Glossary

Idle capacity
The capacity generally not used in a system of linked resources. From a theory of constraints perspective, idle capacity consists of protective capacity and excess capacity. See: excess capacity, productive capacity, protective capacity.

Idle inventory
The inventory generally not needed in a system of linked resources. From a theory of constraints perspective, idle inventory generally consists of protective inventory and excess inventory. See: excess inventory, productive inventory, protective inventory.

Idle time
The time when operators or resources (e.g., machines) are not producing product because of setup, maintenance, lack of material, lack of tooling, or lack of scheduling.

IFB
Abbreviation for invitation for bid.

IIE
Abbreviation for Institute of Industrial Engineers.

Imperfection
A quality characteristic’s departure from its intended level or state without any association to conformance to specification requirements or to the usability of a product or service. See: blemish, defect, nonconformity.

Implementation
The act of installing a system into operation. It concludes the system project with the exception of appropriate follow-up or post-installation review.

Implied authority
The right of an agent, when directed by a principal to accomplish a task, to do what is reasonably necessary to accomplish it.

Implied contract
A binding agreement inferred from the actions of the parties.

Implied warranty
A warranty imposed on sellers beyond any express agreement in the contract.

Implode
1) Compression of detailed data in a summary-level record or report. 2) Tracing a usage and/or cost impact from the bottom to the top (end product) of a bill of material using where-used logic.

Implosion
The process of determining the where-used relationship for a given component. Implosion can be single-level (showing only the parents on the next higher level) or multilevel (showing the ultimate top-level parent). See: where-used list. Ant: explosion.

Import/export license
Official authorization issued by a government allowing the shipping or delivery of a product across national boundaries.

Imports
Products bought in one country and produced in another.

Inactive inventory
Stock designated as in excess of consumption within a defined period or stocks of items that have not been used for a defined period.

Inbound stockpoint
A defined location next to the place of use on a production floor. Materials are brought to the stockpoint as needed and taken from it for immediate use. Inbound stockpoints are used with a pull system of material control.

Incentive
A reward, financial or otherwise, that compensates a worker for high or continued performance above standard. An incentive is also a motivating influence to induce effort above normal.

Incentive arrangements
The incentive contract allows for the sharing of the cost responsibility between the buyer and seller. Incentives are incorporated into the contracts to motivate the supplier to improve its performance in areas such as quality, on-time delivery, and customer satisfaction. There are three elements of an incentive agreement: target cost, target profit, and the sharing agreement.

Incentive contract
A contract where the buyer and seller agree to a target cost and maximum price. Cost savings below the target are shared between buyer and seller. If actual cost exceeds the target cost, the cost overrun is shared between buyer and seller up to the maximum price.

Income
Syn: profit.

Income statement
A financial statement showing the net income for a business over a given period of time. See: balance sheet, funds flow statement.

Incoming business
The number of orders, the dollar value of orders, or the quantity of units that have been received on orders from customers. This volume is particularly important to the forecaster, who must compare incoming business against the forecast rather than against actual shipments when actual shipments do not reflect true customer demand. This situation may exist because of back-ordered items, bottlenecks in the shipping room, etc.

In-control process
A process in which the statistical measure being evaluated is in a state of statistical control (i.e., the variations among the observed sampling results can be attributed to a constant system of chance causes). Ant: out-of-control process.

Incremental analysis
A method of economic analysis in which the cost of a single additional unit is compared to its revenue. When the net contribution of an additional unit is zero, total contribution is maximized.

Incremental available-to-promise
Syn: discrete available-to-promise.

Incremental cost
1) Cost added in the process of finishing an item or assembling a group of items. If the cost of the components of a given assembly equals $5 and the additional cost of assembling the components is $1, the incremental assembly cost is $1, while the total cost of the finished assembly is $6. 2) Additional cost incurred as a result of a decision.

Indented bill of material
A form of multilevel bill of material. It exhibits the highest level parents closest to the left margin, and all the components going into these parents are shown indented toward the right. All subsequent levels of components are indented farther to the right. If a component is used in more than one parent within a given product structure, it will appear more than once, under every subassembly in which it is used.

Indented tracking
The following of all lot numbers of intermediates and ingredients consumed in the manufacture of a given batch of product down through all levels of the formula.

