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Glossary

Yellow Belt

Sometimes referred to as Green Belts (GB) -- varies from business to business. A Yellow Belt typically has a basic knowledge of Six Sigma, but does not lead projects on their own, as does a Green Belt or Black Belt. In addition, Yellow Belts may often be responsible for running smaller process improvement projects using the PDCA (Plan, Do, Check, Act) methodology. PDCA, often referred to as the Deming Wheel, enables Yellow Belts to identify processes that could benefit from improvement. These smaller Yellow Belt projects often get escalated to the Green Belt or Black Belt level where a DMAIC methodology is used to maximize cost savings using Statistical Process Control. (See Six Sigma Belts)



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Lean Advisors - Lean Definitions - Work In Progress - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Work In Progress

Items (material or information) between machines or processes or activities waiting to be processed.



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Lean Advisors - Lean Definitions - Work Cell - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Work Cell

see cell



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Lean Advisors - Lean Definitions - WIP - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

WIP

Items (material or information) between machines or processes or activities waiting to be processed.



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Lean Advisors - Lean Definitions - Waste - Types - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Waste - Types

  1. Overproduction

  2. Inventory

  3. Defects

  4. Overprocessing

  5. Motion

  6. People's Talents

  7. Waiting

  8. Transport

  9. Re-Prioritzation



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Lean Advisors - Lean Definitions - Waste - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Waste

Anything that does not add value to the final product or service, in the eyes of the customer. An activity the customer wouldn't want to pay for if they knew it was happening.



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Lean Advisors - Lean Definitions - Visual Factory - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Visual Factory

An environment where it is easy for everyone to 'see' the current status of the process or 'system' and the visual give immediate information to the individuals to understand 'how the operation is doing'.



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Lean Advisors - Lean Definitions - Variable Costing - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Variable Costing

Adds all traceable costs of resources used to unit-level costs. The contribution margin (under variable costing) is sales revenue minus all variable cost.



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Lean Advisors - Lean Definitions - Variable Cost - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Variable Cost

Cost that change in total proportion to changes in the related level of total activity or volume.



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Lean Advisors - Lean Definitions - Value Stream Mapping - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Value Stream Mapping

A pencil-and-paper tool used: a) to follow a product or information (or both) activity path from beginning to end and draw a visual representation of every process (value and non-value) in the material and information flows. b) then to design a future state map which has waste removed and creates more flow and c) to end up with a detailed implementation plan for the future state.



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Lean Advisors - Lean Definitions - Value Stream - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Value Stream

All activities, both value added and non value-added, required to bring a product group or service from order to the hands of the customer, and a design from concept to launch to production to delivery.



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Lean Advisors - Lean Definitions - Value Added - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Value Added

Activities or work essential to ensure a product or service meets the needs of the customer.



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Lean Advisors - Lean Definitions - Value - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Value

A product or service's capability provided to a customer at the right time, at an appropriate price, as defined in each case by the customer.



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Lean Advisors - Lean Definitions - Traditional Cost Systems - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Traditional Cost Systems

see Variable Costing



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Lean Advisors - Lean Definitions - TQM - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

TQM

A systematic customer focused approach to continuous performance improvement. A philosophy and set of guiding principles which represent the foundation for continuously improving the organization through employee involvement. The application of quantitative methods and human resources to improve the materials and services supplied to and by an organization and all the processes within the organization and the degree to which the needs of the customer are met. The integration of fundamental management techniques, existing improvement efforts, and technical tools, under a disciplined approach to focus on continuous improvement.



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Lean Advisors - Lean Definitions - TPM - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

TPM

A series of methods, originally pioneered by Nippondenso (a member of the Toyota group), to ensure that every machine in a production process is always able to perform its required tasks so that production is never interrupted.



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Lean Advisors - Lean Definitions - Total Quality Management - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Total Quality Management

A systematic customer focused approach to continuous performance improvement. A philosophy and set of guiding principles which represent the foundation for continuously improving the organization through employee involvement. The application of quantitative methods and human resources to improve the materials and services supplied to and by an organization and all the processes within the organization and the degree to which the needs of the customer are met. The integration of fundamental management techniques, existing improvement efforts, and technical tools, under a disciplined approach to focus on continuous improvement.



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Lean Advisors - Lean Definitions - Total Productive Maintenance - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Total Productive Maintenance

A series of methods, originally pioneered by Nippondenso (a member of the Toyota group), to ensure that every machine in a production process is always able to perform its required tasks so that production is never interrupted.



