V

Valuation
The technique of determining worth, typically of inventory. Valuation of inventories may be expressed in standard dollars, replacement dollars, current average dollars, or last-purchase-price dollars.

Value
The worth of an item, good or service.

Value added
1) In accounting, the addition of direct labor, direct material, and allocated overhead assigned at an operation. It is the cost roll-up as a part goes through a manufacturing process to finished inventory. 2) In current manufacturing terms, the actual increase of utility from the viewpoint of the customer as a part is transformed from raw material to finished inventory. It is the contribution made by an operation or a plant to the final usefulness and value of a product, as seen by the customer. The objective is to eliminate all non-value-added activities in producing and providing a good or service.

Value-added network (VAN)
A network, often supporting EDI, providing services additional to those provided by common carriers.

Value analysis
The systematic use of techniques that identify a required function, establish a value for that function, and finally provide that function at the lowest overall cost. This approach focuses on the functions of an item rather than the methods of producing the present product design.

Value-based management (VBM)
The concept of satisfying customers to create shareholder wealth.

Value chain
The functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment.

Value chain analysis
An examination of all links a company uses to produce and deliver its products and services starting from the origination point and continuing through delivery to the final customer.

Value chain initiative
This initiative combines software, hardware, and supply chain companies to develop an integrated system to support software sharing among diverse applications.

Value-driven enterprise
An organization that is designed and managed to add utility from the viewpoint of the customer in the transformation of raw materials into a finished good or service.

Value engineering and/or analysis
A disciplined approach to the elimination of waste from products or processes through an investigative process that focuses on the functions to be performed and whether such functions add value to the good or service.

Value stream
The processes of creating, producing, and delivering a good or service to the market. For a good, the value stream encompasses the raw material supplier, the manufacture and assembly of the good, and the distribution network. For a service, the value stream consists of suppliers, support personnel and technology, the service “producer,” and the distribution channel. The value stream may be controlled by a single business or a network of several businesses.

Valve inventory
In a Just-in-Time context, inventory at a stockpoint that is too large to be located next to the point of use of the material, and from which material is drawn by a pull system. The valve inventory is often located at a stockpoint in the plant’s receiving area.

VAN
Acronym for value-added network.

Variable
A quantity that can assume any of a given set of values. Ant: constant.

Variable cost
An operating cost that varies directly with a change of one unit in the production volume, e.g., direct materials consumed, sales commissions.

Variable costing
An inventory valuation method in which only variable production costs are applied to the product; fixed factory overhead is not assigned to the product. Traditionally, variable production costs are direct labor, direct material, and variable overhead costs. Variable costing can be helpful for internal management analysis but is not widely accepted for external financial reporting. For inventory order quantity purposes, however, the unit costs must include both the variable and allocated fixed costs to be compatible with the other terms in the order quantity formula. For make-or-buy decisions, variable costing should be used rather than full absorption costing. Syn: direct costing.

Variable overhead
All manufacturing costs, other than direct labor and direct materials, that vary directly with production volume. Variable overhead is necessary to produce the product, but cannot be directly assigned to a specific product.

Variables data
Measurement information. Control charts based on variables data include average (X-bar) charts, range (R) charts, and sample standard deviations charts.

Variable yield
The condition that occurs when the output of a process is not consistently repeatable either in quantity, quality, or combinations of these.

Variance
1) The difference between the expected (budgeted or planned) value and the actual. 2) In statistics, a measurement of dispersion of data. See: estimate of error.

Variation
A change in data, a characteristic, or a function that is caused by one of four factors: special causes, common causes, tampering, or structural variation.

VAT analysis
In the theory of constraints, a procedure for determining the general flow of parts and products from raw materials to finished products (logical product structure). A V logical structure starts with one or a few raw materials, and the product expands into a number of different products as it flows through divergent points in its routings. The shape of an A logical structure is dominated by converging points. Many raw materials are fabricated and assembled into a few finished products. A T logical structure consists of numerous similar finished products assembled from common assemblies, subassemblies, and parts. Once the general parts flow is determined, the system control points (gating operations, convergent points, divergent points, constraints, and shipping points) can be identified and managed.

VBM
Abbreviation for value-based management.

Velocity
1) The rate of change of an item with respect to time. See: inventory turnover, lead time. 2) In supply chain management, a term used to indicate the relative speed of all transactions, collectively, within a supply chain community. A maximum velocity is most desirable because it indicates higher asset turnover for stockholders and faster order-to-delivery response for customers.

Vendor
Any seller of an item in the marketplace. See: supplier.

Vendor lead time
Syn: supplier lead time.

Vendor-managed inventory (VMI)
A means of optimizing supply chain performance in which the supplier has access to the customer’s inventory data and is responsible for maintaining the inventory level required by the customer. This activity is accomplished by a process in which resupply is done by the vendor through regularly scheduled reviews of the on-site inventory. The on-site inventory is counted, damaged or outdated goods are removed, and the inventory is restocked to predefined levels. The vendor obtains a receipt for the restocked inventory and accordingly invoices the customer. See: continuous replenishment.

