturers to identify bottlenecks and divert workload to alternative production cells.

Advanced product quality planning -- A structured method of defining and establishing the steps necessary to ensure that a product satisfies the customer. By moving quality efforts into planning and prevention, this multistage process identifies and anticipates potential problem areas.

Agile manufacturing—Tools, techniques, and initiatives that enable a plant or company to thrive under conditions of unpredictable change. Agile manufacturing not only enables a plant to achieve rapid response to customer needs, but also includes the ability to quickly reconfigure operations — and strategic alliances—to respond rapidly to unforeseen shifts in the marketplace. In some instances, it also incorporates “mass customization” concepts to satisfy unique customer requirements. In broad terms, it includes the ability to react quickly to technical or environmental surprises.

Annual total inventory turns -- A measure that is calculated by dividing the value of annual plant shipments at plant cost (for the most recent full year) by the total average daily inventory value at plant cost. Total average daily inventory includes raw materials, work in process, and finished goods. Plant cost includes material, labor, and plant overhead.

Benchmarking—Formal programs that compare a plant’s practices and performance results against “best-in-class” competitors or against similar operations.

Bottleneck -- Any point at which movement is slowed because demand placed on a resource is greater than capacity.

Cellular manufacturing -- A manufacturing approach in which equipment and workstations are arranged to facilitate small-lot, continuous-flow production. In a manufacturing "cell," all operations necessary to produce a component or subassembly are performed in close proximity, thus allowing for quick feedback between operators when quality problems and other issues arise. Workers in a manufacturing cell typically are cross-trained and, therefore, able to perform multiple tasks as needed.

Computer-aided design (CAD)—Computer-based systems for product design that may incorporate analytical and “what if” capabilities to optimize product designs. Many CAD systems capture geometric and other product characteristics for engineering-data-management systems, producibility and cost analysis, and performance analysis. In many cases, CAD-generated data is used to generate tooling instructions for computer-numerical-control (CNC) systems.

Computer-aided manufacturing (CAM)—Computerized systems in which manufacturing instructions are downloaded to automated equipment or to operator workstations.

Computer-aided process planning (CAPP) -- Software-based systems that aid manufacturing engineers in creating a process plan to manufacture a product whose geometric, electronic, and other characteristics have been captured in a CAD database. CAPP systems address such manufacturing criteria as target costs, target leadtimes, anticipated production volumes, availability of equipment, production routings, opportunity for material substitution, and test requirements.

Computer-integrated manufacturing (CIM)—A variety of approaches in which computer systems communicate or interoperate over a local-area network. Typically, CIM systems link management functions with engineering, manufacturing, and support operations. In the factory, CIM systems may control the sequencing of production operations, control operation of automated equipment and conveyor systems, transmit manufacturing instructions, capture data at various stages of the manufacturing or assembly process, facilitate tracking and analysis of test results and operating parameters, or a combination of these.

Computerized maintenance management systems (CMMS) -- Software-based systems that analyze operating conditions of production equipment -- vibration, oil analysis, heat, etc. -- and equipment-failure data, and apply that data to the scheduling of maintenance and repair inventory orders and routine maintenance functions. A CMMS prevents unscheduled machine downtime and optimizes a plant's ability to process product at optimum volumes and quality levels.
Computerized process simulation -- Use of computer simulation to facilitate sequencing of production operations, analysis of production flows, and layout of manufacturing facilities.

Computerized SPC -- See "statistical process control."

Concurrent engineering—A cross-functional, team-based approach in which the product and the manufacturing process are designed and configured within the same time frame, rather than sequentially. Ease and cost of manufacturability, as well as customer needs, quality issues, and product-life-cycle costs are taken into account earlier in the development cycle. Fully configured concurrent engineering teams include representation from marketing, design engineering, manufacturing engineering, and purchasing, as well as supplier––and even customer––companies.

Continuous-replenishment programs -- Arrangement with supplier companies in which the supplier monitors the customer's inventory and automatically replaces used materials, eliminating the need for purchase orders and related paperwork.

Core competency—The processes, functions, and activities in a plant or company that are its “life blood”—typically those activities for which the enterprise derives the greatest return for its investments or those that intrinsically align the enterprise with its core market.

Corporations -- Corporations include Original Equipment Manufacturers (OEMs) and Systems Integrators; Large Distributors of Branded and Private Label Manufactured Products; Large Telco Service Corporations that provide services through OEM parts; Hospitality and Travel Corporations, Gaming Corporations, and Energy and Utilities Companies.