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Lean Advisors - Lean Definitions - Throughput Costing - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Throughput Costing

Counts only unit-level costs as the cost of a product or service. All other costs of resources used are counted as operating costs (or expenses). The throughput (under throughput costing) is sales revenue minus all unit-level spending for direct costs.

Timing is the key in distinguishing between absorption, variable, and throughput costing. All manufacturing costs will ultimately be expensed under all three methods. Under throughput costing, only the unit-level spending for direct costs are included in the product cost. All other committed costs are expensed as period costs during the period in which they are incurred. Under variable costing, the fixed manufacturing-overhead costs are expensed during the period in which they are incurred. Under absorption costing, fixed manufacturing-overhead costs are held in inventory as product costs until the period during which the units are sold. Then those costs flow into cost-of-goods-sold expense.

Throughput, variable and absorption costing will not result in significantly different income measures in a JIT setting. Under JIT inventory and production management, inventories are minimal and as a result inventory changes are also minimal. The three methods result in significantly different income measures only when inventory changes significantly from period to period.



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Lean Advisors - Lean Definitions - Theory of Constraints - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Theory of Constraints

Theory of Constraints describes methods to maximize operating income when faced with some bottleneck and some non-bottleneck operations.



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Lean Advisors - Lean Definitions - Target Cost - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Target Cost

Is a function of the sales price and the organization's target profit margin. Target Cost is profit management. The four major steps of target costing are:


  • Determine the target price - this is the amount customers are willing to pay for a product or service with specified features and functions

  • Set the target cost, per unit and in total - the target cost is the market price less the required return. The total target cost is the per unit target cost multiplied by the expected number of sales units of product or service over its life.

  • Compare the total target cost to the currently feasible total cost to measure the cost reduction target - currently feasible total cost is the cost to make the product given current design and process capabilities. The difference between the total target cost and currently feasible cost is the cost reduction target.

  • Redesign or design products and processes to achieve the cost reduction target - this can be an iterative process until both the product or service and its cost meet marketing and financial objectives.




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Lean Advisors - Lean Definitions - Takt Time - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Takt Time

The rate of demand from the customer. Takt Time = Available Operating Time/Requirement



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Lean Advisors - Lean Definitions - Supermarket - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Supermarket

A controlled inventory of items that is used to schedule production at an upstream process. Very visible.



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Lean Advisors - Lean Definitions - SMED - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

SMED

The process that allows a person to reduce the time to change a production process over from making one part or product to another part or product. The process to reduce the time elapsed from the last good part A to the first good part B at the same station or process. This process must take less than ten minutes (hence single minute).



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Lean Advisors - Lean Definitions - Standard Work - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Standard Work

A precise description of each work activity specifying cycle time, takt time, the work sequence of specific tasks, and the minimum inventory of parts on hand needed to conduct the activity.



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Lean Advisors - Lean Definitions - Standard Costing - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Standard Costing

Assigns costs to products based on expected costs of resources used, which may differ from both normal and actual costs. Under a standard-costing system, standard costs are used for product-costing purposes as well as for control purposes. The costs entered into Work-in-Process Inventory are standard costs. From that point forward, standard costs flow through all the manufacturing accounts. When goods are finished, the standard cost of the finished goods is removed from the Work-in-Process Inventory account and transferred to the Finished-Goods Inventory account. When goods are sold, the standard cost of the goods sold is transferred from the Finished-Goods Inventory account to Cost of Goods Sold.



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Lean Advisors - Lean Definitions - Six Sigma Performance - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting Sigma 1: Defects per million = 690,000 Sigma 2: Defects per million = 308,537 Sigma 3: Defects per million = 66,807 Sigma 4: Defects per million = 6,210 Sigma 5: Defects per million = 233 Sigma 6: Defects per million = 3.4 - Lean Training - Lean Manufacturing Training, Lean Implementation support for all services and sectors including healthcare, aerospace, food processing, process, and manufacturing. - LeanAdvisors.com" />

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Kaizen Institute - LEAN ADVISORS

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The Triple Bottom Line: People, Planet, Profit
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Glossary

Six Sigma Performance

Sigma 1: Defects per million = 690,000
Sigma 2: Defects per million = 308,537
Sigma 3: Defects per million = 66,807
Sigma 4: Defects per million = 6,210
Sigma 5: Defects per million = 233
Sigma 6: Defects per million = 3.4



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Lean Advisors - Lean Definitions - Six Sigma Belts - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Six Sigma Belts

Master Black Belt
Black Belt
Green Belt
Yellow Belt



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Lean Advisors - Lean Definitions - Six Sigma - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Six Sigma

Approximately 3 errors per million. Six Sigma means the elimination of variance in the process in order to allow flow using the necessary analytical tools and process.