Indented where-used
A listing of every parent item, and the respective quantities required, as well as each of their respective parent items, continuing until the ultimate end item or level-0 item is referenced. Each of these parent items calls for a given component item in a bill-of-material file. The component item is shown closest to the left margin of the listing, with each parent indented to the right, and each of their respective parents indented even further to the right.

Independent demand
The demand for an item that is unrelated to the demand for other items. Demand for finished goods, parts required for destructive testing, and service parts requirements are examples of independent demand. See: dependent demand.

Independent demand item management models
Models for the management of items whose demand is not strongly influenced by other items managed by the same company. These models can be characterized as follows: (1) stochastic or deterministic, depending on the variability of demand and other factors; (2) fixed quantity, fixed cycle, or hybrid (optional replenishment). See: fixed reorder cycle inventory model, fixed reorder quantity inventory model, optional replenishment model.

Independent float
In project management, the amount of float on an activity that does not affect float on preceding or succeeding activities. See: float, free float, total float.

Independent project
A project which, whether or not it is accepted, does not eliminate other projects from eligibility. See: contingent project, mutually exclusive project.

Index
A value, expressed as a percentage, giving the relationship of a measurement to a base value. A result of 100 would be average while numbers greater than 100 would be above average and those less than 100 would be below average.

Indicator
An index of business activities.

Indirect costs
Costs that are not directly incurred by a particular job or operation. Certain utility costs, such as plant heating, are often indirect. An indirect cost is typically distributed to the product through the overhead rates.

Indirect labor
Work required to support production in general without being related to a specific product, e.g., floor sweeping.

Indirect labor cost
The compensation paid to workers whose activities are not related to a specific product.

Industrial engineering
The engineering discipline concerned with facilities layout, methods measurement and improvement, statistical quality control, job design and evaluation, and the use of management sciences to solve business problems.

Industrial facilities management
The installation and maintenance of the physical plant, its surroundings, and the physical assets of an organization.

Industrial market
A market where most or all customers are individuals or businesses that buy products to produce other goods and services. Syn: business market, producer market. See: consumer market, government market, institutional market.

Industry
A set of companies providing a product or service where each company’s offering is a close substitute for its competitors’ offerings.

Industry analysis
A major study of an industry; its major competitors, customers, and suppliers; and the focus and driving forces within that industry.

Industry structure types
Economists have developed models of the types of competition faced by various firms. These types are (1) Pure monopoly—Only one firm provides a particular product or service. The monopoly may be regulated or unregulated; (2) Pure oligopoly—A few companies produce essentially the same product or service and market it within a given area. A company is forced to price its product at the going rate unless it can differentiate its product; (3) Differentiated oligopoly—A few companies produce partially differentiated products or services that are marketed within a given area. Differentiation may be based on quality, features, styling, or services offered along with the product; (4) Monopolistic competition—Many competitors offer partially differentiated products or services. Most competitors focus on market segments where they can meet customers’ needs somewhat better than their competitors; and (5) Pure competition—Many competitors offer undifferentiated products or services.

Inefficiency risk
The risk of losing customers because another firm has lower unit costs.

Infinite loading
Calculation of the capacity required at work centers in the time periods required regardless of the capacity available to perform this work. Syn: infinite scheduling.

Inflation
An ongoing rise in the overall level of prices. Inflation reduces the purchasing power of money.

Influence filter
In e-commerce, a device to make stakeholders better satisfied with a Web site.

Informal culture
Organizational characteristics and relationships that are not part of the formal structure but that influence how the organization accomplishes its goals.

Information
Data that have been interpreted and that meet the need of one or more managers.

Information data warehouse
A repository (typically large) of corporate data that can be accessed using specialized query tools. This technique separates the analysis of data from the recording of data and is often used to combine data from different computing systems to make information access more convenient and coherent. See: data warehouse.

Information system
Interrelated computer hardware and software along with people and processes designed for the collection, processing, and dissemination of information for planning, decision making, and control.

Information system architecture
A model of how the organization operates regarding information. The model considers four factors: (1) organizational functions, (2) communication of coordination requirements, (3) data modeling needs, and (4) management and control structures. The architecture of the information system should be aligned with and match the architecture of the organization.

Information technology
The technology of computers, telecommunications, and other devices that integrate data, equipment, personnel, and problem-solving methods in planning and controlling business activities. Information technology provides the means for collecting, storing, encoding, processing, analyzing, transmitting, receiving, and printing text, audio, or video information.

Ingredient
In the process industries, the raw material or component of a mixture. See: component.

