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B2B: Business to business. That is, companies which sell directly to other companies, rather than to private consumers.
B2C: Business to Consumer. Contrast B2B above.
B Class Items: Those products which are in the B Class when a group of products is analysed and ranked according to annual usage x unit value - see ABC Classification.
BAA: Broad Agency Announcement.
B&Q: A major UK DIY chain store founded by Richard Block and David Quale in 1969 in Southampton. B & Q is similar to the US 'Home Depot' chain.
Backflushing: The practice of calculating the amounts of stock of components in an assembly area or on a shop floor by reference to three sources of data: (1) the original amounts known to have been delivered to assembly or to the shop floor; (2) the amounts of achieved production of finished work involving the use of the components; and (3) the Bill of Materials. For example, suppose that 1 unit of component C1 and 2 units of component C2 go to manufacture 1 unit of P. Next suppose that 100 units of C1 are delivered to the shop floor and 140 units of C2 are delivered. Finally, suppose 30 units of P are manufactured. From backflushing, we deduce that the stock of C1 is now 70 units (100 - 30) and the stock of C2 is 80 (140 - (2 x 30)). (Account must be taken of any scrapped manufacturing units, of course ... despite quality improvement drives, scrap in some processes is inevitable, especially in the chemical and food industries.) Three circumstances where backflushing is useful or mandatory are (i) where bulk materials are used in long production runs, and these materials are withdrawn by bulk handling methods as needs be, and where exact quantities cannot be picked; (ii) where scrap amounts vary widely, forcing increases in production run quantities until the point is reached where sufficient good quality material has been produced; and (iii) in closed processes, especially in food or chemical manufacture. Backflushed records go wrong very quickly for five main reasons. (1) There may be discrepancies in the recorded Bill of Materials held on file from actuality, perhaps due to the recorded BOM being out of date; (2) variances from standard scrap, waste or yield figures are likely to occur, which are then not taken account of properly (or are not able to be taken into account); (3) production workers may make product substitutions during assembly or manufacture; (4) the backflushing of the records being maintained is not carried out at the time that the component stock is actually used, leading to lack of synchronisation of records and actual stock; and (5) other unrecorded actions that constantly take place against the open stock. Consequently, if possible, the original amounts of stock supplied should be as small as possible, to enable frequent, fast counting of the remaining floor stock followed by the direct correction of the backflushed records. Normally, backflushing is performed when an operator initiates a transaction to do so. Note that if backflushing is used in order to calculate the expected (future) material amounts to be used in a production job, it is referred to as pre production issuing or pre production backflushing. However, in most circumstances, it is initiated after actual production has taken place, and is called post production issuing or post production backflushing. If the backflushing is not specifically initiated by the production worker, but instead takes place automatically in the background, it referred to as blind post production issuing, or blind backflushing. See also deduct point.
Backlog: In a make-to-order environment, those accepted customer orders on which work has not yet been started. In a make-to-stock environment, backlog may also mean accepted customer orders which have not been despatched. If the reason for their non-despatch is a shortage of stock, the backlog is also a backorder.
Backhaul: In distribution, when a vehicle has delivered goods to an outlying point, it will be forced to return empty to its home base unless a customer can be found, near to the delivery point, who requires a load to be transported back (ie "backhauled") to the original base, or somewhere near it. Backhaul opportunities are always welcome in distribution, but are often difficult to find. The problem is not merely finding a customer requiring a delivery back to the original spot, but finding one who who wants the delivery at the very time that the empty vehicle is ready to return. However, Roy Harmon* maintains that this is a supine response and that "old fashioned backhaul" is outmoded. Harmon talks of "circulating density", and asks why data relating to the disposition and location of vehicles which have completed their original deliveries should not be communicated to a consortium's central computer, so that they can be directed to points where they are now required by members of the consortium for a further (return) journey. See also cabotage. (* Reinventing the Warehouse, by Roy L Harmon, p 55).
Backload: The load carried in backhaul (qv).
Backorders: In a make-to-stock environment, customer orders still current but which have not been fulfilled because of a shortage of stock. The existence of backorders implies that customers are willing to allow their orders to stand until stock becomes available - ie that they do not cancel the orders and either go elsewhere or purchase substitute products. See also backlog,
Backscheduling: calculation of the quantities and times of needed step-by-step materials manufacture by first starting with the quantity and time/date required of the final manufacture, and then working back in time to the various prior stages. MRP is a backwards scheduling system - the user specifies the dates required for master scheduled materials, and the system uses leadtimes to calculate the required completion dates of supporting manufacture by back calculation through the bill of materials. APS, on the contrary, is a forwards scheduling system - the system starts with the current date and schedules plan manufacture forward, consequently finding the earliest starting dates of other materials next on the product's manufacturing route.
BACS: Banks' Automated Clearing System - an interbank data exchange and communication system whereby a company may make direct payment to a supplier's bank account.
Back Door Selling: a common informal US purchasing term for the selling of goods or services to companies without their seeking competitive offers or bids.
Backwardation: Normally, but not always, the price of a commodity future is less than the current spot price. As time progresses towards the maturation date of the future, the futures price rises until, at the maturity date, the futures price and the spot price are equal. The rise in the futures price up to the spot price is referred to as backwardation. But contrast contango.
Backwards Scheduling: The creation of a schedule by assuming that planned production will be completed at the date in the future when the work is required to be ready, and then working backwards in time to the current day to find when work should start to meet this required date. MRP is a backwards scheduling system.
