Glossary, A to Z

Short definitions of the terms you meet on the shop floor and in engineering, each with a link to the full article. Use the letters to jump to a term and come back whenever a new acronym shows up.

A

A3 Report: Problem-solving and communication tool from the Toyota Production System that fits background, root cause analysis, countermeasures, action plan and follow-up onto a single A3-size sheet, guiding the team through a structured PDCA-based storyline. Read the full article
ABC Analysis: Classification of items such as inventory or customers into three classes by cumulative share of total value, based on the Pareto principle. A few class A items hold most of the value and deserve the tightest control. Read the full article
Activity-Based Costing (ABC): Costing method that assigns overhead to products according to the activities they consume, using cost drivers. It is more accurate than volume-based allocation and reveals the true profitability of products and customers. Read the full article
Andon: A visual and audible signaling system that lets operators call for help or stop the line when they detect an abnormality. It supports Jidoka by making problems visible immediately so they can be addressed at the source. Read the full article
APQP (Advanced Product Quality Planning): A structured framework, common in the automotive industry, that organizes activities from concept through series production. It aims to ensure the product meets customer requirements by anticipating risks and defining controls before launch, with phases reviewed through defined deliverables. Read the full article

B

Bathtub curve: A model of a product's failure rate over its life in three phases: infant mortality (decreasing), useful life (roughly constant) and wear-out (increasing). It guides maintenance strategy, warranty planning and burn-in testing decisions. Read the full article
BOM (Bill of Materials): A structured list of all components, raw materials and subassemblies required to build a product, with their quantities. It underpins material requirements planning (MRP), purchasing and product costing. Read the full article
Break-even point: Sales volume at which revenue equals total costs, giving zero profit. Break-even (units) = fixed costs ÷ (unit price − unit variable cost), where the denominator is the unit contribution margin. Read the full article
Bullwhip effect: Supply chain phenomenon in which small changes in end-customer demand are amplified at each upstream stage, causing excess inventory and stockouts. Typical causes are isolated forecasts, batch ordering, price fluctuations and poor information sharing. Read the full article

C

CMMS (Computerized Maintenance Management System): Software that centralizes work orders, preventive maintenance plans, equipment history, spare parts and costs. It helps plan interventions, track indicators such as MTBF and MTTR, and support maintenance decisions with reliable records. Read the full article
Contribution margin: The difference between a product's selling price and its variable costs. It shows how much each unit contributes toward covering fixed costs and generating profit, and supports decisions on product mix, pricing and volume. Read the full article
Control chart: A chart that tracks a process characteristic over time, with a center line and upper and lower control limits computed from the data (mean ± 3 standard deviations). Points beyond the limits or non-random patterns signal special-cause variation. Read the full article
Cost of Quality: The total spent to achieve quality plus the losses from not achieving it. It is grouped into prevention, appraisal, internal failure and external failure costs. Investing in prevention tends to lower failure costs. Read the full article
Cp and Cpk: Process capability indices. Cp = (USL − LSL) ÷ 6σ compares process spread with the tolerance; Cpk = min[(USL − μ) ÷ 3σ; (μ − LSL) ÷ 3σ] also accounts for how well the mean is centered within the specification limits. Read the full article
Cross-docking: A logistics practice in which inbound goods are moved straight to outbound shipping with little or no intermediate storage. It cuts inventory, dwell time, and handling cost between supplier and customer. Read the full article

D

Digital Twin: A virtual replica of a product, machine or process, fed with real data from the physical asset. It lets teams simulate scenarios, monitor performance, test changes and anticipate failures without disturbing actual operations. Read the full article
DMAIC: The Six Sigma improvement cycle with five phases: Define, Measure, Analyze, Improve, and Control. It structures data-driven projects to reduce variation and defects in existing processes and to sustain the gains. Read the full article
DOE (Design of Experiments): A statistical technique that deliberately varies several process factors at once and measures their effect on a response. It identifies significant factors and interactions with fewer runs than changing one factor at a time. Read the full article
DPMO and sigma level: DPMO (defects per million opportunities) = defects ÷ (units × opportunities per unit) × 1,000,000. It is converted into a sigma level, a measure of process capability: the higher the sigma level, the lower the defect rate. Read the full article

