A3 Method

The A3 system is a means of describing a business process in a compact form. It was originally created by the Toyota Motor Corporation and was named after the paper size on which it was printed, A3 (11' x 17'). Toyota used the A3 methodology to help develop its famed Toyota Production System (TPS).

Abandonment

(1) The decision of a carrier to give up or discontinue service over a route. Railroads must seek ICC permission to abandon routes. (2) This refers to people who, when placed on hold in an incoming call, elect to hang up ('abandon') the call, as in the phrase 'call abandonment'. Call centers closely monitor the 'abandonment rate' as a measure of their inefficiency.

ABB

An approach to budgeting where a company uses an understanding of its activities and driver relationships to quantitatively estimate workload and resource requirements as part of an ongoing business plan. Budgets show the types, number of, and cost of resources that activities are expected to consume based on forecasted workloads. The budget is part of an organization's activity-based planning process and can be used in evaluating its success in setting and pursuing strategic goals.

ABC Classification

A method of classifying inventory items relative to their impact on total control. The group is divided into classes called A, B, and C (and sometimes D), with the A group representing the highest value with 10 to 20% of the number of items. The B, C, and D (if used) groups have lower values but typically higher populations. Items with higher usage value (the 20%) are counted more frequently. The specific bars to be used in setting ABC levels will vary by organization, as they will impact the financial control applied to inventory and the level of effort spent counting. See Cycle Counting.

ABC Costing

A costing method that identifies activities in an organization and assigns the cost of each activity to all products and services according to their actual consumption by each.

ABC Frequency of Access

Location method where the determination of a product's location within the warehouse or distribution center is based on 1) product's ABC Classification and 2) the number of times or rate at which the product is accessed.

ABC Inventory Control

A method of inventory control which divides items into categories based on the value of usage. Items are typically divided by a company-defined set of values into A, B and C categories

ABC Model

In cost management, a representation of resource costs during a time period that are consumed through activities and traced to products, services, and customers, or to any other object that creates a demand for the activity to be performed.

ABC System

In cost management, a system maintains financial and operating data on an organization's resources, activities, drivers, objects, and measures. ABC models are created and maintained within this system.

ABI

The U.S. Customs program automates the flow of customs-related information among customs brokers, importers, and carriers.

ABM

Activity-Based Management

Abnormal Demand

Demand for a product may be either greater or lower than expected by a given percentage, which is determined by the organization. When observed, it should be determined whether it may be a one-time spike or if the effect is part of a trend that should be considered during future forecasts.

ABP

Activity-based planning (ABP) is an ongoing process to determine activity and resource requirements (both financial and operational) based on the ongoing demand for products or services by specific customer needs. Resource requirements are compared to available resources, and capacity issues are identified and managed. Activity-based budgeting (ABB) is based on the outputs of activity-based planning.

Absorption Costing

A cost accounting approach captures overhead and other indirect costs separately from unit costs for a given period. It then applies (absorbs) those costs into unit costs at the period end based on various factors such as movement and COGS elements.

ACAT

U.S. DoD ACAT programs are Milestone Decision Authority programs or programs designated by the Milestone Decision Authority.

Acceptable Quality Level (AQL)

In quality assessment, the acceptable quality level, also known as the assured quality level, describes the maximum number of defects acceptable during the random sampling of an inspection.

Acceptable Sampling Plan

A quality management procedure that defines the sample sizes and acceptable defect levels for validating the quality of products.

Acceptance Number

In quality assessment, the acceptable quality level, also known as the assured quality level, describes the maximum number of defects acceptable during the random sampling of an inspection.

Acceptance Sampling

A statistical quality control method tests samples of products at defined points, as opposed to testing each product.

Accessibility

The ability of a carrier to provide service between an origin and a destination.

Accessorial Charges

A carrier's charge for accessorial services, such as loading, unloading, pickup, and delivery. Also, see Upcharges.

Accessorial Fee

A carrier's charge for accessorial services, such as loading, unloading, pickup, and delivery. Also, see Upcharges.

Accessory

A feature that can optionally be added to a finished good at the discretion of the customer is called an optional feature. An example would be the addition of a special trim feature to an automobile.

Accountability

The act of making a group or individual responsible for certain activities or outcomes, for example, managers and executives are accountable for business performance, even though they may not actually perform the work.

Accounts Payable (A/P)

1) A financial term referring to the amount of transactions that have been accrued but not paid to a vendor. 2) An accounting function.