Cpk -- A statistical calculation of process capability based on the relationship between process variability and design specifications. A good Cpk value indicates that the process is consistently under control -- i.e., within specification limits -- and also is centered on the design target value. A Cpk value of 1.33 typically is considered a minimum acceptable process capability; as the Cpk value approaches 2.0, the process approaches Six Sigma capability (3.4 defective units per million).

Cross-functional teams—Teams of employees representing different functional disciplines and/or different process segments who tackle a specific problem or perform a specific task, frequently on an ad hoc basis.

Cross-training—Skill-development practices that require or encourage production workers and other employees to master multiple job skills, thus enhancing workforce flexibility.
Customer leadtime—The time elapsed from receipt of an order until the finished product is shipped to the customer.

Customer reject rate (ppm) -- A quality measure -- expressed in parts per million -- reflecting the number of completed units rejected or returned by external customers. Calculation should include parts reworked by customers. Applies to all shipped units, including parts.
Cycle time— See “manufacturing cycle time.”

Days of inventory -- Calculate days of inventory by dividing the average inventory on hand (raw-materials inventory, work-in-process inventory, finished-goods inventory, or total inventory) by average daily usage.

Demand flow scheduling systems -- Software systems designed to optimize demand-based manufacturing techniques.

Design for assembly -- The practice in which ease and cost of assembly is emphasized during the product-design stage.

Design for logistics -- The practice in which physical handling and distribution of a manufactured product are emphasized during the product-design stage.

Design for manufacturability -- The practice in which ease and cost of manufacturing, as well as quality-assurance issues, are emphasized during the product-design stage.

Design for procurement -- A practice in which product designers work effectively with suppliers and sourcing personnel to identify and incorporate technologies or designs that can be used in multiple products, facilitating the use of standardized components to achieve economies of scale and assure continuity of supply.

Design for quality -- The practice in which quality assurance and customer perception of product quality are emphasized as an integral part of the design process.

Design for recycling/disposal -- The practice in which ultimate disposal and recycling of the manufactured product are considered during the product-design stage.

Design of experiments -- An experimental design methodology that enables process designers to determine optimum product/process parameters by conducting a limited number of experiments involving combinations of variables. The usual objective is to determine which variables in a complex process are most critical for quality control -- or those that can be most easily changed to reduce overall process variance.

Discrete manufacturing -- The production or assembly of parts and/or finished products that are recognizable as distinct units capable of being identified by serial numbers or other labeling methods -- and measurable as numerical quantities rather than by weight or volume.

Electronic data interchange (EDI)—Information-system linkages, based on communication protocols and document formats, that permit intercompany computer-to-computer communications. It not only speeds communication, but also eliminates re-keying of information and reduces the opportunity to introduce errors. A typical EDI application might speed information exchange between a customer and supplier company for purchase orders, invoices, or other transactions. EDI communications are often facilitated through “electronic mailbox” systems on third-party value-added networks or over the Internet.

Empowered natural work teams -- Teams that share a common workspace and/or responsibility for a particular process or process segment. Typically such teams have clearly defined goals and objectives related to day-to-day production activities, such as quality assurance and meeting production schedules, as well as authority to plan and implement process improvements. Unlike self-directed teams, empowered work teams typically do not assume traditional "supervisory" roles.

Enterprise integration (EI) -- A broad implementation of information technology to link various functional units within a business enterprise; on a wider scale, it may also integrate strategic partners in an interenterprise configuration. In a manufacturing enterprise, EI may be regarded as an extension of CIM that integrates financial or executive decision-support systems with manufacturing tracking and inventory systems, product-data management, and other information systems.

Enterprise resource planning (ERP)—An extension of MRP II software designed to operate on enterprise-wide computing platforms. ERP systems typically claim the ability to achieve tighter (or “seamless”) integration between a greater variety of functional areas, including materials management, supply chain management, production, sales and marketing, distribution, finance, field service, and human resources. They also provide information linkages to help companies monitor and control activities in geographically dispersed operations.
Expert systems -- Software-based "artificial-intelligence" systems that capture the knowledge and experience of experts in a specialized field and make that expertise available to less-skilled personnel.

Extranet—An exclusionary Internet-like network that securely connects customers and suppliers to a corporate or plant intranet in order to access information deemed sharable by the intranet operators.