E

Earned Value Management (EVM): A project management method that integrates scope, schedule, and cost by comparing planned value, earned value, and actual cost. It yields indices such as SPI = EV ÷ PV and CPI = EV ÷ AC. Read the full article
Economic order quantity (EOQ): The order or production quantity that minimizes the sum of ordering (or setup) costs and inventory holding costs. In the classic model, EOQ = √(2DS ÷ H), where D is demand, S is cost per order and H is holding cost per unit. Read the full article
ERP: An integrated management system that brings finance, purchasing, inventory, production, sales, and human resources onto a single database. It provides real-time visibility and standardizes business processes across the company. Read the full article

F

FIFO and LIFO: Inventory issue and valuation rules. Under FIFO (first in, first out), the oldest stock is used or sold first, which suits perishable items; under LIFO (last in, first out), the most recently received stock is issued first. Read the full article
First Pass Yield (FPY): The percentage of units that go through a process on the first attempt with no defects, rework, or scrap. FPY = good units at first pass ÷ total units entering the process. Read the full article
FMEA: Failure Mode and Effects Analysis: a preventive method that identifies potential failures in a product or process and ranks them by severity, occurrence and detection (RPN = S × O × D), so actions are defined before failures happen. Read the full article

G

Gantt chart: A horizontal bar chart of a project schedule, showing each activity's start, duration and finish along a time axis. It makes overlaps and dependencies visible and helps compare planned progress with actual progress. Read the full article
Gemba: Japanese term for the place where the work is actually done, such as the shop floor. In lean, managers go to the gemba to observe the process, understand the facts and support improvement based on real evidence rather than assumptions. Read the full article
GUT Matrix: A prioritization tool that scores each problem on Gravity (severity), Urgency and Tendency (trend), usually from 1 to 5. The product G × U × T ranks the problems and shows which to address first. Common mainly in Brazil. Read the full article

H

HACCP: Hazard Analysis and Critical Control Points: a preventive food safety system that identifies biological, chemical and physical hazards and sets critical control points with limits, monitoring and corrective actions. Read the full article
Heijunka: Production leveling in volume and mix over time, sequencing small batches of different products instead of building large batches. It smooths the load on resources, lowers inventory and lead times, and supports pull flow. Read the full article
Histogram: A bar chart showing the frequency distribution of a data set grouped into classes. It reveals the shape, center, and spread of a process and allows comparison against specification limits. Read the full article
Hoshin kanri: A Japanese method of strategy deployment that aligns long-term company objectives with annual targets and action plans at every level. It combines cross-level dialogue, periodic reviews and the PDCA cycle to keep focus and execution. Read the full article

I

IATF 16949: Quality management system standard for the automotive supply chain. It builds on ISO 9001 with sector-specific requirements such as defect prevention, reduction of variation and waste, process control and supplier development. Read the full article
Incoterms: International rules published by the International Chamber of Commerce that define the responsibilities of seller and buyer in sales contracts for transport, insurance, costs, risk transfer and customs clearance, such as FOB and CIF. Read the full article
Industrial Engineering: The engineering discipline that designs, improves and manages integrated systems of people, materials, information, equipment and energy. It covers quality, logistics, process design, production planning, costing and ergonomics. Read the full article
Industrial IoT (IIoT): The use of Internet of Things technology in industrial settings: connected sensors, machines and systems that collect and exchange data in real time. It supports equipment monitoring, predictive maintenance and production performance analysis. Read the full article
Industrial productivity: Ratio between output produced and the resources consumed as input, such as labor hours, machines or materials. Productivity = output ÷ input. It can be partial, for a single factor, or total, covering all factors. Read the full article
Industry 4.0: A stage of industrial transformation built on cyber-physical systems, the Internet of Things, data analytics, and automation. It connects machines, products, and people to make production more flexible, traceable, and data-driven. Read the full article
Inventory turnover: A measure of how many times inventory is replaced over a period. Turnover = cost of goods sold ÷ average inventory. A higher value means less capital tied up, provided service levels are maintained. Read the full article
Ishikawa Diagram: A cause-and-effect diagram, also called a fishbone diagram, that groups the possible causes of a problem into categories such as method, machine, manpower, material, measurement and environment. It supports root cause analysis in team brainstorming. Read the full article
ISO 14001: The international standard specifying requirements for an environmental management system. It guides organizations to identify environmental aspects and impacts, meet legal obligations and continually improve environmental performance, with third-party certification available. Read the full article
ISO 45001: The international standard for occupational health and safety management systems. It sets requirements for an organization to identify hazards, control risks, and reduce work-related injuries and illness, with continual improvement. Read the full article
ISO 9001: International standard specifying requirements for quality management systems. It rests on customer focus, process approach, leadership, risk-based thinking and continual improvement, and is the reference for certifying organizations of any size or sector. Read the full article

