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GO TO L, La,Lb Lc Ld Lea, Led, Let, Li, Ll, Lm, Lo, Lot, Low, Lq, Lt last entry
L4L: Lot for Lot (qv).
Labour Costs: In relation to determining the standard cost of a manufactured product, labour costs are expenditures incurred relating to wages and salaries. Labour costs may be direct or indirect. Contrast "Materials Costs" and "Expenses".
Labour Stability: In Human Resources, this is often defined as (the number of employees exceeding one years service)/ ((total number of employees that were also, themselves, employed one year ago) x 100%.
Labour Turnover: In Human Resources, this is often defined as (number of employees who left during a given year)/ (average number employed during the year) x 100%.
Lagging Indicator: If a second event is known always to take place following a prior event, observation and analysis of the second event may allow conclusions to be drawn about the prior event. An example might be an uncrease in the demand for anti-theft devices following an increase in the rate of burglaries in an area. More importantly, see Leading Indicator.
Lake Wobegon Effect, The: Lake Wobegon is a fictional town in Minnesota, the invention of author Garrison Keillor, where all the women are strong, all the men are good looking, and all the children are above average. The remarkable statistic relating to the children is the significance of Lake Wobegon's presence in this Glossary - in manufacturing quality, as Deming never tired of saying, there is an average and, as a result of common causes of variation, there is a statistical distribution above and below it. If the manager doesn't like the lower boundaries of performance of a system under his control, he should get to work and improve it. See also target.
Landmark: (1) A type of schwundgeld launched in November 2005 in Reinstadt, central Germany; (2) An easily recognised geographic feature often used by a traveller to assist him in his journey.
LAN: Local Area Network (see also WAN).
Langelad Pipeline: The world's longest sub-marine pipeline at 750 miles. The Langeled gas pipeline was opened in 2006, and runs from Nyhamna, Norway to Easington, Yorkshire (UK).
LAP: Large Area Processing.
Lap Phasing: Synonymous with Operation Overlapping, qv.
Lb: An abbreviation, from the Latin libra, for a "pound", being the principal unit of weight in the Imperial system of weights and measures, as employed in the UK and US. 1 lb = 0.453 592 37 kgs.
LBO: leveraged buy-out (ie a buy out by a person or group made with the help of someone else's money).
L/C: See Letter of Credit.
LC: Low Cost.
LCA: Life Cycle Assessment (see also Terotechnology).
LCD: Liquid Crystal Display.
LCL: (1) Less than Carload Lot, a largely American term meaning a vehicle or rail shipment which occupies less volume than a full load. (2) Lower Control Limit (on control charts in SPC).
LCOC: Liquid Crystal On Silicon.
LCPC: Life Cycle Product Cost (see also LCA).
LD50: (Live/die 50:50). A theoretical yardstick in drug marketing, meant to represent the point in product efficacy at which half the consumers in the market will buy the product (and live) and half will not (and die). The concept of an LD50 point relates to Taguchi's loss to society (qv) - that is, for the consumer, there is no strict cut off point which divides good quality from bad quality. As product performance deteriorates, acceptability to the consumer declines exponentially.
Leading Indicator: In sales forecasting, if one event is known always to precede a second event, observation and analysis of the first event may allow conclusions (especially in regard to sales demand volumes) to be drawn about the second. Examples are: (1) statistics relating to births and the sale six months later of baby foods; and (2) housing starts and carpet sales - ie after the building's completion, the new owner will require to carpet his house.
Leadtime: In manufacturing, leadtime is the assumed elapsed time from the point of entry of a job into production to its completion and final emergence therefrom. It is normal to consider manufacturing leadtime as consisting of five separate elements : queue time (time spent in queues waiting to begin); set-up (time to set the machine up for the job); run (the time occupied by actual manufacture); wait (the time waiting after manufacture has been completed); and move (the time spent moving the job to its next destination). However, other elements might also be relevant in other environments - for example, inspection time and tear down time. In whatever way it may be sliced, almost always in the traditional job shop environment, 90% of leadtime is found to comprise queue time. (Sometimes a cause of excessive queue time is the operation of a viscious circle - qv.) Note that leadtime in distribution has a completely different make up - for example, order processing + packing & despatch + transit time + order receipt + putting away.
Leadtime Demand: The demand for a product that is forecast to occur over the time necessary to secure its replenishment from the source of supply. If the forecast is F units/month, and the month comprises 20 days, then the daily forecast is F/20 units. Now if the replenishment leadtime is D days, the leadtime demand is F/20 x D units.