Bailee - see Bailor.
Bailment - see Bailor .
Bailor: A party (such as a person or company) committing goods, known as "bailments", on trust to a "bailee", the bailee being contracted to do work on the goods so committed. Thus the bailor commits his jacket to a dry cleaner, the jacket being the bailment and the dry cleaner being the bailee. The contract (for the cleaning of the jacket) is between the bailor (the customer) and the bailee (the dry cleaners).
Baksheesh: A word derived from Persian, and in the East having the innocent meaning of a tip or gratuity. To businessmen of the West, however, the word is used to mean a bribe (*) for business between a buyer and supplier. In most Third World countries, the giving of baksheesh is the norm of business, the amounts to be given and the methods of its payment being customary and well-known. Expenditure incurred in making baksheesh payments are not UK tax deductible, and so must be claimed by alternative, creative means. (The English word "bribe" is rather too strong - perhaps the milder term "backhander" might be more apposite.)
Baku-Ceyhan Pipeline: The Baku-Ceyhan oil pipeline was opened in 2006 between Azerbaijan and southern Turkey, on the Mediterranean, and is 1100 miles long. See Stock (Pipeline). The world's longest sub-marine pipeline at 750 miles is the Langeled gas pipeline, also opened in 2006, , from Nyhamna, Norway to Easington, Yorkshire (UK).
Balance Sheet: A major financial statement required by law and good accounting practice to be completed and filed as part of a company's annual returns (along with the Profit and Loss Account, qv). The balance sheet shows the assets and liabilities of the company at the point in time it is struck - ie the financial year end. Since the capital value of the company equals assets less liabilities, the balance sheet also indirectly gives the value of the company.
Balanced Scorecard, The (BSC): An idea put forward by Robert Kaplan (*) and David Norton in their book of 1996 that organisational management within the company must take into account a complete range of sub-objectives, some of which may appear to be in conflict and some of which may be mutually reinforcing. A balance must be arrived at by weighing the conflicting requirements for ... (1) corporate learning and growth; (2) superior operation of the company's business processes (especially in relation to its "mission"); (3) intense focus on the company's customers; and (4) soundness of financial status. So far, so good - nothing new there. However, what is then put forward is the meaningless phrase you can't improve what you can't measure (if the visitor to this glossary does not think that the phrase is meaningless, he should reflect on both the word improve and the word measure in this context.) But if the phrase is indeed accepted as having meaning, and if we want our company to "improve", then we must follow Kaplan and Norton's logic further. For it follows that there must literally be a balanced scorecard, one quantitatively measuring the perspectives (1) to (4) previously related. From this point, Kaplan & Norton's Balanced Scorecard idea drifts into a dreamworld haunted by silly numbers, psycho babble and highfalutin consultants, and the generation of more froth than you get from the caffe latte machine at your local Starbucks. (* Prof. Kaplan was also co-inventor with Robin Cooper of Activity Based Costing, a concept also deeply suspect for reasons very similar to those surrounding The Balanced Scorecard.)
Baltic Exchange (Baltic International Freight Futures Exchange): (Web site at www.balticexchange.com) A London market dealing in shipping freight. For some time after the physical destruction of its building at 30, St Mary Axe, in the heart of the City of London by the IRA in 1992, the Baltic Exchange operated through a communications network. It has now moved into its futuristic new offices termed The Swiss Re* Tower, otherwise known as The Erotic Gherkin because of its shape. (See Building the Gherkin at www.buildingthegherkin.com. (* 're' is pronounced 'ree', and stands for re-insurance'.)
BAM: (1) Bottleneck Allocation Methodology, or (2) Business Activity Monitoring - the monitoring of key performance indicators, perhaps as a substitute for old-fashioned good management.
Bandwidth: the capacity of a communication link, measured in bits per second.
Bank Bill: see Bill of Exchange.
Bankrupcy: A company cannot become "bankrupt": this term is reserved exclusively for private individuals, and comes about when a person's creditors successfully petition the Official Receiver (*). The Receiver will appoint a trustee, who is then responsible for investigating the person's assets. A bankrupt person is permitted to carry on a business, but must do so under severe restrictions. If a company cannot pay its debts, its creditors may appy to the courts to "wind it up" - an insolvency practitioner is appointed to liquidate its assets, the proceeds being then distributed among them in an order laid down by law. See also "Chapter 11" in this Glossary. (*) The Bankrupcy Court is located in Carey Street, in the City of London - the origin of the slang expression in queer street.
BAPI: Business Application Programming Interface.
Bar Code: One Dimensional (1D) bar codes are the familiar (*) representation of the individual characters and digits making up an item's code by a succession of vertical lines of varying thickness, the lines capable of being read and interpreted by a computer scanning device. There are numerous alternative 1D systems for representing an item's code. Examples are Interleaved 2 of 5 (having the advantage of high physical density of the code); Code 39 (popular in manufacturing industry); EAN (European Numbering System); and UPC (Universal Product System). See the individual entries for these four systems. See also RFID tags. Two Dimensional (2D) bar codes, also known as stacked bar codes, comprise small postage stamp size complex patterns that appear to the naked eye as square dots and other tiny geometric shapes. 2D bar codes convey vastly more data than their 1D cousins and have been referred to as portable databases. Technologies include PDF417, MaxiCode and DataMatrix. They require to be read by special scanners. (* The first consumer item ever to be bar coded and scanned with a bar code reader was a packet of Wrigley's gum on June 26th 1974.)