J

Jidoka (autonomation): A pillar of the Toyota Production System in which a machine or operator detects an abnormality and stops the process. It keeps defects from moving downstream and prompts the team to address the cause at its source. Read the full article
Just in Time (JIT): Pillar of the Toyota Production System that means producing and delivering only what is needed, in the quantity and at the time needed. It reduces inventory and lead time, exposes problems and requires stable processes, continuous flow and reliable suppliers. Read the full article

K

Kaizen: A Japanese philosophy of continuous improvement built on small, steady, incremental changes involving every employee. It aims to eliminate waste and standardize gains rather than rely on occasional large projects. Read the full article
Kanban: A visual flow control system that uses cards or signals to authorize production or replenishment only when consumption occurs. It supports pull production, limits work in progress, and prevents excess inventory. Read the full article

L

Lead time: Total elapsed time from the start of a process, such as the customer order, to delivery of the product. It includes processing, waiting, transport and queue time. By Little's Law, lead time = work in process ÷ throughput rate. Read the full article
Lean Manufacturing: A production system derived from the Toyota Production System that delivers customer value by eliminating waste along the flow. It relies on continuous flow, pull production, standard work, built-in quality and continuous improvement. Read the full article
Lean Six Sigma: An approach that combines lean's elimination of waste with Six Sigma's reduction of variation and defects. It aims for faster, more stable, higher-quality processes, backed by data. Read the full article
Line balancing: Allocation of tasks across workstations so that each station's cycle time stays close to takt time, reducing idle time and bottlenecks. Line efficiency = sum of task times ÷ (number of stations × cycle time). Read the full article
LOTO (lockout/tagout): Safety procedure that isolates and locks energy sources of machinery using lock devices and warning tags during maintenance or setup. It prevents unexpected start-up or release of stored energy that could injure workers. Read the full article

M

Make or Buy: A strategic decision between producing an item or service in-house and purchasing it from a supplier. It compares total cost, capacity, quality, lead time, core competence and the risk of external dependence. Read the full article
Markup: Percentage added to cost to set the selling price. Price = cost × (1 + markup). It differs from margin, which is based on price: margin = (price − cost) ÷ price. It must cover expenses, taxes and the target profit. Read the full article
MES: Manufacturing Execution System: software that tracks and controls production in real time on the shop floor, recording orders, confirmations, downtime, quality and traceability, and linking the ERP with the machines. Read the full article
MPS (Master Production Schedule): A plan that defines how much of each finished product to build and when, by time period, balancing demand forecasts, customer orders, and capacity. It is the main input to MRP. Read the full article
MRP (Material Requirements Planning): A planning method that calculates what to buy or make, in what quantity and when, based on the master production schedule, bills of materials (BOM) and current inventory. It generates planned orders offset by lead times. Read the full article
MSA and Gauge R&R: Measurement system analysis (MSA) assesses whether a measurement system is fit for its use. Gauge R&R quantifies variation due to repeatability (same operator and instrument) and reproducibility (between operators), compared with process variation or tolerance. Read the full article
MTBF and MTTR: MTBF is mean time between failures (operating time ÷ number of failures) and measures reliability. MTTR is mean time to repair (total repair time ÷ number of failures) and measures maintainability. Read the full article
Muda, Mura and Muri: The three categories of loss in the Toyota Production System. Muda is waste, activity that adds no value. Mura is unevenness or variation in workload. Muri is overburden of people or equipment beyond reasonable limits. Read the full article

N

Nonconformity and corrective action: A nonconformity is the failure to meet a specified requirement. Corrective action eliminates the cause of the nonconformity, found through root cause analysis, to prevent recurrence, and its effectiveness must be verified afterwards. Read the full article
NPV, IRR and payback: Investment appraisal methods. NPV sums cash flows discounted at the required rate of return; IRR is the discount rate that makes NPV equal to zero; payback is the time needed to recover the initial investment. Read the full article

O

Obeya: A visual management room where leaders and teams gather to review metrics, problems, and action plans on wall boards. It supports fast decisions and cross-functional alignment on projects and daily operations. Read the full article
OEE: Overall Equipment Effectiveness: a metric of how well a machine or line is used, calculated by multiplying availability, performance and quality (OEE = A × P × Q), exposing losses from downtime, slow running and defects. Read the full article