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Lean Advisors - Lean Definitions - Single Minute Exchange of Dies - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Single Minute Exchange of Dies

The process that allows a person to reduce the time to change a production process over from making one part or product to another part or product. The process to reduce the time elapsed from the last good part A to the first good part B at the same station or process. This process must take less than ten minutes (hence single minute).



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Lean Advisors - Lean Definitions - Sensei - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Sensei

Teacher, one who has gone before.



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Lean Advisors - Lean Definitions - Resource Consumption Accounting - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Resource Consumption Accounting

A detailed system analysis of the nature and behavior of resources. We place dollars behind resources, but we do not place dollars on activities, thus it only makes sense to track resources rather than activities (Activity Based Cost System) Resource Consumption Accounting introduces ways to measure and manage capacity, which leads to better management of limited assets. Resource Consumption Accounting also uses "mapping" to identify resources with processes and activities. Resource Consumption Accounting defines resource pools (similar to Activity Based Cost System activity pools) so that "families" having similar technologies, machinery, etc, can be grouped together.



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Lean Advisors - Lean Definitions - Quick Changeover - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Quick Changeover

Quick Changeover is a process that allows a person to reduce the time to changeover a production process from making one part or product to another part or product. The process to reduce the time elapsed from the last good part A to the first good part B at the same station or process.

Quick Changeover is also referred to as SMED or Single Minute Exchange of Die.

This quick changeover process must take less than ten minutes (hence single minute).



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Lean Advisors - Lean Definitions - Push - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Push

To produce or process an item without any real demand from the customer - usually creates inventory and all other 'wastes'.



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Lean Advisors - Lean Definitions - Pull System - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Pull System

To produce or process an item only when the customer needs it and has requested it. The customer can be internal or external.



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Lean Advisors - Lean Definitions - Productivity - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Productivity

The ratio of measured outputs over measured inputs (i.e. - widgets produced per man-hour).



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Lean Advisors - Lean Definitions - Product Family - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Product Family

A group of products that go through the same or similar downstream or "assembly" steps and equipment.



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Lean Advisors - Lean Definitions - Product Cost - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Product Cost

The costs of all resources used to produce a product. These include direct and indirect production costs.



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Lean Advisors - Lean Definitions - Product Costing System - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Product Costing System

Accumulates the costs of a production process and assigns them to the products that constitute the organization's output.

The elements of a CVP cost model are prices, variable (or throughput) costs, quantities, and committed (or fixed) costs. The CVP model is a special financial model in which the only driver of costs, revenues, and profits is the quantity of product or service produced and sold. The basic CVP model has several other limitations. The following items, for example, are assumed to remain constant: sales mix, technology, efficiency, and management. The model is based on straight-line linear relationships, thus ignoring such factors as quantity discounts.



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Lean Advisors - Lean Definitions - Period Cost - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Period Cost

The cost of resources used in a period that cannot be traced easily to either products or production processes.



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Lean Advisors - Lean Definitions - Process Costing - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Glossary

Process Costing

Treats all units of output produced in a period alike by accumulating and averaging costs over the units produced.



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Lean Advisors - Lean Definitions - Poka Yoke - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Poka Yoke

A mistake proofing device or procedure to prevent a defect throughout the system or process (office or manufacturing).



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Lean Advisors - Lean Definitions - Overproduction - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Overproduction

Producing more, sooner or faster than is required by the next process or customer.



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Lean Advisors - Lean Definitions - Opportunity Cost - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Opportunity Cost

The forgone value of an alternative that is precluded by choosing another alternative.



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Lean Advisors - Lean Definitions - Operation Costing - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Operation Costing

Have features of job and process costing by treating each job as a unique unit of output but by also allocating costs of standard operations to jobs in a uniform manner.



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Lean Advisors - Lean Definitions - One Piece Flow - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

One Piece Flow

In its purest form continuous flow means that items are processed and moved directly to the next process one piece at a time. Each processing step completes its work just before the next process needs the item, and the transfer batch is one. Also known as "one-piece flow" and "make one, move one".



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Lean Advisors - Lean Definitions - Normal Costing - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Normal Costing

Assigns costs to products based on historical, average costs, which may be different from current, actual or expected costs.



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Lean Advisors - Lean Definitions - Muda - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Muda

See 'Waste'



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Lean Advisors - Lean Definitions - Mixed Model - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Mixed Model

Mixed Model flow is making value flow by taking out the waste in your value stream so that multiple products are made in each time period. This is accomplished by making the mixed model flow part perform as if it were a dedicated asset.

Each product flows at the rate of customer demand, even though mixed products are being made.