Leadtime Management: Action taken at the shop supervisor level to shorten the leadtime of a current production job - see Operation Splitting, Operation Overlapping and Operation Compression.
Leadtime Offset: In materials planning, all components needed in a manufacturing job are usually required to be available at a date equal to "the job's due date, less the job's overall leadtime". However, all of the components may not be needed together right from the start - for example, some may enter the production process part way through, after initial work on the job has been started. If a component is not needed at the start, and it is very expensive or it is in short supply, a lead time offset can be applied to it so that the materials planning system does not call for it until an appropriate time after the job has indeed started. A problem in practice with lead time offsets is that software writers fail to provide a check at the start of the job as to whether a complete kit of parts is and will be available. The parts with a lead time offset are not supposed to be present at the start of the job, and may well be literally unavailable at the start. What the planner needs to know is whether they will become available later when they are due.
Leakage: See Shrinkage Factor.
Lean; Lean Manufacturing: "Lean" means the conduct of manufacturing operations with minimum waste - ie with a minimum of the seven wastes of over production; waiting time; transportation; processing time itself; movement; the production of non-conforming product; and the maintenance of stock. In truth, the elimination of waste and the pursuit of lean manufacturing operation are identical to the aims and practice of Just-in-Time. But instead of adopting the full JIT philosophy, especially as it relates to the synchronisation of production to market demand, consultants have taken the various elements needed to support JIT, such as SMED, TPM and kaizen, and promoted them as individual tools in a "lean kitbag". The University of Kentucky, among other institutions, is currently holding a major, modular executive programme on "lean" - visit http://www.mfg.uky.edu/lean/.
Lean DRP: See Fair Shares and DRPII.
Learning Curve: As more and more units of a product are produced, the time to make each one gets increasingly short and the cost of doing so increasingly less compared with the time and cost needed when the product was completely novel. The learning curve expresses the relationship between: (1) on the horizontal axis, the total number of units made so far, and (2) on the vertical axis, the average time, or cost, to make each unit. (The scales of the graph are usually logarithmic so that the learning curve itself appears as a straight line.) The learning curve is useful to the buyer negotiating the price to be paid for further units of a product after the initial manufacture on his behalf of a novel product . In order for a manufacturer and buyer to make use of the learning curve, they should jointly agree on its adoption and cooperate in establishing the data needed - see sub-section 4.4 of the free on-line 'course' on purchasing at this site.
Lease: A means of financing the payment for an asset. The company wishing to acquire the asset (the lessee) arranges with the organisation putting up the money (the lessor), and a simultaneous transaction then takes place as follows: The supplier of the asset sells the equipment to the lessor, and the lessee agrees to pay the lessor money to have immediate, exclusive use of it for a limited number of years (often either 2 or 3). Payments made by the lessee to the lessor depend on the cost of the equipment and the prevailing rate of interest on money. A financial lease is one where the lessor is a financial institution, usually a finance house such as Mercantile Credit, but perhaps a bank. An operating lease is one where the supplier himself is the lessor (usually, the leasing division of a large company). Computers are very often leased through operating leases, since the lessee will probably wish to upgrade to a new model at the end of the payment period and therefore does not wish to buy the equipment outright. The government has an interest in leasing, since the lessee's payments are, financially speaking, expenses, and their payment reduces his profit and hence liability to tax. Contrast Hire Purchase.
Lease Purchase: Synonymous with Hire Purchase, qv.
Least Processing Time: See SPT.
Ledger: The collection of accounts maintained by a company. Typically, ledger types are distinguished as follows: personal ledger; private ledger; and nominal ledger (or impersonal ledger). Ledger records (ie records of sales, debts, receipt, encashments and so on ) are sometimes referred to as the company's "books".
Leeway: In a Closed-Loop MRP system, the "leeway" is the number of days by which an open or firm plan should theoretically be rescheduled, so that plans in practice comply with the latest planning schedule calculated through MRP, but in fact will not be so rescheduled. For example, an open plan might need to be rescheduled in by 2 days to bring its due date into line with a newly calculated need date. However, if a 3 day leeway had been set, no message to reschedule in by 2 days would be output by the system. The reason for instituting a leeway is to maintain the stability of the existing plan and eliminate the need for planners to attend to too many rescheduling messages. It is important to see nervousness on this matter.