P

Pareto chart: A bar chart sorted in descending order with a cumulative percentage line, used to prioritize causes or defects. It reflects the idea that a few causes usually account for most of the effects. Read the full article
PDCA: A four-step continuous improvement cycle: Plan, Do, Check, Act. It tests changes on a small scale, evaluates the results and standardizes what worked before the cycle starts again. Read the full article
PERT/CPM: Project scheduling techniques based on an activity network. CPM identifies the critical path, which sets the minimum project duration. PERT adds probabilistic time estimates for each activity. Read the full article
PLC (programmable logic controller): A ruggedized industrial computer that reads sensor inputs, runs a stored control program, and drives outputs such as motors, valves, and actuators. It is the backbone of machine and production line automation. Read the full article
Poka-yoke: A mistake-proofing device or method that prevents a human error or detects it immediately, before it becomes a defect. Examples include fixtures that allow only the correct fit and sensors that block the next step. Read the full article
PPAP: Production Part Approval Process, used mainly in the automotive supply chain. The supplier submits evidence that its process meets all customer requirements before series production shipments begin. Read the full article
Preventive, predictive and corrective maintenance: Three maintenance strategies. Corrective maintenance acts after a failure, preventive maintenance intervenes at planned intervals, and predictive maintenance uses equipment condition monitoring to intervene only when needed. Read the full article
Production capacity: The maximum output a system, machine, or workstation can deliver in a given period, taking resources, shifts, and downtime into account. It is compared with demand to identify bottlenecks and to plan investments or schedule changes. Read the full article
Production order: A document or record that authorizes and specifies the manufacture of a quantity of an item, including routing, materials, due dates and resources. It is used to schedule work, report production and calculate costs. Read the full article
Production Planning and Control (PPC): Function that plans, schedules and monitors production to meet demand with available resources. It defines what, how much and when to produce, integrates forecast, inventory and capacity, and tracks deadlines and deviations, usually supported by MRP and ERP. Read the full article
Pull production: A system in which work starts only when the downstream process or customer consumes what was made, signaling the need, for example through kanban. It reduces inventory and overproduction by limiting work in process. Read the full article

Q

QFD (House of Quality): Quality Function Deployment: a method that translates customer needs into technical design requirements, using a matrix called the House of Quality to relate what the customer wants to how the company will deliver it. Read the full article
Queueing theory: Branch of operations research that models systems with arrivals and service, such as machines and checkouts, to estimate waiting time, queue length and utilization. In a simple system, utilization = arrival rate ÷ service rate. Read the full article

R

RACI Matrix: A tool that defines, for each task or deliverable, who is Responsible (does the work), who is Accountable (owns the outcome), who is Consulted and who is Informed. It clarifies roles and avoids gaps or overlaps in responsibility. Read the full article
RCM (Reliability-Centered Maintenance): A method that analyzes each asset's functions, failure modes, and consequences to select the most suitable maintenance strategy for it, prioritizing safety, availability, and cost over routine, calendar-based tasks. Read the full article
ROI and EVA: ROI (return on investment) = gain from investment ÷ investment cost. EVA (economic value added) = net operating profit after tax − capital charge; a positive EVA means the business creates value above what its capital requires. Read the full article
RPN (Risk Priority Number): An FMEA indicator calculated as Severity × Occurrence × Detection, each rated on a 1 to 10 scale. A higher RPN means higher priority for risk reduction actions, though severity should also be reviewed on its own. Read the full article

S

S&OP: Sales and Operations Planning: a periodic management process that aligns demand, production, inventory and finance into a single consensus medium-term plan, resolving gaps between what is sold and what can be delivered. Read the full article
Safety stock: Extra inventory held to absorb variability in demand and replenishment lead time. A common formula is Z × standard deviation of demand × √lead time, where Z reflects the desired service level. Read the full article
SIPOC: A high-level diagram that describes a process through Suppliers, Inputs, Process, Outputs, and Customers. It sets the scope and aligns the team's understanding at the start of improvement projects. Read the full article
Six Sigma: A data-driven methodology that reduces variation and defects in processes, aiming for no more than 3.4 defects per million opportunities. It follows the DMAIC cycle (define, measure, analyze, improve, control) with statistical tools. Read the full article
SMED: Single-Minute Exchange of Die: a set of techniques for cutting changeover time by separating internal activities, done with the machine stopped, from external ones, done while it runs. It enables smaller batches and greater flexibility. Read the full article
SPC (statistical process control): Use of statistical methods, mainly control charts, to monitor process variation over time. It separates common-cause from special-cause variation so that action can be taken before the process produces out-of-specification items. Read the full article
SQDCM: Set of five categories used in shop floor visual management: safety, quality, delivery, cost and morale. Tracked on daily boards, they guide short meetings and quick improvement actions, with safety usually first. Read the full article
Standard Operating Procedure (SOP): A document that describes step by step how to perform a task consistently, with responsibilities, materials, parameters and quality criteria. It ensures repeatability and safety and serves as a basis for training and audits. Read the full article
Standardized work: A documented description of the best known sequence of operations, with its cycle times and standard work in process. It is the baseline for training, quality control, and continuous improvement, since without a standard there is nothing to improve against. Read the full article
Supply chain: The network of suppliers, plants, distribution centers and customers through which materials, information and funds flow. Supply chain management coordinates these flows to meet demand at suitable cost, lead time and service level. Read the full article
SWOT analysis: Strategic planning tool that sorts internal factors into strengths and weaknesses and external factors into opportunities and threats. It supports decisions and helps define strategies that use strengths and reduce vulnerabilities. Read the full article