Barrel: the customary unit of measure of oil and other petroleum products, being 42 US gallons (= 35 imperial gallons or 159 litres). There are approximately 7.33 barrels of crude oil per tonne.
Barter: The exchange of goods for other goods, rather than for money. It is estimated that some 10 to 15%. of world trade is conducted in this way. Barter is especially likely to be encountered in trade between countries with "non convertible" currencies, these being currencies with no value outside their countries of origin.
Base Index: A seasonal factor, used in forecasting (see Seasonal Factors).
Batch: A quantity of material manufactured in a single production run.
Batch (Costing): See Costing (Batch).
Batch (Production): A method of production by which many units of material are produced in a single manufacturing operation. In engineering, batch production may mean the production of a lot of X units (say 200 units, cut from a single sheet of metal). In the process industries, it is likely that a batch of material will be made according to a specific recipe ... for example, a batch of 1000kgs of X made by mixing 600kgs of ingredient Y, 700kgs of ingredient Z ...
Batch (Split): See Split Batch.
Batch Number: A unique identification number assigned by production management to a specific, identifiable batch of production. Records of production are identified by batch number, and such records help if it becomes necessary to trace final material later (ie the fault that caused one unit of production to be defective may be present in all units in the batch).
Batch (Order) Picking: in stores and warehouse operations, picking the stock for two, or several, orders together, then accumulating the picked stock at a further location, in order to reduce the overall picking time, especially time spent travelling to the stock. See wave picking.
Batch Progress Control: Batch Progress Control is the name that has been given to a simple way of keeping track of a product's stock count, by keeping track of the stock of separate batches of the product as they are used up over time. Suppose two batches of material M are delivered, each batch comprising 1000 units. Stock of M is 2000 units in all, but two separate accounts are held on its record: Batch 1 (1000 units) and Batch 2 (1000 units). Stock over time is used on a strictly FIFO basis, each withdrawal transaction referring to a specified batch. After a time, physical stock of Batch 1 will be reduced to nil. At this time, the record for Batch 1 should show 0 units (with Batch 2 showing 1000 units, of course). If the record for Batch 1 is not 0, an adjustment is made (since it known that the physical stock is nil). Batch Progress Control is especially effective in a Variable Location warehouse, since with this method of storing stock, locations are continually becoming empty - as each location becomes empty, the fact is reported to the system as a stock "count" of zero.
Batch Scale: a multiplying factor, such as 1.62 or 0.78, applied to a normal product batch quantity and the normal quantities of the batch's material components, to adjust all such quantities to non-standard conditions. Thus the normal batch production quantity might be 1000kgs, but the plant manager may decide to make 1200kgs instead, employing a batch scale of 1.2.
Battle of the Forms (legal): Where a purchase negotiation is not face-to-face, but conducted by post, the so-called Battle of the Forms might determine what constitutes an offer and what constitutes a counteroffer. The supplier offers to sell on his conditions, 'attached hereto', perhaps in the letter, hoping the contract will be set up on his own standard terms. The buyer 'accepts', agreeing the supplier's price, but does so by way of his own purchase order document, containing his standard terms, enclosed in his letter. This is a not acceptance of the supplier's offer, including the supplier's standard conditions. Instead, it is a counteroffer substituting the buyer's standard terms. If the supplier now goes ahead and delivers the goods without more ado, the contract is formed on the buyer's terms. It is clearly important for each party to know the state that has been reached - ie what the prevailing position is with regard to standard forms, letters, faxes and e-mails. Note that the convention is followed in law that if there is acceptance of an offer by post, it occurs at the moment such acceptance it is posted (Such acceptance is still valid even though the physical document might be lost in the post.) Note that this rule (of defining acceptance as the moment of posting) applies only to the acceptance of an offer. It does not apply to making an offer, or revoking an offer, or any other matter in negotiation. (Thinking otherwise is a trap many people fall into. Note, however, that the contract itself may stipulate that acceptance is to be made in some other way than posting, for example, by actual communication.) Note also that the problem which the posting convention overcomes (ie delay) does not apply when fax or email are used. Legally, then, in these cases, acceptance is deemed to take place when the fax or email is received. Glossary readers are referred to Sections 4.11 and 4.12 in the free on-line Negotiation Course at this site.
Postscript to 'Battle of the Forms'
In the case in 2007 of Lidl v Hertford Foods Ltd, the judge stated that the stages of offer, counter-offer, acceptance etc are often impossible to determine in the haste to conclude the deal, and that, except in the most straighforward of cases, the courts are no longer prepared to trawl through the evidence to determine who 'won' the Battle of the Forms. Instead, they are now coming to the radical conclusion that neither party's terms and conditions apply. To protect its position, a company should be absolutely certain that the other company has agreed its own terms before proceeding. Three tips are: (1) always send a covering letter both referring to and including its own terms and conditions which are to apply. Finally, request that these terms are acknowledged by the other party, and never conclude the deal unless and until this acknowledgement has been received. (2) If the other party takes issue with a term, deal with it specifically, and arrive at a revised set of terms and conditions which both accept. (3) If the type of transaction still lends itself to a 'Battle of the Forms' situation, add the following text to the covering letter referred to above: Unless otherwise agreed in writing, the terms and conditions of this Agreement shall apply to any order placed by the customer. In the event of any inconsistency between these terms and those passing between the parties, these terms shall prevail. No variation of the terms and conditions shall be allowed unless expressly accepted in writing.