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Lean Advisors - Lean Definitions - Monument - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Monument

Any design, scheduling, or production technology with scale requirements necessitating that designs, order, and products be brought to the machines to wait in a queue for processing.



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Lean Advisors - Lean Definitions - Material Flow - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Material Flow

Movement of physical product through the value stream.



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Lean Advisors - Lean Definitions - Material Requirements Planning (MRP) - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Material Requirements Planning (MRP)

A software tool which enables a manufacturer to plan, allocate and track material and financial resources for a production process.



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Lean Advisors - Lean Definitions - Master Black Belt - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Master Black Belt

Six Sigma Quality experts that are responsible for the strategic implementations within an organization. Master Black Belt main responsibilities include training and mentoring of Black Belts and Green Belts; helping to prioritize, select and charter high-impact projects; maintaining the integrity of the Six Sigma measurements, improvements and tollgates; and developing, maintaining and revising Six Sigma training materials.The Master Black Belt should be qualified to teach other Six Sigma facilitators the methodologies, tools, and applications in all functions and levels of the company, and should be a resource for utilizing statistical process control (typically just outside the Black Belt's knowledge base) within processes. (See Six Sigma Belts)



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Lean Advisors - Lean Definitions - Malcolm Baldrige Award - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Malcolm Baldrige Award

Recognizes continuous improvements in quality management by US manufacturers, service companies, educational institutes and healthcare providers. Also published a criteria for performance excellence with seven categories.

The annual self-evaluation covers the following seven categories of criteria:


  • Leadership

  • Strategic Planning

  • Customer and Market Focus

  • Information and Analysis

  • Human Resource Focus

  • Process Management

  • Business Results


The National Institute of Standards and Technology (NIST), a federal agency within the Department of Commerce, is responsible for managing the Malcolm Baldrige National Quality Award. The American Society for Quality (ASQ) administers the Malcolm Baldrige National Quality Award under a contract with NIST.



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Lean Advisors - Lean Definitions - Lean - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

The KAIZEN Lean & Green™ Solution
Environmental Responsibility Driving Economic Performance
The Triple Bottom Line: People, Planet, Profit
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Glossary

Lean

Lean is simply a thought process, not a tool, used to look at your business whether it is manufacturing, service or any other activity where you have a supplier and a customer/receiver. The key thought processes within Lean are identifying 'waste' from the customer perspective and then determining how to eliminate it. Waste is defined as the activity or activities that a customer would not want to pay for and/or that add no value to the product or service from the customer's perspective. Once waste has been identified in the Current State, a plan is formulated to reach the Future State in an effective manner that encompasses the entire system.



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Lean Advisors - Lean Definitions - Lead Time - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

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Glossary

Lead Time

The time that elapses between receiving an order and shipping the product or service to the customer.



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Lean Advisors - Lean Definitions - Kanban - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

The KAIZEN Lean & Green™ Solution
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The Triple Bottom Line: People, Planet, Profit
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Glossary

Kanban

A signaling device that gives instruction for production or conveyance of items in a pull system.



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Lean Advisors - Lean Definitions - Kaizen Costing - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

The KAIZEN Lean & Green™ Solution
Environmental Responsibility Driving Economic Performance
The Triple Bottom Line: People, Planet, Profit
Download brochure | Watch Video | Green Funding Options

Glossary

Kaizen Costing

Is the process of cost reduction during the manufacturing phase of an existing product. The Japanese word kaizen refers to continual and gradual improvement through small betterment activities, rather than large or radical improvement made through innovation or large investments in technology. Kaizen costing is most consistent with the saying "slow and steady wins the race."



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Lean Advisors - Lean Definitions - Kaizen - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

The KAIZEN Lean & Green™ Solution
Environmental Responsibility Driving Economic Performance
The Triple Bottom Line: People, Planet, Profit
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Glossary

Kaizen

This is the Japanese word for improvement. Kaizen implies more than improvement in basic production processes. Kaizen represents a philosophy whereby an organization, and the individuals within it, undertake continual improvements of all aspects of organizational life.



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Lean Advisors - Lean Definitions - Just In Time - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting

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Kaizen Institute - LEAN ADVISORS

The KAIZEN Lean & Green™ Solution
Environmental Responsibility Driving Economic Performance
The Triple Bottom Line: People, Planet, Profit
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Glossary

Just In Time

Producing or conveying only the items that are needed by the next process when they are needed and in the quantity needed. Can even be used between facilities or companies.



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Lean Advisors - Lean Definitions - Job Order Costing - Lean Manufacturing | Lean Tools | Lean Training | Lean Healthcare | Lean Consulting