Finished-goods turn rate -- A measure of asset management that typically is calculated by dividing the value of total annual shipments at plant cost (for the most recent full year) by the average finished-goods inventory value. Plant cost includes material, labor, and plant overhead.
Finite capacity scheduling -- Software-based systems that enable simulation of production scheduling (and determination of delivery dates) based on actual unit/hour capacity at each step in the production routing. Finite scheduling systems, running on desktop computers, often compensate for the "infinite capacity" assumptions built into capacity-planning modules in traditional MRP II systems.

Finite element analysis (FEA) -- A mathematical method for analyzing stress. FEA is used in product-design software to conduct graphical on-screen analysis of a model's reactions under various load conditions.

First-pass yield -- The percentage of finished products that meet all quality-related specifications at a final test point. When calculating yield for components, the percentage that meets all quality-related specifications at a critical test point. In process industries, yield often is calculated as the percentage of output that meets target-grade specifications (excluding saleable "off-grade" product).

Flexible assembly systems -- Automated assembly equipment and/or cross-trained work teams that can accommodate a variety of product configurations in small lots.

Flexible machining centers -- Automated machining equipment that can be rapidly reprogrammed to accommodate small-lot production of a variety of product or component configurations.

Flexible manufacturing system (FMS)—Automated manufacturing equipment and/or cross-trained work teams that can accommodate small-lot production of a variety of product or part configurations. From an equipment standpoint, an FMS is typically a group of computer-based machine tools with integrated material handling that is able to produce a family of similar parts.

Focused-factory production -- A plant configuration and organization structure in which equipment and manpower are grouped to create essentially self-contained "mini-businesses," each with a specific product line or customer focus. A single plant may be divided into several focused-factory units, designed around process flows, each of which has control over such support activities as maintenance, manufacturing engineering, purchasing, scheduling, and customer service.

Forecast/demand management software—A class of software that provides front-end input to master production scheduling systems and helps optimize inventory planning. Such software not only takes into account historical demand trends, but also may calculate the impact of planned sales promotions, price reductions, and other factors that cause spikes in demand levels.

In plant defect rate -- The fallout rate, parts per million (ppm), of all components in manufacturing and assembly that fail quality tests at any point in the production process.

Intranet—A secure, internal corporate Internet-based network.

Inventory turn rate—A measure of asset management capability (see “annual inventory turns”).

ISO 9000—An international quality-process auditing program, based on a series of standards published by the International Standards Organization in Geneva, Switzerland, through which manufacturing plants receive certification attesting that their stated quality processes are adhered to in practice.

ISO 14000 -- Standards and guidelines defined by the International Standards Organization for environmental management systems.

JIT (Just in Time)/continuous-flow production—Implementation of “just in time” techniques to reduce lot sizes, reduce setup times, slash work-in-process inventory, reduce waste, minimize nonvalue-added activities, improve throughput, and reduce manufacturing cycle time. JIT production typically involves use of “pull” signals to initiate production activity, in contrast to work-order (“push”) systems in which production scheduling typically is based on forecasted demand rather than actual orders. In many “pull” systems, a customer order/shipment date triggers final assembly, which in turn forces replenishment of component WIP inventory at upstream stages of production.

JIT (Just in Time) delivery—Delivery of parts and materials in small lots—and on a frequent basis—timed to the needs of the production system.

Kaizen—The systematic, organized improvement of processes by those who operate them, using straightforward methods of analysis. It is a “do it now” approach to continuous improvement.

Kaizen event -- A concentrated effort, typically spanning three to five days, in which a team plans and implements a major process change or changes to quickly achieve a quantum improvement in performance. Participants generally represent various functions and perspectives and may include nonplant personnel.

Kanban signal -- A method of signaling suppliers or upstream production operations when it is time to replenish limited stocks of components or subassemblies in a just-in-time system. Originally a card system used in Japan, kanban signals now include empty containers and even electronic messages.

Labor turnover rate -- A measure of a plant's ability to retain workers, expressed as a percentage of the production workforce that annually departs, regardless of reason. High turnover rates often indicate employee dissatisfaction with either working conditions or compensation.

Lost-workday rate -- Calculate as the total number of lost and/or restricted workdays (NLW, lost days beyond the day of injury or illness) divided by total hours worked by all employees in a calendar year (EH), multiplied by 200,000 (base for 100 equivalent full-time employees working 40 hours per week, 50 weeks per year): NLW ÷ EH x 200,000.