Bayesian Forecasting: A powerful technique ideally suited to the manufacturing environment because of the rapidity of change of behaviour often present in product demand. The technique was derived in 1948 from Bayesian Statistics by Prof. David Champernowne and refined by Prof. Jeff Harrison and Colin Stevens. The method is mathematically highly complex, and relies on tracking the relative probabilities that a time-series under analysis is in one or other of four states: (1) stationarity; (2) trend; (3) step change; and (4) random fluctuation. The method is particularly good at distinguishing between a random fluctuation in demand and a step change. For example, when unusually high (or low) demand is first recorded, a high probability will be assigned to its being a random outlier. If a second high (or low) demand is now received, a rapid downward adjustment is made to this probability and an equally rapid adjustment made to the probability of a step change. The forecasts are thus quickly brought into line with the new level. Bayesian forecasting is being extensively taken up by forecasting software vendors. See Bayesian Statistics below.
Bayesian Statistics: Bayesian statistics are experiential statistics. That is, they are based on experience and observation. The fundamental Bayseian formula relates a prior probability and a posterior probabability and can be stated as PRIOR PROBABILITY + OUTCOME = POSTERIOR PROBABILITY. To illustrate what is meant with an example, suppose we have equal numbers of two types of biassed six-sided dice in an urn - Type A dice come up with a '6' 30% of the time, and Type B come up with a '6' 60% of the time. We first take a die from the urn - the probability of its being Type A is .5 and the probability of its being Type B is also .5. If we were now to roll the die, the chance of its being Type A and getting a 6 with the roll is .5 x .3 (= .15). The chance of its being Type B and getting a 6 with the roll is .5 x .6 (= .30). Suppose we now roll the die we have just removed from the urn and obtain a 6. According to Bayes' theorem, the probability of the die being Type A is given by: (the probability of rolling a 6 and its being Type A)/(the probability of rolling a 6 and its being Type A + the probability of rolling a 6 and its being Type B). In other words, with our example, if we roll a 6, the chance of the die being Type A is .15/(.15 + .30) = 1/3, and the chance of its being Type B is .30/(.15 + .30) = 2/3. In summary, the outcome of the roll of the die has allowed us to modify our original probabilities as to the type of die we withdrew from the urn very considerably from the original .5 and .5.
BBC: The British Broadcasting Corporation, founded as The British Broadcasting Company in 1922, and incorporated under royal charter as a state owned corporation, The British Broadcasing Corporation, in 1927 (limited TV transmissions commenced in 1932). The BBC does not carry commercial advertisements - it is almost entirely supported through a compulsory levy on viewers of £135.50 pa. The corporation employs 26,000 staff and has a budget of £4billion. Although its stated purpose is to inform, to educate and to entertain, all programmes show a strong political bias to left wing ideology. (Recruitment ads to BBC managerial posts are carried exclusively in the Guardian, a left wing UK newspaper.) On foreign affairs, The BBC is anti Israel.
BCS: The British Computer Society - visit www.bcs.org.
BEAMA: The Federation of British Electrotechnical and Allied Manufacturers' Association. This organisation is based in London, and provides a legal and commercial advice service to companies wishing to enter into contracts involving price adjustments (see CPA). The BEAMA maintains various indexes relating to inflation in the construction industry. The web address of the BEAMA is http://www.beama.org.uk (phone 020-7793-3000).
Bear (also Bull and Stag): A bear is stock exchange jargon for a trader on the stock market speculating that a share price will fall; a bull is jargon for a trader speculating on a price increase. A stag is a trader who subscribes to an initial public company flotation of shares with the intention of immediately selling his holding when the shares are later traded - ie the stag is expecting the price later traded to be higher than the issue price.
Bearer Bonds: Financial securities which are not registered under the names of particular holders, but where physical possession acts as proof of ownership. Bearer bonds are common in the US but unusual in the UK.
Bell Curve: a popular term for the Normal, or Gaussian, distribtion, qv.
Benchmark: To an organisation seeking to improve its own "performance", benchmarks are quantitative measures of performance achieved by others, extolled as desirable targets to which it should aspire. Benchmarks are usually chosen from three sources: (1) internal operations (ie within a large corporation, other companies within that organisation); (2) external companies (in other industries); and (3) competitive companies (rival companies in the same industry). Just a few years ago, "benchmarking" was being promoted as a means of enhancing a company's current performance in some particular sphere. That is, find another company doing better than yourself (ie having a superior benchmark), study it to identify how the conduct of its operations is different or better, and copy it. One realisation that followed was that, often, the reasons for differences between ones own performance and the standards of others may be due to fundamental differences between ones own systems and those of the others. As well, there are likely to be significant or fundamental and unavoidable differences from company to company between the capabilities and motivation of their staff and the natures of their markets. (An example of false comparison is warehousing/distribution cost as a percentage of sales income - this ratio cannot be compared across companies because of company-to-company differences in pricing policy and sales volume.) Nevertheless, benchmarking may achieve four objectives: (1) regularly comparing KPIs (Key performance indicators), despite the pitfalls just mentioned; (2) identifying and understanding the reasons for differences in performance; (3) sharing best practice and new ideas; and (4) reviewing progress and ensuring continuous improvement. For an interesting website run by the NHS Logistics Authority dealing with benchmarking by several organisations visit http//www.logmark.org. See also targets , productivity and value added.
