A spaghetti diagram is a tool used to track the amount of movement or distance traveled by a worker or materials. You can then use a spaghetti diagram to analyze what you tracked and improve the flow. As a tool that is used in the analysis of process flows, a spaghetti diagram reveals redundancy in processes and helps users to identify various forms of waste. The name comes from the reference of laying spaghetti noodles out to show the flow of materials or workers.
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Total Productive Maintenance can be a very powerful strategy in supporting the Just in Time System. In fact, it can be a powerful strategy in supporting any organization in general. The foundational measurement that is used in TPM is Overall Equipment Effectiveness. Overall Equipment Effectiveness or OEE as it is often referred to, is a key performance indicator used in the manufacturing industry to determine the efficiency of its plant operation. Most companies do not have a full understanding of their capacity on manufacturing equipment. OEE measures and makes your plants' effectiveness visual for everyone to see. You can then create actionable steps to improve quality and production, save time, and eliminate waste. It is important to note that OEE does not tell you what to improve, rather it is a gauge or a KPI to help you understand where to improve.
Total productive maintenance is a maintenance strategy which focuses on achieving improved performance, reduced breakdowns and better quality through the preventative maintenance and effort of employees.
A process is a sequence of interdependent and linked procedures designed to transform inputs into the desired outputs. Each stage of a process consumes some type of resource (e.g. time, energy). Some parts of a process are intended to create value while other parts of a process are intended to support the creation of value.
Inventory waste is any unnecessary storage of materials, products or information.
Cash to cash cycle time looks at the amount of time, usually days, of working capital a business has tied up in managing its inventory or supply chain. Like many metrics, the more efficient the cash-to-cash cycle time is, the fewer days an organization's cash is unavailable for use.
Days sales outstanding or DSO as it is often called, is a ratio that measures the average number of days a company takes to collect its accounts receivable. When a company's DSO is short, it tells us that the company is faster at collecting payments from customers. This also means you are able to use the cash from sales sooner.
Inventory is listed as an asset on a firm's balance sheet and consists of the stocks or items needed to maintain production, support activities such as maintenance and repair, and provide customer service. Inventory typically is categorized based on its flow through the production cycle, using such designations as raw materials, work in process, and finished goods. Maintenance, repair, and operating supplies also are stocked to support the functionality of the firm.
Days payable outstanding ratio is used in accounting and finance departments that measures how many days, usually on average, it takes a company to provide payment to its suppliers. The higher a company’s DPO, the longer it takes to pay its bills.
Visual control refers to methods, devices, activities and or systems which are designed to assist in the management or control of our activities, processes, parts and or machines through visual and or other sensory means.
PDCA or plan-do-check-act is a four step method used in lean, quality improvements and other continuous improvement strategies.
Inventory Turnover is the number of times your inventory cycles or turns over in a year or other defined period. Inventory turnover can help an organization understand how efficiently their inventory is supporting sales. The inventory turnover number implies how often inventory was bought and sold throughout the year or other defined period. Put another way, inventory turnover is an indicator of how well a business is using their inventory. For example, how many dollars of sales from a cost perspective are being supported by each dollar of inventory.
Though not a valuation method, transfer pricing is a technique that organizations use to assist in aggregate inventory management, especially when looking at, and adjusting margins. Formally defined transfer pricing is a practice used in accounting to transfer the cost of goods or services from one area of a business to another.
Standard costs are actually estimates of the actual costs in a company’s production process. These estimates are used because knowing the exact costs would be impossible until the process is performed. Another way to think of standard costs is as the target or budgeted costs involved in a businesses processes. Standard costs usually include: material costs, labor costs and overhead costs.
The specific identification inventory valuation method is used to track each and every item in your inventory individually. This includes the time it enters the inventory until the time it leaves it. Let’s not get confused here, specific identification is different from LIFO and FIFO. LIFO and FIFO groups pieces of inventory together based on when they were purchased and how much they cost, while specific identification identifies and tracks every piece of inventory individually. The specific inventory method tags or marks each item with its purchase cost and any additional costs that are incurred in the transformation process until it is sold.
LIFO is a method used for cost flow assumption purposes in the cost of goods sold calculation. The LIFO method of inventory valuation assumes the most recent products or, "last in" products of a company’s inventory have been used first.
First in First out is a method used in inventory valuation for accounting purposes. The method advocates the practice of using the oldest inventory item first, hence the name "first in" "first out." The principle is also applicable in maintaining precise sequence during and through the production of items because it ensures that the first part into a process or inventory location is also the first part to be used. The FIFO lane is one method of controlling and regulating a pull system that is between two disconnected (decoupled) processes.
Inventory valuation can make or break a company. It is absolutely essential that the valuation method you choose aligns with the needs of your specific business and the industry it serves. In this post we will introduce one valuation type known as actual cost valuation.
Hedge inventory finds its roots in the term ‘hedging’. Hedging which means reducing or controlling risk is a common practice in many industries and a not so common one in others. Hedge inventory is actually very similar to anticipation inventory, except there is more risk and quite a bit less certainty in increased demand and decreased supply.
Have you ever wondered, what does the word anticipation mean? In this lecture, we will answer the question, what is anticipation inventory?
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April 2024
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