Machine availability rate -- The percentage of time that production equipment is available for use, divided by the maximum time it would be available if there were no downtime for repair or unplanned maintenance.

Machine vision -- Optical systems in which video equipment is used to guide robotic or automated equipment during production operations; also, computerized visual inspection systems used for quality control.

Manufacturing cost -- Includes quality-related costs, direct and indirect labor, equipment repair and maintenance, other manufacturing support and overhead, and other costs directly associated with manufacturing operations. It does not include purchased-materials costs or costs related to sales and other nonproduction functions.

Manufacturing cycle time—The length of time from the start of production and assembly operations for a particular (finished) product to the completion of all manufacturing, assembly, and testing for that product or specific customer order. (Does not include front-end order-entry time or engineering time spent on customized configuration of nonstandard items.)

Manufacturing execution system (MES) -- A software-based system that provides a link between planning and administrative systems and the shop floor. It can link MRP II-generated production schedules to direct process-control software. An element of computer-integrated manufacturing, MES encompasses such functions as planning and scheduling, production tracking and monitoring, equipment control, maintaining product histories (verifying and recording activities at each stage of production), and quality management.

MRP II—Software-based Manufacturing Resources Planning systems that translate forecasts into master production schedules, maintain bills of material (lists of product components), create work orders for each step in the production routing, track inventory levels, coordinate materials purchases with production requirements, generate “exception” reports identifying expected material shortages or other potential production problems, record shop-floor data, collect data for financial reporting purposes, and other tasks depending on the configuration of the MRP II package.

NAICS -- The North American Industry Classification System (NAICS) is a coding system of the U.S., Mexican, and Canadian governments that identifies specific economic sectors. It replaces the U.S. Standard Industrial Classification (SIC) system. Coding for most manufacturers encompasses the 6-digit subsets of numbers 31 through 33.

Natural work team -- A team of employees, often hourly personnel, who share a common workspace and have responsibility for a particular process or process segment.

Online order entry system—A computer-based system that enables distributors, field sales representatives, and even customers to place orders directly, over the Internet or a corporate intranet, without intervention by an inside salesperson. An Internet-based transaction might be initiated by accessing a Web Page, then choosing a sales-order-entry option. The software often includes a product configurator and pricing “engine,” and may be linked to production scheduling systems.

Planning and scheduling technologies—A variety of software-based advanced planning, scheduling, and optimization systems.

On-time delivery rate -- The percentage of time that products ordered by customers are received by the specified time or date.

Operating equipment efficiency (OEE) -- The percentage of time that equipment, when running or required for production, is producing good-quality products at an acceptable rate. OEE = machine availability as a percentage of scheduled uptime x quality yield percentage of all products for a given line x percentage of optimal production rate at which equipment operates.

OSHA-reportable incident rate -- Should be calculated as the number of injuries (N) divided by total hours worked by all employees in a calendar year (EH) multiplied by 200,000 (base for 100 equivalent full-time employees working 40 hours per week, 50 weeks per year): N ÷ EH x 200,000.

Planning and scheduling technologies -- A variety of software-based advanced planning, scheduling, and optimization systems.

Poka-yoke—“Fail-safing” techniques to eliminate errors or quality-related production defects as far upstream in the process as possible. Example: requiring completed components to pass through a customized opening to ensure that dimensions do not exceed tolerance limits. Also includes methods to check equipment operating conditions prior to making a part. A major objective is to minimize the need for rework.

Predictive maintenance -- Practices that seek to prevent unscheduled machinery downtime by collecting and analyzing data on equipment conditions. The analysis is then used to predict time-to-failure, plan maintenance, and restore machinery to good operating condition. Predictive maintenance systems typically measure parameters on machine operations, such as vibration, heat, pressure, noise, and lubricant condition. In conjunction with computerized maintenance management systems (CMMS), predictive maintenance enables repair-work orders to be released automatically, repair-parts inventories checked, or routine maintenance scheduled.

Preventive maintenance -- Maintenance activities, often performed by machine operators at regularly scheduled intervals, to keep equipment in good working condition.

Proactive environmental practices -- The efforts of plant management to adopt, at its own fiscal and chronological pace, leading-edge environmental practices that reduce pollutants, emissions, etc., prior to regulatory actions that necessitate these actions.