Benchmark Jobs: One of the tasks required to be performed as a part of Reward Management (qv) is that of job evaluation. In evaluation, either by a quantitative system such as point-factor or by a qualitative system such as simple grading, certain company jobs may be regarded intuitively as absolutely typical of others. It will be believed that an in-depth analysis of any such typical job will give results that can be applied to many others, without the need for the individual analysis of these others.
BER: Beyond Economic Repair (qv), or Bit Error Rate..
BERBOH: British Examination and Registration Board in Occupational Hygiene.
BerkShare: a type of schwundgeld devised by one Susan Witt, originating in Great Barrington, Massachusetts, USA, intended to support the town's local economy.
Berliner: (1) an inhabitant of Berlin; (2) a type of sweet German pastry with a jam or marmalade filling; (3) a type of schwundgeld launched in February 2005 in Berlin; (4) a newspaper with a 'tabloid' format.
Beta Risk: See Consumer's Risk (in sampling).
Beyond Economic Repair: A tool or piece of equipment requiring repair, but where the cost of the repair necessary is estimated to be greater than X% of the cost of a new replacement. The percentage X is set by technical management. For example, if X = 80% and the cost of a replacement tool was £200, the tool would be beyond economic repair if the expected repair cost was over £160.
BGO: blinding glimpse of the obvious.
Bhopal: A city of 1.2m in north eastern India, within the state of Madhya Pradesh, and the location of the world's worst industrial accident, in the form of an escape of methyl isocyanate from storage tanks at the Union Carbide plant on December 3rd, 1984. It is estimated that over 5,000 people were killed, many in great agony, and that as many again were permanently blinded or otherwise gravely disabled. Union Carbide itself suffered great anguish; a fund of $500m was established by the company to support victims of the tragedy. The CEO at the time, Warren Anderson, has been personally pursued in the courts by the Indian government, but jumped bail. Legal action against Union Carbide finally came to an end in March 2003, however, when New York district judge John Keenan blocked all further action against the company on the grounds that it had already done all that was possible to alleviate the consequencies of the accident. Union Carbide is now owned by Dow Chemicals of Michigan. A recommended Indian novel set with the Bhopal tragedy as background is Animal's People, by Indra Sinha.
Bi Modal: See Mode.
Bias (in measurements): see Accuracy.
BIC: Best in Class (see BOB).
BIFA: British International Freight Association.
Big Bang Implementation: A number of MRP consultants recommend that in developing a new system, the "cut over" (as they call it) to the new system from the old one should be undertaken over a very short time (a few days). The recommendation is risky and expensive - by contrast, see "Evolutionary Development".
Big Blue: rather dated slang for IBM Corporation (blue is the company's preferred colour for advertising etc.).
Bill of Configurations: Synonymous with Modular Bill of Materials (qv).
Bill of Events: a critical path analysis - see PERT.
Bill of Exchange: A bill of exchange is a key financial "instrument", or device, used for the exchange of money in international trade. It comprises a document signed by the drawer of the bill (ie the party originating it, such as the company buyer) ordering a payee (eg the buyer's bank) to pay a specified amount of money to a third party, the drawee (eg the supplier of the goods bought). If the bill of exchange is "accepted", or guaranteed, by the payee, it can be traded in the money markets. If the payee is indeed a bank, it is termed a bank bill; if the payee is a trader or broker, it is a trade bill. The exchange and use of a bill of exchange between the parties concerned will be governed either by The Bill of Exchange Act, 1884 or by the Geneva Convention of 1930. A bill of exchange is analogous to a domestic cheque - the buyer may be the drawer of the cheque, the buyer's bank the payee and the supplier the drawee. However, in international trade, the BOE has many further uses than has a mere cheque: it facilitates the granting of trade credit; it provides evidence of the validity of a supplier's demand for payment; if it is accepted, it gives the supplier access to credit and finance; it provides the payee (ie the bank or trader) with evidence of indebtedness; and its existence assists clarity in the settling of possible disputes. In the US, the bill of exhange is referred to as a "note". Bills of exchange have been used in Europe since the 14th century.
Bill of Features and Options: Synonymous with Modular Bill of Materials.
Bill of Imprest: an order authorising a person to draw money in advance (OED).
Bill of Labour: A structured listing resembling a bill of materials, but instead showing the standard work hours needed to produce all components in a key work centre.
Bill of Lading: Expressed in shipping terms rather than in terms of air or road freight, a bill of lading is a memorandum issued by the captain of a vessel, on behalf of the distribution company responsible for the shipment of the goods he is carrying, stating that goods stowed on board are in (apparently) good condition. The memorandum acts as the acknowledgment of receipt of the goods by the shipment company and is evidence of a contract between the two parties. (Eventually, the bill of lading provides proof of shipment and delivery - the document bears other details such as the place of departure, the destination, the price of freight etc..) A bill of lading is also assignable - that is, the company/person to which it has been assigned can claim possession of the goods.