LEO: Low Earth Orbit, or the acronym for Lyons Electronic Office, a British computer developed in 1955 by the food company J.Lyons Ltd in conjunction with engineers from Cambridge University. (See A Computer called LEO, by Georgina Ferry, published 2003.)
Letter of Comfort: An encouragement by a party, to a lender of money, that the lender should advance money to a third party. Such letters are often deliberately phrased in a vague manner, and are intended to fall short of being guarantees. Since they are usually come across in a commercial context, the writer of a letter of comfort should be very cautious in his phraseology, since it might be held that he intends the letter to form the basis of a legal agreement.
Letter of Credit (L/C): A letter of credit is a document, along with certain other accompanying certificates, intended to facilitate trade, especially international trade. The form of the L/C and the commercial and legal procedures accompanying it have been laid down by the International Chamber of Commerce (qv). The purpose of the L/C is to eliminate or reduce certain risks involved in international trade incurred by both supplier and buyer. The particular risks targetted include: (1) one side swindling the other; (2) those risks arising from the unfamiliarity of the parties with each other's court or language; (3) customs problems; and (4) political uncertainty (for example, in relation to prohibited imports). Note that if a buyer is fully familiar with a foreign supplier and the supplier's country, he will not usually care to incur the cost of a letter of credit ... perhaps £250. The "letter of credit" itself is issued by the buyer's bank, referred to as the Issuing Bank, and specifies the activities to be performed by a nominated bank in the supplier's country of origin, and the documents and data to be furnished by this bank (The Advising Bank). A letter of credit may be revocable or irrevocable. Often, a standard form, UCP1993, is employed. A letter of credit can also be usefully used to overcome cash flow difficulties: a bank will often be prepared to issue and honour a letter of credit on evidence that a buyer will be capable of providing funds in the near future. For example, production by the buyer of a purchase order from a customer (ie relating to its own sales) may be accepted as evidence of future ability to pay. See sub-sections 4.6.3 and 4.7 of the free on-line 'course' on purchasing at this site.
Letter of Intent: A "letter of intent" is often sought from a purchaser by a supplier to give the supplier assurance that initial work on the purchaser's behalf can safely be commenced and that a fully specified contract will duly be agreed. If the later formal contract is not, however, signed, the status of the letter of intent will in fact depend on circumstances. It may be regarded as a written contract in itself, or as evidence of acceptance of an oral contract, or it may be stated to have no legal force at all. If sent, letters of intent should clearly state what work the supplier is authorised to start and what specific limits of expense he may incur. CIPS' advice, however, is that buyers should refuse to send them because of the attendant uncertainty.
Levelling (of the Bill of Materials): see Low Level Coding.
Leverage: when applied to financial management, the application of other people's money to our own.
LIBOR: London Inter-Bank Offered Rate - The rate of interest at which London banks offer to lend money to other banks, the rate being based on the lending bank's base rate.
Life Cycle (of a Product): The period from a product's launch to its final withdrawal from the selling range. Usually, the life cycle can be illustrated by the familiar changes in demand levels which occur. Thus, on launch, demand increases very rapidly in accordance with the product's appeal to the marketplace. Demand then flattens out and remains at a high, steady level for a lengthy period of time. Eventually, it declines as the product loses its appeal and alternative, competitive products appear. Finally as sales further decline, marketing withdraw it. One tricky phase for the manufacturer is the launch - it is difficult to predict what sales will be, and statistical forecasts made after the upwards acceleration will clearly be in error. A second problem phase is decline - when marketing department take the decision to terminate it, what about existing stocks and any continuing demand for spares and service?
Lifed Item: A tool or piece of equipment against which the supplier or tools store supervisor has assigned a likely life span. The life span will typically be nominated in terms of usage - say, 1000 hours, or 50,000 miles.
LIFFE (pronounced "life"): The London International Financial Futures Exchange, the market in the City of London in which bonds and currencies are bought and sold. The value of contracts in a given month amount to many thousands of billion pounds.
LIFO (Last in, First out): The opposite of FIFO (qv). From the viewpoint of stock rotation, it can rarely be correct to retain the oldest stock. However, if the stocked items are not liable to deteriorate with age, normal stock rotation may be irrelevant. Consequently, with heavy goods such as concrete blocks and other building materials, it may be convenient to store incoming items on top of items already present, and issue the new items first from the top. An example of LIFO in everyday queue management is a lift (US = elevator).