Innovation risk
The risk of losing customers because another firm creates more innovative products.

In-process waiver requests
Requests for waivers on normal production procedures because of deviations in materials, equipment, or quality metrics, where normal product specifications are maintained.

Input control
Management of the release of work to a work center or production facility.

Input/output control (I/O)
A technique for capacity control where planned and actual inputs and planned and actual outputs of a work center are monitored. Planned inputs and outputs for each work center are developed by capacity requirements planning and approved by manufacturing management. Actual input is compared to planned input to identify when work center output might vary from the plan because work is not available at the work center. Actual output is also compared to planned output to identify problems within the work center. Syn: input/output analysis. See: capacity control.

Input/output devices
Modems, terminals, or various pieces of equipment whose designed purpose relates to manual, mechanical, electronic, visual, or audio entry to and from the computer’s processing unit.

Inspection
Measuring, examining, testing, or gauging one or more characteristics of a good or service and comparing the results with specified requirements to determine whether conformity is achieved for each characteristic.

Inspection order
An authorization to an inspection department or group to perform an inspection operation.

Inspection ticket
Frequently used as a synonym for an inspection order; more properly a reporting of an inspection function performed.

Instantaneous receipt
The receipt of an entire lot-size quantity in a very short period of time.

Institute for Supply Management (ISM)
A non profit society for purchasing managers and others, formerly the National Association of Purchasing Managers (NAPM).

Institute of Industrial Engineers (IIE)
A nonprofit educational organization with members interested in the field of industrial engineering.

Institutional market
A market in which most or all customers are one of the following: schools, hospitals, prisons, and other institutions that provide products and services to individuals who are under their care. See: consumer market, government market, industrial market.

Intangible costs
Those costs that are difficult to quantify such as the cost of poor quality or of high employee turnover.

Integrated change control
In project management, a system under which any changes are coordinated across the entire project.

Integrated enterprise
A business or organization made up of individuals who have acquired the knowledge and skills to work with others to make the organization a greater success than the sum of each individual’s output. Integration includes increased communication and coordination between individuals and within and across teams, functions, processes, and organizations over time. See: cross-functional integration.

Integrated internet marketing (I2M)
The use of Internet facilities to sell products, influence stakeholder attitudes, and improve the company’s image.

Integrated services digital network (ISDN)
Emerging international standard for using public phone lines to transmit voice and data over the same line.

Integrating mechanism
A physical, organizational, or informational entity that allows people and functions to interact freely by transcending boundaries.

Intelligent agent
A program that regularly gathers information without the owner being present.

Interactive
A characteristic of those applications where a user communicates with a computer program via a terminal, entering data and receiving responses from the computer.

Interactive computer system
A computer system that supports real-time interaction with a user. The response time to the user is similar to the actual timing of the business or physical process. See: interactive system.

Interactive customer care
A generic term for a variety of services provided over the Internet. These services include customer service and technical support.

Interactive scheduling
Computer scheduling where the process is either automatic or manually interrupted to allow the scheduler the opportunity to review and change the schedule.

Interactive system
Refers to those computer applications in which a user communicates with a computer program via a system, entering data and receiving responses from the computer. See: interactive computer system.

Interest
1) Financial share in a project or enterprise. 2) Periodic compensation for lending money. 3) In an economy study, synonymous with required return, expected profit, or charge for the use of capital. 4) The cost for the use of capital. Sometimes referred to as the time value of money.

Interest rate
The ratio of the interest payment to the principal for a given unit of time. It is usually expressed as a percentage of the principal.

Intermediately positioned warehouse
A warehouse located between customers and manufacturing plants to provide increased customer service and reduced distribution cost.

Intermediate part
Material processed beyond raw material and used in higher level items. See: component.

Intermittent production
A form of manufacturing in which the jobs pass through the functional departments in lots, and each lot may have a different routing. See: job shop.

Intermodal transport
1) Shipments moved by different types of equipment combining the best features of each mode. 2) The use of two or more different carrier modes in the through movement of a shipment.

Internal controls
The policies and procedures, the documentation, and the plan for an organization that authorize transactions, safeguard assets, and maintain the accuracy of financial records.

Internal customer
The recipient (person or department) of another person’s or department’s output (good, service, or information) within an organization. See: customer, external customer.

Internal environment
The chosen domain or scope of activities within which an organization operates, for example, the tasks associated with goods or services to be delivered by the organization. See: external environment, organizational environment.