Bill of Materials: A single-level bill of materials, as the term is applied to a sales product or assembly, is a representation of that product and the immediate components of which it is composed. By "representation" is meant not only the identities of the components but the number of them which go to make it up (eg, for a bicycle, ... the components are two wheels, one frame etc.). This concept can be extended further if the single level bills of materials of the individual component materials themselves are included in the picture (for example, one wheel consisting of a rim and 180 wheel spokes ...). Similarly, the bills of material of these constituent sub-components can also be added, and so on all the way down to the basic raw materials. If all of the sales products, together with all of their components, sub-components and, eventually, raw materials, are included in a grand representation, then the company's overall bill of materials is complete. Many components will be common to more than one final sales product, of course, and many sub-components will be common to more than one component, so that this final representation may be thought to be a highly complex diagrammatic structure with intertwined interdependencies. If an attempt were to be made to draw or illustrate the complete structure literally, perhaps centred around a multi-level hierarchy, the complexity of doing so would in most likelihood be too great. In practice, the representation of the bill of materials is not made diagrammatically. Instead, it is made on the computer and is relatively simple. Thus the bill of materials database contains one record entry for each separate item involved in the total bill - ie one record for sales product X, one record for sales product Y ... one record for component C1, one record for component C2 ... and so on. Furthermore, the data associated with each such record comprises only the identities of the product's immediate constituents. Conceptualisation of the database is straightforward and its maintenance is simple. When the user wishes to analyse the bill of materials' structure or investigate the intertwined dependencies referred to above, this is done at the time required, by immediate manipulation of the bill of materials file by the computer. (Questions that the user might pose are: "what raw materials are involved in this sales product's manufacture?", "what are all the sub-assemblies which contain this sub-component?".) Computer manipulation of the bill of materials is a well-established skill. The tools used for such manipulation are recursion (a program invoking itself) and, particularly, the creation and searching of index lists. See also planning bill of materials.
Bill of Materials (Levelled): The bill of materials (qv) can be pictured as a hierarchy of constituent products, with sales products at the "top", components lower down, then sub-components and finally raw materials. In the process industries, there may be as many as a dozen levels in the hierarchy. For the purposes of materials planning, it is necessary to determine the levels of all the constituent products. The reason is that in calculating material plans, it is necessary to proceed methodically, level by level, down the bill from the top level to the bottom, to ensure that the total requirements are added for components which may be common to many higher level structures. To find which products are at the top of the bill, each product on the file must be checked to see whether any other product uses it (ie has it as a component). If it does not, then that product is at the top and is assigned to Level 0. Following the detection and assignment of all Level 0 products, the immediate constituents of them can be assigned to Level 1.When all these assignments have been made, the constituents of these products in turn can be assigned to Level 2 ... and so on down the bill to the raw materials. Note that the level number to which raw materials are assigned is "Level 99". This, however, is merely a numbering convention to allow them to be distinguished from other entries in the bill - they are not literally at this level. The bill of materials is said to be levelled when the analytical process is complete. Most importantly, see also Low Level Coding.
Bill of Materials (Indented): A list of the components in the bill of materials of a product, the list being set out diagrammatically such that the materials in each successively lower level of the bill are typographically indented increasingly far from the left-hand margin of the page. Thus "bicycle" is next to the left margin, "wheel" is next, half an inch from the margin, "spoke" is next, one inch from the margin, "tyre" and "inner tube" are next, each one and a half an inches from the margin ... and so on.
Bill of Quantities: (hence the professional term quantity surveyor) A document which itemises the quantities of materials and required labour in a construction project. Quantities and labour are derived from design drawings used by contractors for tendering, progress reporting, effecting design variations, stage payments and so on to final commissioning and handover.
Bill of Resources: A list or other representation of all critical plant resources needed to make an end-item. ("Critical" is usually taken to mean a resource known in the past to have been a trouble from the capacity viewpoint.) The bill of resources can be used in rough cut capacity planning to make a quick evaluation of the viability, from the capacity viewpoint, of a potential master schedule.
Bin/Bin Card: A bin is an old-fashioned term for a receptacle for holding stores stock. A bin card is, literally, a card kept within the bin, and on which the number of items present is inscribed, along with the dates and numbers of issues and receipts that have taken place. In effect, it is a manual stock record.
Binomial Distribution: a theoretical frequency distribution having a close connection with the well known binomial expansion, the distibution being concerned with the relative probabilities of an event being "true" or "untrue".
BIOS: Basic Input Output System.
BIS: Bank of International Settlements, a consortium of the world's major central banks.
BIST: Built-in Self Test.
BITA: British Industrial Truck Association.
Black Belt: The leader of a project team (of green belts) in a Six Sigma project. Black belts need to be thoroughly versed in the Six Sigma methodology of DMAIC (qv), familiar with the statistical techniques encountered in the Analyse phase of DMAIC and in possession of qualities of leadership. On the appointment to a Black Belt position of a person of suitable personal qualities, but without experience, intensive Six Sigma training of perhaps several weeks will be necessary. The Ju Jitsu "belt" terminology emanated from Motorola, the founders of Six Sigma. In companies committed to Six Sigma, at least in the US, it is estimated that there will be one certificated black belt per 100 employees.
Black Book (Little): A humorous term for an imaginary small book supposedly containing a list of the jobs and dates which a foreman is working to. The jobs and dates are presumed to have been arrived at by the day-to-day pressures of work, by intuition and by other informal means - ie not arrived at via a formal planning system. The "little black book" is a term used by those advocating a logical, formal planning system (such as APS or MRP) who wish to denigrate informal alternative systems.