Accounts receivable (A/R)

On a company's balance sheet, accounts receivable are the amounts that customers owe to that company. Sometimes called trade receivables, they are classified as current assets, assuming that they are due within one year.

Accreditation

The process in which certification of competency, authority, or credibility is presented is called accreditation. An example of accreditation is the accreditation of testing laboratories and certification specialists who are permitted to issue official certificates of compliance with established standards.

Accredited Standards Committee (ASC)

A committee of the ANSI was chartered in 1979 to develop uniform standards for the electronic interchange of business documents. The committee develops and maintains U.S. generic standards (X12) for Electronic Data Interchange.

Accumulation bin

An area where items to be used in the assembly of a product are staged prior to work being done. See Staging.

Accuracy

A value, usually expressed as a percentage, which expresses the level of precision incurred during transactions, is called an accuracy rate. An example of this can be seen when comparing actual inventory levels to what was expected from bookkeeping records.

ACD

A feature of large call centers or 'Customer Interaction Centers' telephone switches is that they route calls based on rules such as the next available employee and skill set, among others.

ACE

Update of the outdated Automated Commercial System (ACS). It is intended to provide an automated information system to enable the collection, processing, and analysis of commercial import and export data. This will allow for the faster and more cost-effective movement of goods through the ports, as well as the detection of terrorist threats.

ACH

Automated Clearinghouse: A nationwide electronic payments system that more than 15,000 financial institutions use on behalf of 100,000 corporations and millions of consumers in the U.S. It is the funds transfer system of choice among businesses that make electronic payments to vendors. It is economical and can carry remittance information in standardized, computer-processable data formats.

Acknowledgment

Typically, this is a response, either electronic or as a physical document, which confirms the receipt of an order from the supplier to the buyer.

Acquisition Categories(ACAT)

U.S. DoD ACAT programs are Milestone Decision Authority programs or programs designated by the Milestone Decision Authority.

Acquisition Cost

The net price, plus other costs needed to purchase the item and get it to the point of use, include the item's purchasing costs (closing, research, accounting, commissions, legal fees), transportation, preparation, and installation costs.

ACSI

American Customer Satisfaction Index

Action Message

A system message is usually created during MRP calculations to draw attention to a current or potential problem and suggest corrective action.

Action Plan

A specific method or process is used to achieve the results called for by one or more objectives. An action plan may be a simpler version of a project plan.

Action Report

A system message is usually created during MRP calculations to draw attention to a current or potential problem and suggest corrective action.

Activation

TOC recognizes that it is possible to produce without contributing to throughput. TOC defines production that contributes to throughput as utilization. Production that does not contribute to throughput is known as activation. Activation is not desired because it not only fails to increase throughput, but it also increases inventory and operating expenses. This is consistent with the Just-In-Time (JIT) philosophy.

Active Inventory

Materials held in a facility, which are intended to be consumed in manufacturing/assembly or sold in a specified period, are referred to as Active Stock Goods. These goods are stored in active pick locations and are ready for order filling.

Activity

Work is performed by people, equipment, technologies, or facilities. Activities are usually described by the 'action-verb-adjective-noun' grammar convention. Activities may occur in a linked sequence, and activity-to-activity assignments may exist.

Activity Analysis

The process of identifying and cataloguing activities for detailed understanding and documentation of their characteristics is called activity analysis. This analysis is accomplished through interviews, group sessions, and questionnaires.

Activity Based Budgeting (ABB)

An approach to budgeting where a company uses an understanding of its activities and driver relationships to quantitatively estimate workload and resource requirements as part of an ongoing business plan. Budgets show the types, number of, and cost of resources that activities are expected to consume based on forecasted workloads. The budget is part of an organization's activity-based planning process and can be used in evaluating its success in setting and pursuing strategic goals.

Activity-based costing (ABC)

A common method for cost assigning, ABC includes overhead expenses related to activities, such as units of work or tasks completed with a specific purpose. This provides a precise breakdown of costs on a per client or per product basis.

Activity Based Costing (ABC)

A methodology that measures the cost and performance of cost objects, activities, and resources. Cost objects consume activities, and activities consume resources. Resource costs are assigned to activities based on their use of those resources, and activity costs are reassigned to cost objects (outputs) based on the cost objects' proportional use of those activities. Activity-based costing incorporates causal relationships between cost objects and activities and between activities and resources.

Activity-Based Management (ABM)

A discipline focusing on the management of activities within business processes as the route to continuously improve both the value received by customers and the profit earned in providing that value. ABM uses activity-based cost information and performance measurements to influence management action. See Activity-Based Costing.