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1. Business plan A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a project

balance sheet, and a cash flow (source and application of funds) statement. A business plan is usually stated in terms

of dollars and grouped by product family. The business plan is then translated into synchronized tactical functional

plans through the production planning process (or the sales and operations planning process). Although frequently

stated in different terms (dollars versus units), these tactical plans should agree with each other and with the busines

plan. See: long-term planning, strategic plan. 2) A document consisting of the business details (organization,

strategy, and financing tactics) prepared by an entrepreneur to plan for a new business.

2. Business

planning

1) A statement of long-range s trategy and revenue, cost, and profit objectives usually accompanied by budgets, a

projected balance sheet, and a cash flow (source and application of funds) statement. A business plan is usually state

in terms of dollars and grouped by product family. The business plan is then translated into synchronized tactical

functional plans through the production planning process (or the sales and operations planning process). Although

frequently stated in different terms (dollars versus units), these tactical plans should agree with each other and with

the business plan. See: long-term planning, strategic plan. 2) A document consisting of the business details

(organization, strategy, and financing tactics) prepared by an entrepreneur to plan for a new business.

3. Casual forecast A type of forecasting that uses cause-and-effect associations to predict and explain relationships between the

independent and dependent variables

4. Collaborative,

Planning,Forecasting,

and

Replenishment

(CPFR)

1) A collaboration process whereby supply chain trading partners can jointly plan key supply chain activities from

production and delivery of raw materials to production and delivery of final products to end customers. Collaborationencompasses business planning, sales forecasting, and all operations required to replenish raw materials and

finished goods. 2) A process philosophy for facilitating collaborative communications. CPFR is considered a standar

endorsed by the Voluntary Interindustry Commerce Standards. Syn: collaborative planning.

5. Customer

Relationship

Management

A marketing philosophy based on putting the customer first. The collection and analysis of information designed for

sales and marketing decision support (as contrasted to enterprise resources planning information) to understand an

support existing and potential customer needs. It includes account management, catalog and order entry, payment

processing, credits and adjustments, and other functions. Syn: customer relations management.

6. Decomposition A method of forecasting where time series data are separated into up to three components: trend, seasonal, and

cyclical; where trend includes the general horizontal upward or downward movement over time; seasonal includes a

recurring demand pattern such as day of the week, weekly, monthly, or quarterly; and cyclical includes any repeating

nonseasonal pattern. A fourth component is random, that is, data with no pattern. The new forecast is made byprojecting the patterns individually determined and then combining them. See: cyclical component, random

component, seasonal component, trend component.

7. Decoupling

Point

The locations in the product structure or distribution network where inventory is placed to create independence

between processes or entities. Selection of decoupling points is a strategic decision that determines customer lead

times and inventory investment. See: control points.

8. Demand

management

1) The function of recognizing all demands for goods and services to support the market place. It involves prioritizing

demand when supply is lacking. Proper demand management facili tates the planning and use of resources for

profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the

design, pricing, promotion, and distribution of products and services to bring about transactions that meet

organizational and individual needs. Syn: marketing management.

9. Distributionplanning

The planning activities associated with transportation, warehousing, inventory levels, materials handling, orderadministration, site and location planning, industrial packaging, data processing, and communications networks to

support distribution.

10. Distribution

requirements

planning

(DRP)

1) The function of determining the need to replenish inventory at branch warehouses. A time-phased order point

approach is used where the planned orders at the branch warehouse level are "exploded" via MRP logic to become

gross requirements on the supplying source. In the case of multilevel distribution networks, this explosion process ca

continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and

become input to the master production schedule. Demand on the supplying sources is recognized as dependent, and

standard MRP logic applies. 2) More generally, replenishment inventory calculations, which may be based on other

planning approaches such as period order quantities or "replace exactly what was used," rather than being limited to

the time-phased order point approach.

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11. Exponential

smoothing

forecast

A type of weighted moving average forecasting technique in which past observations are geometrically discounted

according to their age. The heaviest weight is assigned to the most recent data. The smoothing is termed exponential

because data points are weighted in accordance with an exponential function of their age. The technique makes use o

a smoothing constant to apply to the difference between the most recent forecast and the critical sales data, thus

avoiding the necessity of carrying historical sales data. The approach can be used for data that exhibit no trend or

seasonal patterns. Higher order exponential smoothing models can be used for data with either (or both) trend and

seasonality.

12. Extrinsic

forecasting

A forecast method on a correlated leading indicator, such as estimating furniture sales based on housing starts.

Extrinsic forecasts tend to be more useful for large aggregations, such as total company sales, than for individual

product sales. Ant: intrinsic forecast method. See: quantitative forecasting technique.