T

Takt Time: The pace of production needed to meet customer demand: available time ÷ customer demand. It synchronizes production with sales and serves as the reference for balancing operations and sizing the workforce. Read the full article
TCO (Total Cost of Ownership): The sum of all costs of an asset or product over its life cycle, including acquisition, operation, maintenance, energy and disposal. It keeps purchasing decisions from relying on the purchase price alone. Read the full article
Theory of Constraints (TOC): A management approach from Eliyahu Goldratt holding that system performance is limited by a few constraints. It focuses on identifying the bottleneck, exploiting it, subordinating everything else to it, elevating it and repeating the cycle. Read the full article
Time Study: A method that measures the duration of each element of an operation with a stopwatch over repeated observations to establish a standard time. It adjusts for operator pace and allowances and supports capacity planning and costing. Read the full article
Toyota Kata: A set of practice routines for building scientific thinking and continuous improvement habits. In short cycles, people grasp the current condition, set a target condition and run experiments toward it, supported by coaching. Read the full article
Toyota Production System (TPS): A production management system developed at Toyota, built on the pillars of Just-in-Time and Jidoka and on a base of stability and continuous improvement. It aims to deliver customer value by eliminating waste in the flow. Read the full article
TPM (Total Productive Maintenance): An approach that involves the whole organization, especially operators, in maintaining and improving equipment. It aims for zero breakdowns, zero defects, and zero accidents, raising overall equipment effectiveness (OEE). Read the full article
TWI (Training Within Industry): A supervisor training program with modules for instructing workers (Job Instruction), improving methods (Job Methods) and handling people (Job Relations). It standardizes on-the-job training and supports consistent work practices. Read the full article

U

U-Shaped Cell: A workstation layout in a U shape where the entry and exit points are close together. A few operators can tend several machines, which supports one-piece flow, easy communication and flexible line balancing. Read the full article

V

VSM (Value Stream Mapping): A lean tool that maps the flow of material and information for a product from supplier to customer, recording cycle times, inventories and waiting. It separates value-adding from non-value-adding activity and guides the future state design. Read the full article

W

WBS (Work Breakdown Structure): A hierarchical decomposition of a project's total scope into smaller, manageable deliverables and work packages. It is the basis for estimating time and cost, assigning responsibilities and tracking progress. Read the full article
WMS (Warehouse Management System): Software that controls receiving, putaway, storage, picking and shipping, with real-time inventory tracking. It improves inventory accuracy, reduces picking errors and raises overall warehouse productivity. Read the full article

Y

Yamazumi: Stacked bar chart showing, for each station or operator, the breakdown of cycle time into value-added, necessary non-value-added and waste activities. With the takt time line added, it is used to balance workload. Read the full article

#

5 Whys: A root cause analysis technique that asks "why?" repeatedly, typically around five times, starting from the observed problem. It moves past symptoms to the underlying cause, so the corrective action addresses the real source of the failure. Read the full article
5S: Workplace organization method of Japanese origin built on five steps: sort (seiri), set in order (seiton), shine (seiso), standardize (seiketsu) and sustain (shitsuke). It cuts waste, supports visual management and creates a stable base for safety and quality. Read the full article
5W2H: A planning tool that structures an action plan by answering seven questions: what, why, where, when, who, how and how much. It makes responsibilities, deadlines and resources explicit before execution begins, reducing ambiguity and rework. Read the full article
8D Report: A structured problem-solving method in eight disciplines, used to handle customer complaints and nonconformities. It sets up a team, describes the problem, contains its effects, finds the root cause, applies corrective and preventive actions, and closes by recognizing the team. Read the full article

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