Limiting Quality Level (LQL): A quality level that a supplier agrees with a customer that it will equal or exceed, expressed as a percentage of non-conforming items.
Line Department: a company department which generates revenue or which acquires, distributes or manufactures material. Contrast staff department (qv).
Line Side Stocks: Commonly used C-Class items issued to the shop floor for general use and replenished by the 2-bin system. Also known as floor stocks.
Line Stopper: A heart-felt term for a stocked item, whether a production component or a machine spare, which is essential for the continuation of production and which has a very long replenishment leadtime. The line stopper is usually inexpensive, stocked in small quantities and replenished at infrequent intervals. Since line stoppers are almost always "Class C" as defined by ABC Analysis (qv), and so will receive little management attention, it is wise to promote them manually to the honorary status of Class A!
Linear Exponential Smoothing: (Double Exponential Smoothing) A refinement of single exponential smoothing especially applicable when there is an upwards or downwards trend in the time-series. If a moving average lags behind the original data because of trend in the data (and the trend is linear), it is possible to take a further moving average of the moving average already taken, and measure this degree of lag between this second moving average and the first one. This degree of lag is the extent to which the first moving average lags the original data. Consequently, it can be used to correct the first moving average. Although it appears somewhat complex, linear smoothing is not so and is merely involved. It results in a very worthwhile improvement in forecasting accuracy.
Linear Loss Function: A term that has been used for the Partial Expectation, qv.
Linear Programming: See Mathematical Programming.
Liquidated Damages (legal): A buyer may insert into a contract a stipulation that if some specified activity required of the supplier is not, in fact, performed, then the supplier will pay a certain sum to the buyer as recompense. For example, "delivery of the goods is to be made on the 15th, and the supplier will pay liquidated damages of £1000 per day for every day they are delivered later than the 15th ... ". From the legal point of view, it is essential that the liquidated damages should be a fair reflection of the buyer's real likely loss. If they are not, the supplier will refuse to pay them, and will be supported in his refusal by the courts regardless of the fact that he signed the contract in the first place. From the practical point of view, the circumstances under which the liquidated damages become due, and when they are to be paid, should be quite clear. Liquidated damages also arise in negotiation (glossary readers are reminded of presence of the on-line negotiation 'course' at this site).
Liquidity Ratio: the ratio of (current assets less stock)/current liabilities.
Little's Law: Manufacturing Process Leadtime = (Number of Items in Process) / (Number of Item Completions per Hour).
Live/die 50:50: See LD50.
Live Storage: Roll through storage systems typically based on chutes or metal rollers. Additional productivity is associated with live storage (as opposed to static storage), and is obtained at very little cost Visit www.live-storage.com.
LG Electronics: formerly Goldstar, the innovative Korean manufacturing company set up in 1958.
LLP: Limited liabilty partnership (also see Ltd )
LLU: Local Loop Unbundling.
LMDS: Local
Multi-Point Distribution System.
LME (London Metal Exchange): The market in the City of London for buying and selling non-ferrous metals and metal futures. The LME is the largest non-iron market in the world. It trades in US dollars and dealing is still (2007) done by "open outcry" rather than by way of computer.
LNA: Local Noise Amplifier.
Load: When applied to capacity planning, the total amount of work standing at a work centre waiting to be processed. (The figure is usually expressed in hours.)
Load Factor: A decimal fraction calculated as follows: (demonstrated capacity) / (available hours). Thus if the demonstrated capacity of a work centre is 80 hours and the available hours is only 60 hours, the load factor is 1.33 (80/60).
Loading Bay: The area of a stores or warehouse which receives the vehicles and goods of suppliers of raw materials or from which vehicles and goods are despatched to customers - where the stores meets the outside world. Critical issues are side loading of vehicles (speed of access) v. end-loading (economy of parking, temperature control and safety); safety; temperature control; and efficient vehicular traffic management. It may be preferable that incoming goods should be delivered direct to their points of use within the factory. If this is to be arranged, there must be good data communications to a controlled central area. Also see sub-section 1.2.4 of the free on-line course on stores at this site.
Local Delivery: In the context of distribution, the conveyance of relatively small loads from a depot or DC to customers' premises. Issues in local delivery are likely to include tailoring the delivery service to the varying requirements of customers (eg as to timing), rather than load efficiency. See also Trunking.
