One element of holding costs is risk. Risk costs are the risk that is assumed when inventory is acquired. In addition to this risk costs refer to loss of inventory value. This is often referred to as the shrinkage that occurs within inventory.
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Storage costs are another important element of your holding costs. When you think of storage costs you should think of any of the resources that you use to handle and store your inventory. These costs may be direct or indirect money spent on the storage of your goods. Storage costs can include costs for warehousing, warehouse equipment, space, rent, electricity, software, depreciation and warehouse personnel.
Capital costs are the costs required to purchase raw material or inventory items along with financing fees, loan maintenance fees, and interest. They refer to the money that is invested in your inventory.
Opportunity costs are the opportunities that you may have missed out on as a result of a purchase you made. In other words it is the return on your investment that could have occurred had you chosen to invest in something else.
ABC inventory classification is one of the most fundamental concepts of inventory management. Many organizations use ABC inventory classification to assist with inventory management, sales of inventory and purchasing of inventory. This classification system works by placing inventory into different categories.
Poka-yoke (ポカヨケ) is a Japanese term that means "mistake-proofing". It is derived from poka o yokeru (ポカを除ける), a term in shogi and igo referring to avoiding an unthinkably bad move.
Zero Quality Control is a method/approach for achieving zero defects in an organization. Zero gives reference to the objective of ZQC which is to produce products/services with zero defects.
The DMAIC Method is a problem solving methodology used within a six sigma strategy. The methodology focuses on improving business processes, specifically through the improvement of quality and reducing variation. It is an Integral part of six sigma.
Single minute exchange of die is a concept developed by Shigeo Shingo which seeks to perform all setup/changeover times under ten minutes (single minute).
The standard deviation is a statistic that tells you how tight or loose the range/spread of data is in relation to the mean or average of the data. Typically when a data range is clustered tightly the "bell curve" will be tall/steep. When the data is range is spread far apart the "bell" will appear flat or short and wide.
Visual management is a way to visually communicate and manage various standards, metrics, improvements, safety requirements and expectations. All forms of visual management should be clearly displayed and understood with no explanation other than visual analysis by everyone.
Manufacturing lead time is different than lead time. Manufacturing or production lead time is the total amount of time it takes to "manufacture" or "produce" an item.
Engineer to Order, also known as design to order refers to products or services whose customer specifications/requirements contain significant customization, unique designs or innovative and new purchased materials.
Standard work in process is the minimum necessary level of items or materials needed to maintain the proper flow in a production environment.
Organizational design is the formation of an organization's structure.
One of the most important components of standard work is understanding what the cycle time of a process is. Cycle time is sometimes referred to as standard cycle time. Cycle time is the amount of time it takes to complete an individual operation or task from start to finish. In other words, the amount of time required to process one part. This includes processing time on a machine, any manual work that may be required, waiting, inspection, walking and any other activities involved in processing the one part.
A problem statement describes what, where, how big and when the problem occurs. The statement is intended to be very clear and concise, focusing only on the issue or opportunity that was initially discovered.
The degree or process by which a multinational organization standardizes, integrates or combines activities around the world so that they use the same methods, no matter where the activity or method is being performed.
The Project charter is an informal contract between the organization and the team. A project charter will define the focus of a project, the problem, the goal, the scope, team and metrics linking the team's objectives together. The project charter often is revised multiple times throughout a project.
Assets is an accounting term that is used for items and resources that a company already owns. The term is used on a balance sheet to classify these items. Assets on hand are not the same as liabilities. The APICS Dictionary defines the term Assets as:
"Batching" or batch production is a technique used in both office and manufacturing environments. This type of production creates the object or activity over a series of workstations one stage at a time. The objects are created in "groups" or "batches."
The ©STUDY activity was inspired by Mr. Taiichi Ohno's famous stand in the circle training method.
Continuous improvement is the act of making incremental and regular improvements, which is often referred to as kaizen.
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May 2024
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