Vendor measurement
The act of measuring the vendor’s performance to a contract. Measurements usually cover delivery reliability, lead time, quality, and price. See: supplier measurement.

Vendor-owned inventory (VOI)
Syn: consigned stocks.

Vendor scheduler
Syn: supplier scheduler.

Vendor scheduling
Syn: supplier scheduling.

Venture team
A set of individuals assigned outside normal channels to develop ideas for new products.

Vertical dependency
The relationship between a parent item and a component in its bill of material that defines the need for the component based on producing the parent, without regard to the availability of other components at the same level in the bill of material. See: horizontal dependency.

Vertical display
A method of displaying or printing output from an MRP system where requirements, scheduled receipts, projected balance, etc., are displayed vertically. Vertical displays are often used in conjunction with bucketless systems. Ant: horizontal display.

Vertical integration
The degree to which a firm has decided to directly produce multiple value-adding stages from raw material to the sale of the product to the ultimate consumer. The more steps in the sequence, the greater the vertical integration. A manufacturer that decides to begin producing parts, components, and materials that it normally purchases is said to be backward integrated. Likewise, a manufacturer that decides to take over distribution and perhaps sale to the ultimate consumer is said to be forward integrated. See: backward integration, forward integration.

Vertical marketing
A coordinated product marketing system, with activities undertaken by one company, for a supply chain.

Vertical marketing system
A marketing system that focuses on the means to reduce the traditional independence of indirect channels. The system strategically seeks to increase the integration and interdependence of channels by uniting them with common objectives and team management, e.g., franchising, cooperatives, and vertical integration.

Vertical merger
An alliance of two firms where one firm is a supplier to the other.

Vestibule training
A variant of job rotation in which a separate work area is set up for a trainee so that the actual work situation does not pressure the trainee. Examples are cockpit simulators and other machine simulators.

Virtual corporation
The logical extension of outpartnering. With the virtual corporation, the capabilities and systems of the firm are merged with those of the suppliers, resulting in a new type of corporation where the boundaries between the suppliers’ systems and those of the firm seem to disappear. The virtual corporation is dynamic in that the relationships and structures formed change according to the changing needs of the customer.

Virtual factory
A changed transformation process most frequently found under the virtual corporation. It is a transformation process that involves merging the capabilities and capacities of the firm with those of its suppliers. Typically, the components provided by the suppliers are those that are not related to a core competency of the firm, while the components managed by the firm are related to core competencies. One ability found in the virtual factory is that it can be restructured quickly in response to changing customer demands and needs.

Virtual organization
Short-term alliances between independent organizations in a potentially long-term relationship to design, produce, and distribute a product. Organizations cooperate based on mutual values and act as a single entity to third parties.

Virtual reality
Hardware and software that create an apparently real environment.

Vision
The shared perception of the organization’s future—what the organization will achieve and a supporting philosophy. This shared vision must be supported by strategic objectives, strategies, and action plans to move it in the desired direction. See: vision statement.

Vision statement
An organization’s statement of its vision. See: vision.

Visits
In e-commerce, the set of requests made by one user at one Web site. If there is no activity within a given time frame (usually 30 minutes), the visit is considered closed.

Visual control
The control of authorized levels of activities and inventories in a way that is instantly and visibly obvious. This type of activity and inventory control is used in a workplace organization where everything has an assigned place and is in its place.

Visual inspection
Inspection performed without test instruments.

Visual review system
A simple inventory control system where the inventory reordering is based on actually looking at the amount of inventory on hand. Usually used for low-value items, such as nuts and bolts. See: two-bin inventory system.

Vital few, useful many
A term used by J.M. Juran to describe his use of the Pareto principle in quality management, which he first described in 1950. (The principle was used much earlier in economics and inventory control methodologies.) The principle suggests that most effects come from relatively few causes; that is, 80% of the effects come from 20% of the possible causes. The 20% of the possible causes are referred to as the “vital few”; the remaining causes are referred to as the “useful many.” When Juran first defined this principle, he referred to the remaining causes as the “trivial many,” but since no problems are trivial in quality assurance, he changed it to “useful many.”

VMI
Abbreviation for vendor-managed inventory.

VOC
Abbreviation for voice of the customer.

VOI
Abbreviation for vendor-owned inventory.

Voice of the customer (VOC)
Actual customer descriptions in words for the functions and features customers desire for goods and services. In the strict definition, as relates to quality function deployment (QFD), the term customer indicates the external customer of the supplying entity.

Volume flexibility
The ability of the transformation process to quickly accommodate large variations in production levels.

Voucher
A written document that bears witness to, or “vouches” for, something. A voucher generally is an instrument showing services performed or goods purchased and authorizing payment to the supplier.

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