Location Code (stores or warehouse): Storage areas are often organised by aisle (A), rack number (RR), shelf (S) and bin number (B). If so, a location code C10B4 is aisle C, rack 10, shelf B, bin 4.
Location of Distribution Depots: When a distribution facility is established at a particular location within the area covered by a distribution network (qv), it is desirable that it should be located at the optimum point. "Optimum" is usually taken to mean the point at which least cost is incurred in servicing the customers who are to be supplied by the facility (although other definitions could be adopted). One method of finding the optimum location is by computer simulation. A far simpler method is by a so-called "mechanical analogue", a fancy name meaning a plywood board cut out to represent the area to be served, and a set of strings and weights for customers (the heavier the weight, the greater the business with the customer). The optimum, least cost point is the literal centre of gravity of the board and weights. Mathematically, the calculations are trivial, involving the moments of each customer (ie weighting of the customer's business x distance from the required location).
Logistics: "The art of moving and quartering troops, and associated supplies - ie a quarter-master's work." (OED). Logistics now means what distribution used to mean in the 1960s - ie the calculation of needed external supplies and the arrangement for their receipt and replenishment, and the determination of channels of supply and communication.
LOLER regulations:. The Lifting Operations and Lifting Equipment Regulations 1998. These state that all lifting equipment (including fork lift trucks, tail lifts on road transport etc.) should be thoroughly examined at least every 12 months (or every 6 months if the lifts are employed in lifting people or if it is a lifting attachment). As well, examination should be conducted after a lift's installation or after an accident. Inspectors must be independent and 'impartial', and, since the regulations are a a government requirement, inspections should be accompanied by reports and documentation.
London Fox: London Futures and Options Exchange. The market in the City of London dealing in coffee, tea, cocoa, sugar and other similar commodities.
Longitudinal Analysis: examination of the performance of a company over a period of many years, in order to pinpoint significant changes that have occurred and determine the causes of them.
Loop (in Production): Each component and raw material constituting a bill of materials of a product will occur only once in that bill. That is, P is made from Q, Q from R, R from S etc.. Technically, however, it is possible for a component to appear more than once: P made from Q, Q from R, R from Q ... An example is the use of oxide to coat video tape, and the later recovery of the oxide when the tape is cut. The recovered oxide is fed back into an earlier stage of the process. In order to explode and level the bill of materials, loops must first be discovered and removed.
Loss to Society: For the engineer or manufacturer regarding the quality of a product, there are strict limits limits defined by tolerance dimensions. Within the limits, there is quality; outside them, there is not. For the consumer, said Taguchi (qv), there are no such cut-off points. While he certainly seeks a level of quality within the targets of manufacture, he is likely nevertheless to accept "quality" outside them. However, his degree of glad acceptance, or toleration, of any departure from the target limits diminishes exponentially the further outside the limits the quality lies. Taguchi regarded this loss of acceptability (ie as quality moves further and further away from what is really wanted) as a social or human loss, or, in his phrase, a "loss to society". See also LD50.
Lot for Lot (L4L: The manufacture of precisely the number of units required to satisfy net requirements, rather than the manufacture of a standard lot size (which may be more than the number required).
Lot Number: See Batch Number.
Lot Tolerance: Synonymous with Limiting Quality Level (aka LQL).
Low Level Coding: In the process of levelling the bill of materials (see Bill of Materials), it is very likely to be found that a given component contributes to the manufacture of two or more higher level products. It is quite possible that the component may be assigned to one particular level from the viewpoint of one of these higher components, but later in the procedure assigned to a different, lower level from the viewpoint of the second higher product. It is essential for the integrity of the materials planning procedure that all the component's requirements should be considered together. Consequently, when there is a clash of levels, the lower of the levels is assigned to the component. (Doing so may somewhat distort the pictorial representation of the bill.) A computer program is permanently resident to ensure that the low level integrity of the bill of materials is maintained whenever a change is made to the bill's structure.
Lower Control Limit: See Control Limit.
LQL: See Limiting Quality Level.
LSE: The London School of Economics.
LSI: Large Scale Integration.
Ltd. : initials indicating a private company incorporated with Limited liability, as opposed to Co.Ltd., a public limited company. (Shares in a private limited company have been subscribed to by private invitation; in a public limited company, invitations to subscribe have been issued to the public at large.) Compare LLP : Limited liability partnership).
LTL: Less Than Truckload.
Lumpy Demand - see Intermittent Demand