Internal failure cost
The cost of things that go wrong before the product reaches the customer. Internal failure costs usually include rework, scrap, downgrades, reinspection, retest, and process losses.

Internal rate of return
The rate of compound interest at which the company’s outstanding investment is repaid by proceeds from the project.

Internal setup time
The time associated with elements of a setup procedure performed while the process or machine is not running. Ant: external setup time.

International logistics
All functions concerned with the movement of materials and finished goods on a global scale.

International Organization for Standardization (ISO)
Group of cooperating institutes from 140 countries working to develop and publish international standards. It acts as a bridge between public and private sectors.

International standards
Standards established by international standards-setting organizations to promote interoperability among operating environments.

Internet
A worldwide network of computers belonging to businesses, governments, and universities that enables users to share information in the form of files and to send electronic messages and have access to a tremendous store of information.

Internet operations
Operations performed over the Internet encompassing such things as e-mail, telnet, newsgroups, file transfer protocol, and the World Wide Web.

Internet service provider (ISP)
A company that links users to the Internet and provides them with other services.

Interoperation time
The time between the completion of one operation and the start of the next.

Interplant demand
One plant’s need for a part or product that is produced by another plant or division within the same organization. Although it is not a customer order, it is usually handled by the master production scheduling system in a similar manner. See: interplant transfer.

Interplant transfer
The shipment of a part or product by one plant to another plant or division within the corporation. See: interplant demand, transfer pricing.

Interpolation
The process of finding a value of a function between two known values. Interpolation may be performed numerically or graphically.

Interrelationship diagram
A technique used to define how factors relate to one another. Complex multivariable problems or desired outcomes can be displayed with their interrelated factors. The logical and often causal relationships between the factors can be illustrated.

Interrogate
Retrieve information from computer files by use of predefined inquiries or unstructured queries handled by a high-level retrieval language.

Interrupt
A break in the normal flow of a computer routine such that the flow can be resumed from that point at a later time. An interrupt is usually caused by a signal from an external source.

Intranet
A privately owned network that makes use of Internet technology and applications to meet the needs of an enterprise. It resides entirely within a department or company, providing communication and access to information, similar to the Internet, with Web pages, and so on for internal use only.

In-transit inventory
Material moving between two or more locations, usually separated geographically; for example, finished goods being shipped from a plant to a distribution center.

In-transit lead time
The time between the date of shipment (at the shipping point) and the date of receipt (at the receiver’s dock). Orders normally specify the date by which goods should be at the dock. Consequently, this date should be offset by in-transit lead time for establishing a ship date for the supplier.

Intrinsic forecast method
A forecast based on internal factors, such as an average of past sales. Ant: extrinsic forecast.

Inventory
1) Those stocks or items used to support production (raw materials and work-in-process items), supporting activities (maintenance, repair, and operating supplies), and customer service (finished goods and spare parts). Demand for inventory may be dependent or independent. Inventory functions are anticipation, hedge, cycle (lot size), fluctuation (safety, buffer, or reserve), transportation (pipeline), and service parts. 2) In the theory of constraints, inventory is defined as those items purchased for resale and includes finished goods, work in process, and raw materials. Inventory is always valued at purchase price and includes no value-added costs, as opposed to the traditional cost accounting practice of adding direct labor and allocating overhead as work in process progresses through the production process.

Inventory accounting
The branch of accounting dealing with valuing inventory. Inventory may be recorded or valued using either a perpetual or a periodic system. A perpetual inventory record is updated frequently or in real time, while a periodic inventory record is counted or measured at fixed time intervals, e.g., every two weeks or monthly. Inventory valuation methods of LIFO, FIFO, or average costs are used with either recording system.

Inventory adjustment
A change made to an inventory record to correct the balance, to bring it in line with actual physical inventory balances. The adjustment either increases or decreases the item record on-hand balance.

Inventory buffer
Inventory used to protect the throughput of an operation or the schedule against the negative effects caused by delays in delivery, quality problems, delivery of incorrect quantity, and so on. Syn: inventory cushion. See: fluctuation inventory, safety stock.

Inventory control
The activities and techniques of maintaining the desired levels of items, whether raw materials, work in process, or finished products. Syn: material control.

Inventory conversion period
The time period needed to produce and sell a product, measured from procurement of raw materials to the sale of the product.