Problem-solving methodologies -- A variety of approaches to problem solving, including the Deming Circle (Plan-Do-Check-Act), used by all persons working in the same team or organization. Considered fundamental to teamwork.

Process manufacturing—The manufacture of products such as chemicals, gasoline, beverages, and food products that typically are produced in “batch” quantities rather than discrete units. Many process operations require inputs such as heat, pressure, and time (for thermal or chemical conversion).

Product data management (PDM)––Enabling software-based systems that link, manage, and organize product-related data from various sources—both internally and externally with suppliers — across various computer platforms, divisions, departments, and geographic locations. PDM incorporates CAD files, manufacturing data, and documents to reduce engineering design times; ensures timely access to consistent up-to-date product information; and improves information flow and cross-functional communications.

Product-development cycle -- Sometimes called "time to market," this is the period of time from the start of design/development work to commercial product availability.

Productivity change -- The plantwide change in annual value-added per employee, based on total employment in the plant, not just direct labor. Value-added should be calculated by subtracting cost of purchased materials, components, and services from value of shipments. The Best Plants entry form also includes a secondary calculation, which many manufacturers prefer to use: "increase in sales per employee."

Pull system—A system for controlling work flow and priorities whereby the processes needing materials (or attention) draw them from the feeding processes or storage areas as needed, typically using “kanban” signals—in contrast to “push” systems in which material is processed, then pushed to the next stage whether or not it is really needed.

Quality function deployment (QFD)—A customer-focused approach to quality improvement in which customer needs (desired product or service characteristics) are analyzed at the design stage and translated into specific product- and process-design requirements for the supplier organization. Targeted customer needs may include product features, cost, durability, and other product characteristics.

Quick-changeover methods—A variety of techniques, such as SMED (single-minute exchange of dies), which reduce equipment setup time and permit more frequent setups, thus improving flexibility and reducing lot sizes and leadtimes.

QS 9000––A common quality certification program for auto industry suppliers that includes ISO 9000 as a baseline.

Rapid prototyping -- A variety of techniques for quick conversion of CAD-generated product designs into useful, accurate physical models, typically using computer-controlled systems. In the stereolithography approach, controls based on CAD designs guide laser beams that create precise plastic models by polymerizing and fusing liquid resins into a laminated composite of very thin slices.

Raw-materials turn rate -- A measure of asset management that typically is calculated by dividing the value of total annual shipments at plant cost (for the most recent full year) by the average raw-material value at plant cost. Plant cost includes material, labor, and plant overhead.

Real-time feedback -- Instantaneous (or nearly instantaneous) communication of electronically captured data (typically quality data) to process operators or equipment to enable rapid or automated adjustments that keep production processes operating within quality parameters.

Rolled-throughput yield -- Also known as "multiple-point yield," this measure is calculated by multiplying together quality yield values at various points in a production process, not only at the end of the line. The purpose is to make problem areas within a process more visible.

Safety-improvement programs -- Practices intended to constantly improve safety within a plant or across a company, including, but not limited to, safety teams, safety awareness programs and communications, safety "days," safety training, and setting of continuous-improvement goals targeting safety metrics, such as OSHA incidents or lost-workday rates.

Scrap/rework costs—Parts or materials wasted in the production process, plus the cost of fixing defective products so that they pass final inspection.

Self-directed natural work teams—Nearly autonomous teams of empowered employees, including hourly workers, that share a common workspace and/or responsibility for a particular process or process segment. Typically such teams have authority for day-to-day production activities and many supervisory responsibilities, such as job assignments, production scheduling, maintenance, materials acquisition, training, quality assurance, performance appraisals, and customer service. Often called “self-managed” work teams.

Shop-floor data collection -- Automated collection of data on factory-production activities, including units produced, labor hours per unit or customer order, time and date of specific production activities, and maintenance and quality data.

Six Sigma—A term coined by Motorola that emphasizes process improvement for the purpose of reducing variability and making general improvements.

Standard Industrial Classification (SIC)—A coding system of the U.S. government used to identify specific economic sectors. Coding for most manufacturers encompasses the four-digit numbers of 2000 through 3999.

Statistical process control (SPC)—Use of variation analysis, with manual or computerized control charts, to detect non-normal variations in a process as quickly as possible. Often, SPC charts display upper and lower limits for part characteristics or process parameters and show trends over time, indicating when the limits were exceeded or approached and corrective actions were needed. In some closed-loop systems, adjustments are made automatically when readings indicate that a control limit is being approached.