13. Forecasting

process

Data gathering and preparation --> Forecast generation --> Volume and mix reconciliation #1 --> Applying judgeme

--> Volume and mix reconciliation #2 --> Decision-making and authorization --> Volume and mix reconciliation #3

-> Documenting assumptions

14. Imbalances in

supply and

demand can

cause

- poor levels of customer service

- buildup of inventory from large-batch production

- weakened competitive position

15. Intrinsic

forecasting

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

16. Keys to

successful

forecasting

1) People who are responsible for and capable of making the right decisions on what forecasting models to use in

different situations

2) Access to data and knowing what data are relevant

3) Selection of software applications to support the forecasting requirements of companies that differ, for example, in

terms of manufacturing environments, processes, variety of products, and volume

17. Manufacturing

environment

The framework in which manufacturing strategy is developed and implemented. Elements of the manufacturing

environment include external environmental forces, corporate strategy, business unit strategy, other functional

strategies (marketing, engineering, finance, etc.), product selection, product/process design, product/process

technology, and management competencies. Often refers to whether a company, plant, product, or service is make-to

stock, make-to-order, or assemble-to-order. Syn: production environment.

18. Master

productionschedule

(MPS)

Individual end items, i.e. Master Scheduling

19. Master

scheduling

The process where the master schedule is generated and reviewed and adjustments made to the master production

schedule to ensure consistency with the production plan. The master production schedule (the line on the grid) is the

primary input to the material requirements plan. The sum of the master production schedules for the items within the

product family must equal the production plan for that family.

20. Product mix The proportion of individual products that make up the total production or sales volume. Changes in the product mix

can mean drastic changes in the manufacturing requirements for certain types of labor and material.

21. Production

plan

Product family data, i.e. S&OP

22. Pyramid

Forecasting

Marketing and sales roll-up the forecast from SKU level to product family to business plan. Management makes

desired adjustments and then forces-down a new forecast in the same ratio as it was rolled-up

23. Quantitative

forecasting

techniques

An approach to forecasting where historical demand data is used to project future demand. Extrinsic and intrinsic

techniques are typically used. See: extrinsic forecasting method, intrinsic forecasting method.

24. Regression

analysis

A statistical technique for determining the best mathematical expression describing the functional relationship

between one response and one or more independent variables. See: least-squares method.

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25. Resource

planning

Capacity planning conducted at the business plan level. The process of establishing, measuring, and adjusting limits or

levels of long-range capacity. Resource planning is normally based on the production plan but may be driven by higher

level plans beyond the time horizon for the production plan, e.g. , the business plan. It addresses those resources that tak

long periods of time to acquire. Resource planning decisions always require top management approval. Syn: resource

requirements planning. See: capacity planning, long-term planning.

26. rough-cut

capacity

planning

The process of converting the master production schedule into requirements for key resources, often including labor,

machinery, warehouse space, suppliers' capabilities, and, in some cases, money. Comparison to available or

demonstrated capacity is usually done for each key resource. This comparison assists the master scheduler in establishi

a feasible master production schedule. Three approaches to performing RCCP are the bill of labor (resources, capacity)

approach, the capacity planning using overall factors approach, and the resource profile approach. See: bill of resources

capacity planning, capacity planning using overall factors, product load profile, resource profile.

27. S&OP

Forecast

- Consensus on the sales and operations plan

- adequacy of resources for the production and distribution plan

- consistency of the sales and operations plan and financial plan

28. S&OP

Qualitative

Forecasting

techniques

Expert opinion, pyramid, focus group, Delphi

29. S&OP

Quantitative

forecasting

techniques

Time series forecasts, decomposition, regression analysis

30. Sales and

Operations

Planning (

S&OP)

A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve

competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and exis ting

products with the management of the supply chain. The process brings together all the plans for the business (sales,

marketing, development, manufacturing, sourcing, and financia l) into one integrated set of plans. It is performed at lea

once a month and is reviewed by management at an aggregate (product family) level. The process must reconcile all

supply, demand, and new-product plans at both the detail and aggregate levels and tie to the business plan. It is the

definitive statement of the company's plans for the near to intermediate term, covering a horizon sufficient to plan for

resources and to support the annual business planning process. Executed properly, the sales and operation planning

process links the strategic plans for the business with its execution and reviews performance measurements for

continuous improvement. See: aggregate planning, production plan, production planning, sales plan, tactical planning

31. Seasonal

index

A number used to adjust data to seasonal demand. Syn: seasonal adjustment. See: base series.

32. Selecting a

forecasting

model

standard deviation of period demand

CV = --------------------------------------------------

average period demand

if CV < 1 is considered low-variance, CV > 1 considered high-variance

33. Simple

moving

average

A moving average where the oldest data point is dropped and the newest data point is included in the calculation. All da

points are assigned equal weights. See: moving average, weighted moving average.

34. Strategic

planning

The plan for how to marshal and determine actions to support the mission, goals, and objectives of an organization.

Generally includes an organization's explicit mission, goals, and objectives and the specific actions needed to achieve

those goals and objectives. See: business plan, operational plan, strategic planning, strategy, tactical plan.

35. Time series

analysis

Analysis of any variable classified by time in which the values of the variable are functions of the time periods. Time seri

analysis is used in forecasting. A time series consists of seasonal, cyclical, trend, and random components. See: cyclica

component, random component, seasonal component, trend component.

36. Weighted

moving

average

An averaging technique in which the data to be averaged are not uniformly weighted but are given values according to

their importance. See: moving average, simple moving average.