Inventory costs
Costs associated with ordering and holding inventory. See: carrying costs, ordering cost.

Inventory cycle
The length of time between two consecutive replenishment shipments.

Inventory diversion
The shipment of parts against a project or contract other than the original project or contract for which the items were purchased.

Inventory issue
1) Items released from an inventory location for use or sale. 2) The inventory record transaction reducing the inventory balance by the amount released.

Inventory management
The branch of business management concerned with planning and controlling inventories.

Inventory ordering system
Inventory models for the replenishment of inventory. Independent demand inventory ordering models include but are not limited to fixed reorder cycle, fixed reorder quantity, optional replenishment, and hybrid models. Dependent demand inventory ordering models include material requirements planning, kanban, and drum-buffer-rope.

Inventory planning
The activities and techniques of determining the desired levels of items, whether raw materials, work in process, or finished products including order quantities and safety stock levels. Syn: material planning.

Inventory policy
A statement of a company’s goals and approach to the management of inventories.

Inventory receipt
An inventory record transaction that records the receipt or arrival of inventory into physical stores by increasing the inventory on-hand balance by the received quantity. Often associated with receipt of a purchase or production order quantity.

Inventory returns
Items returned to the manufacturer as defective, obsolete, overages, etc. An inventory item record transaction records the return or receipt into physical stores of materials from which the item may be scrapped.

Inventory shrinkage
Losses of inventory resulting from scrap, deterioration, pilferage, etc.

Inventory tax
Tax based on the value of inventory on hand at a particular time.

Inventory turnover
The number of times that an inventory cycles, or “turns over,” during the year. A frequently used method to compute inventory turnover is to divide the average inventory level into the annual cost of sales. For example, an average inventory of $3 million divided into an annual cost of sales of $21 million means that inventory turned over seven times. Syn: inventory turns, turnover. See: inventory velocity

Inventory usage
The value or the number of units of an inventory item consumed over a period of time.

Inventory valuation
The value of the inventory at either its cost or its market value. Because inventory value can change with time, some recognition is taken of the age distribution of inventory. Therefore, the cost value of inventory is usually computed on a first-in-first-out (FIFO) basis, last-in-first-out (LIFO) basis, or a standard cost basis to establish the cost of goods sold.

Inventory velocity
The speed with which inventory passes through an organization or supply chain at a given point in time as measured by inventory turnover. See: inventory turnover.

Inventory write-off
A deduction of inventory dollars from the financial statement because the inventory is of less value. An inventory write-off may be necessary because the value of the physical inventory is less than its book value or because the items in inventory are no longer usable.

Invoice
A list of goods shipped by the supplier to the buyer stating prices, quantities, and other costs.

Islands of automation
Stand-alone pockets of automation (robots, CAD/CAM systems, numerical control machines) that are not connected into a cohesive system.

ISO 14000 Series Standards
A series of generic environmental management standards developed by the International Organization of Standardization, which provide structure and systems for managing environmental compliance with legislative and regulatory requirements and affect every aspect of a company’s environmental operations.

Isolation
The determination of the location of a failure through the use of accessory support and diagnostic equipment.

ISO 9000
A set of international standards on quality management and quality assurance developed to help companies effectively document the quality system elements to be implemented to maintain an efficient quality system. The standards, initially published in 1987, are not specific to any particular industry, product, or service. The standards were developed by the International Organization for Standardization, known as ISO, a specialized international agency for standardization composed of the national standards bodies of 91 countries. The standards underwent major revision in 2000 and now include ISO 9000:2000 (definitions), ISO 9001:2000 (requirements) and ISO 9004:2000 (continuous improvement).

Issue
1) The physical movement of items from a stocking location. 2) Often, the transaction reporting of this activity.

Issue cycle time
The time required to generate a requisition for material, pull the material from an inventory location, and move it to its destination.

Item
Any unique manufactured or purchased part, material, intermediate, subassembly, or product.

Item master file
A file containing all item master records for a product, product line, plant, or company. See: master file.

Item number
A number that serves to uniquely identify an item. Syn: part number, product number, stock code, stock number.

Item record
The “master” record for an item. Typically, it contains identifying and descriptive data and control values (lead times, lot sizes, etc.) and may contain data on inventory status, requirements, planned orders, and costs. Item records are linked by bill of material records (or product structure records), thus defining the bill of material. Syn: item master record, part master record, part record.