Supplier JIT deliveries -- See "JIT delivery."

Supplier partnerships -- Agreements with suppliers whereby operations are linked together, information is openly shared, problems and issues are commonly solved, and joint performance is mutually approved. They usually include multiyear purchase agreements.

Supply-chain/logistics systems—A class of manufacturing software designed to optimize scheduling and other activities throughout the supply chain—or “value chain”—including transportation and distribution functions.

Supply-Chain Operations Reference-model (SCOR) -- SCOR is a process reference model that has been developed and endorsed by the Supply-Chain Council as the cross-industry standard diagnostic tool for supply-chain management. SCOR enables users to address, improve, and communicate supply-chain management practices within and between all interested parties

Takt time -- In repetitive operations, the cycle time between completion of units, calculated based upon the rate of need for those units. Used to determine how to deploy workers or how to set up, revise, or improve operations.

TL 9000 -- A quality system certification program developed by the Quality Excellence for Suppliers of Telecommunications Leadership Forum for the telecommunications industry. The requirements include the ISO 9000 family of standards as a base-line but add specific performance metrics and a formal benchmarking mechanism.

Total cost of quality -- The aggregate cost of poor quality or product failures -- including scrap, rework, and warranty costs -- as well as expenses incurred to prevent or resolve quality problems (including the cost of inspection). In calculations for Best Plants entries, do not include costs of normal maintenance, quality training, or quality-related equipment upgrades.

Total productive maintenance (TPM) -- A comprehensive program to maximize equipment availability in which production operators are trained to perform routine maintenance tasks on a regular basis, while technicians and engineers handle more specialized tasks. The scope of TPM programs includes unscheduled maintenance prevention (through design or selection of easy-to-service equipment), equipment improvements, preventive maintenance, and predictive maintenance (determining when to replace components before they fail).

Total quality management (TQM)—A multifaceted, company-wide approach to improving all aspects of quality and customer satisfaction—including fast response and service, as well as product quality. TQM begins with top management and diffuses responsibility to all employees and managers who can have an impact on quality and customer satisfaction. It uses a variety of quality tools, such as QFD, Taguchi methods, SPC, corrective-action response teams, cause-and-effect analysis, problem-solving methodologies, and fail-safing.

Value-added per employee -- Calculate by subtracting cost of purchased materials, components, and services from value of shipments divided by number of employees. See "productivity change."

Value chain—From the customer's customer to the supplier's supplier, a value chain is the interdependent matrix of company relationships working together to design, plan, make, ship, sell and service goods from raw materials to finished products in today's manufacturing economy. There are nine (macro) value chains that together make up the manufacturing ecosystem: Chemical, Consumer Packaged Goods, Aerospace, Automotive, Consumer Durables, Life Sciences/Pharmaceuticals, Industrial/Farm Equipment, Hi-Tech/Converging Technologies, & Publishing.

Visibility systems -- Visual systems on the plant floor and design areas and elsewhere that enable anyone familiar with the work to understand its status and condition at a glance, or to respond to work priorities. This can be done with standard layouts, signal lights, kanban systems, or other methods. The distinguishing feature is that communication is rapidly executed by line of sight.

Voice recognition/response -- Computerized systems capable of recognizing or synthesizing human voices. Such systems capture verbalized data for quality-control or inventory-tracking purposes (often when operators' hands are busy), recognize spoken commands that activate equipment, and convert computer data into audible information.

WIP turn rate -- A measure of the speed with which work-in-process moves through a plant. Typically calculated by dividing the value of total annual shipments at plant cost (for the most recent full year) by the average WIP value at plant cost.

World-class manufacturer—A somewhat arbitrary designation that can be supported by performance results related to various manufacturing metrics. (World-class metrics may vary from one industry to another.) Typically, it denotes “best in class” producers on a worldwide basis. In the broadest sense, world-class manufacturers are those perceived to deliver the greatest value at a given price level.

Work-in-process inventory (WIP)—The amount or value of all materials, components, and subassemblies representing partially completed production; and anything between the raw material/purchased component stage and finished-goods stage. Value should be calculated at plant cost, including material, direct labor, and overhead.

Yield improvement—Defined as the percentage reduction in rejects within a five-year period. Example: If yield improves from 95% to 98%, that means rejects have been reduced by 60%—from 5% to 2%. Therefore, yield improvement equals 60%.

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