Black Swan: (1) A variety of the genus swan, cygnus atratus, a beautiful bird native to Western Australia. (2) According to Nassim Nicholas Taleb in his highly accaimed book The Black Swan: the Impact of the Highly Improbable, a 'black swan' is Taleb's term (*) for an unusual, totally unexpected event that is a surprise that turns out to be of great importance. It makes fools of us all not only because we failed to anticipate it, but because we fail to see how how we could have failed to see it coming. It is the contention of Taleb that risk analysis fails to take into account the likelihood of black swans, even though the risk takers are extremely vulnerable to them. In terms of risk, the probability of black swans occurring is well outside the limits of statistical probability, and so are unimagined or ignored. An example is the risks to the Twin Towers ... from earthquake, fire, flood ... but not from the 'black swan' terrorist attacks of 9/11 by Muslims. * The term 'black swan' comes from the scenario of a person asked what colour are swans. 'White' he replies, but just as he does so, a black swan flies by, to invalidate his entrenched belief. See also Donald Rumsfeld on unknowns.
Blanket Order: An order placed on a supplier for a raw material intended to cover the buying company's requirements for a considerable period of time (say, for 6 or 12 months). However, the material is not to be delivered in a single lot. Instead, the buyer will "call off" small amounts from the blanket order for individual delivery as and when he needs them. The advantages of the blanket order to the buyer are the need to raise only a single purchase order and the obviousness of the size of the order to both parties when agreeing the unit price of the material. Blanket orders are provided for in materials planning systems. They are not to be confused with the wasteful and pernicious practice of consignment stock (qv). When agreeing a blanket order arrangement, the two parties should be quite clear whether the contract is severable or non-serverable - see stage deliveries.
Blow Through: See Phantom Part.
BMC: British Motor Corporation - a motor company formed from Austin Rover and Morris Motors in 1952 by an ill-advised merger encouraged by the then Labour Government, and which was subsequently not well served in its management and commercial performance. BMC marques included Austin, Morris, Riley, Wolseley and MG.
BNQP: Baldridge National Quality Program (national = US).
Board of Trade (BOT): a UK government department founded in 1621 and now subsumed by the the Department of Business Enterprise and Regulatory Reform. Also see: the DTI.
BOB: Best of breed - usually software considered to be "the best" in its field (best at scheduling, best at forecasting, best at ...). In order to obtain the software functionality it requires, a company may prefer to purchase many individual BOB packages from diverse software suppliers, with the probable requirement then, of course, of swapping data between them, perhaps by inefficient intermediary data files. It may prefer this strategy rather than the purchase of an integrated system from a single software supplier, this course of action presenting no problems of data swapping but risking the danger of the individual functional modules in the integrated system being inferior to the BOB packages. Many analysts indeed consider the multi-BOB solution to be superior to the installation of an ingrated system with many critical components being inferior, but managers( who make the final decisions) come under intense sales pressure by the integrated system vendor and in any case love the sound of the phrase a fully integrated system. Synonymous with BIC (best in class).
BOD: Business Object Definition.
BOGOF: "Buy one, get one free". This retail offer not only stimulates demand, it temporarily shuts rival products out for longer.
BOH: Balance On Hand.
Boilermakers' Society: A former trade union representing the bulk of skilled workers in the steel trade.
BOK: Body of knowledge - all that is known about a subject (referred to more elegantly by the Latin term the corpus).
Bonded Warehouse: The colloquial term for an excise warehouse, this being a storage facility approved by the Commissioners of Her Majesty's Revenue and Customs for the deposit of goods liable to excise duty (ie tax) without the payment of such duty having yet been made. The purpose of the bonded warehouse is so that payment can be postponed until the goods are removed for sale and use by final customers. Without this arrangement, duty would otherwise be liable to be paid (for example, on alcoholic drinks and tobacco goods) immediately on manufacture. However, instead, such goods can be deposited "in bond" in the bonded warehouse without payment having taken place, payment being made immediately only on their later removal. This "privilege" (*) also applies to certain classes of goods directly subject to duty on being imported from abroad. Bonded warehouses were once policed by customs officers themselves, but are now managed by the company, subject to approval and periodic inspection. * In government terms, any slight lifting of the crushing burden of taxation imposed on the UK citizen may be referred to, without humour, as a privilege.
Bonus Schemes: When associated with shop floor work, especially as practised in the engineering job shop, a bonus scheme is intended to reward machine operators financially for achieving rates of production above average. Bonus schemes are often complex and very particular to a specific production environment. For example, management may believe that a rate of production above a certain level could be achieved only at the expense of some other aspect of the job, such as the maintenance of quality levels, and may wish to modify the bonus payable to discourage the higher rate of output. Bonus schemes used in the past include Halsey-Weir Premium; Barth Variable Sharing; Bedaux Point; Piece Rate; Gantt Task & Bonus; Emerson Efficiency; Rowan Premium; and Taylor's Differentiated Rate. See also Targets.
Book Debts: in company accounts, cash sums owed to the company by customers.
Book(s) of Account: Synonymous with Ledger (qv).
Book of Prime Entry: Synonymous with Journal (qv).
Bootstrapping: In demand forecasting, the creation of forecasts for more than one period ahead, especially when the more distant forecasts are calculated by employing the near-in forecasts themselves. For example, the forecast for July may be calculated by averaging the three last months demand figures. If these were April 4 units, May 5 units and June 6units, the forecast for July is 5.0 units (ie (4 + 5 + 6)/3 = 5.0). The bootstrapped forecast for August, the next period after July, is therefore 5.3 (ie ((5 + 6 + 5.0) / 3). We see that we have used bootstrapping to calculate the August forecast, since one of the figures in doing so was the July forecast.
Bottleneck: If a bottleneck is temporary, it is a work centre with insufficient capacity to meet a schedule. The phenomenon of "wandering bottlenecks", for example, arises when either (1) a large lot size of production causes a temporary bottleneck first at one plant, and then, when output has at last been achieved, at the next step along the way, or (2) when two or more large lots by coincidence require processing at the same time on the same plant. If the bottleneck is permanent, it is a work centre with insufficient capacity to meet the master schedule demand on it over a long period of time. Apart from the matter of obtaining more capacity, the issue then is how such output as is achieved is to be allocated to the next stages of production. For example, component C may feed into product A and product B, but the work centre making component C is bottlecked. So, are the total needs of product A for component C to be fulfilled, leaving product B short, or are the total needs of product B for component C to be fulfilled, leaving product A short? For a glimpse of real complexity, imagine the decisions that must be made when bottlenecks supply other bottlenecks. Such situations exist in industry and are usually resolved using mathematical programming, a variant of mathematical "optimisation" techniques. See OPT.
Bottom Up Re-Planning: The solving of a capacity problem relating to a material lower in the bill of materials by examination of the materials and capacity situation at increasingly higher levels. For example, the requirements for a component lower in the bill will spring from the corresponding requirements to support plans for material higher up in the bill of material. However, the higher level plans may involve unnecessarily large lot sizes. If the lot sizes are reduced at this higher level, the consequently reduced needs for components at the lower level may solve the capacity problem there.
Bought Deal: In the City of London, a merchant bank or major investment house may be engaged by a company to set the price of, and manage, an issue of new shares, the bank agreeing to underwrite the issue (ie agreeing to purchase any unsold shares itself). However, instead of proceeding in this fashion, the bank may buy the whole of the issue itself, usually at a discounted rate, thus avoiding the risk and expense of the public launch.
Box-Jenkins Technique: A causal forecasting technique refined and described in the 1970s by George Box and Gwilym Jenkins in which current demand for a product is related to many past demands for the product (say, the past 8 months demand), the relationships being described by a set of autocorrelations. The key to the technique is similar to exponential smoothing, namely the "weightings" applied to the autocorrelations become less and less the older they are. To make the application of Box-Jenkins practical, the user must first choose a demand pattern describing the demand for a product in question from a menu of patterns suggested by the software vendor. While popular in the 1980s, Box-Jenkins has lost ground to Bayesian forecasting, and is actually now being omitted from models incorporated in multi-model forecasting systems (qv).
BPICS: The British Production & Control Society. An organisation originally modelled after APICS, but which has now become The Institute of Operations Management, qv.
BPR: Business Process Re-engineering. The examination of the processes and procedures which make up the operational activities of the company, and through which its products and services are delivered, such examination being conducted with a view to streamlining them to eliminate those which are wasteful (*) and to focus those which "add value" more intently on customer requirements. BPR was "flavour of the month" in the 1990s, but when attempted in practice, often floundered due to the huge complexity of the upheavals and project work needed to bring it about. To accomplish BPR typically required the assembly and management of vast resources in terms of IT, training, materials and facilities ... not only were the projects too ambitios per se, it was required that they should all knit together perfectly from the start. (* Activities that add cost but do not add value - see Just-in-Time.)
Brand: A particular make or class of goods serving as a trademark, widely used in its market as recognition by the consumer. The brand name is used to distinguish the goods concerned from others in the market having similar application. Three attributes the manufacturer endeavours to associate with his brand are quality, reliability and distinction. Sales & Marketing professionals also talk of superbrands, a superbrand being a brand that has established the finest reputation in its field, "offering customers significant emotional and/or tangible advantages over its competitors". There exists a superbrands organisation operating in over sixty contries, which attempts to identify each nation's strongest brands by allocating a score to each one. In the UK, visit www.superbrands.uk.com.
BRC: British Retail Consortium, an organisation supported by the retail trade which, among other things, keeps track of monthly consumer retail spending.
Breach of Contract (legal): In short, a breach comes about when one party or the other fails to filfil the terms laid down in the contract. In fact, the breach may be a breach of condition or a breach of warranty. (In the former case, the injured party may if it wishes terminate the contract; in either case, it may sue in the courts for damages.) Note that one party cannot, by an injurious act, bring a contract to an end without the specific agreement of the other party. For example, if a supplier states he does not intend to deliver the goods next month, the buyer can immediately sue him in the courts - ie he does not have to wait until next month (an anticipatory breach).
Breakback: local jargon for the explosion of the bill of materials (qv). The opposite of breakforward.
Breakbulk: A node within a distribution network having a purpose opposite to that of a consolidation centre. For example, a full container load may be transported economically by a single vehicle to a distant breakbulk node, and the contents then split into a few small loads for local despatch to individual customers or to other subsidiary distribution depots.
Breakdown Maintenance: also known as Corrective Maintenance.
Breakeven Analysis (in costing): The 'breakeven' point is costing jargon for that point where the profits from sales are just sufficient to cover a company's fixed costs. (If the buyer can estimate elements of the supplier's costs, it may be most useful in a negotiation to work out his approximate sales breakeven point.) Thus if, over a particular period, if Q = quantity sold in units; s = selling price (£/unit); v = variable cost price (£/unit)*;F = total fixed costs for this period; P = net profit for the period. Then Q ( s - v ) = F + P. (* The variable cost price is the direct cost - ie what it takes actually to make one unit, regardless of overheads.)
