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NAFTA: North American Free Trade Agreement, an agreement between the US, Canada and Mexico providing for equal opprtunity - ie free of import restrictions and customs tax - regarding the supply of certain goods.
nagara: Japanese for 'smoothing the flow of production by the synchronisation of production and supply', particularly through the institution of small production lots and group technology. See also shojinka.
Naïve Forecasting: Also see Demand Forecasting. Naive forecasting encompasses a family of forecasting techniques based on averaging, or "smoothing". The techniques are so called because no attempt is made to use regression mathematics to establish causal relationships (ie statistically proved cause-and-effect relationships) among the data being subject to analysis (contrast Causal Forecasting). Instead, with naive forecasting, on each occasion a forecast is to be calculated, the data are analysed (ie averaged) in precisely the way they were analysed the previous time.
Naïve One: the name given to a naive forefasting technique in which the forecast simply comprises the last actual demand value recorded. That is, if the last recorded demand was 17 units, 17 units is now made the one-ahead forecast. Naive One is used purely as a yardstick to compare the efficacy of other more sophisticated forecasting methods. See Naive Forecasting and Causal Forecasting.
NAM: National Association of Manufacturers (US body) - visit nam.org.
NASA: National Aeronautics and Space Administration, the famous American organisation.
NCPU: non-conformities per unit. See non-conformity and defect.
NEC: Nippon Electric Corporation, a Japanese electronics company.
Need Date: See Date (Need).
Negative Stock: (1) A negative stock balance can arise on a stock record due to stock (data) transactions being submitted in a sequence other than the sequence of the physical events to which they relate. For example, suppose the stock record initially stands at 10 units, and the next two things actually to happen in order are (a) a receipt of 22 units of new stock, and (b) an issue of 17 units. Then the amount of actual stock is now 15 units (10 + 22 - 17). However, now suppose that the receipt and issue transactions are submitted to the stock records system in the wrong order. After the issue transaction is received, the stock record will be - 7 (ie 10 - 17). It will not be correct until after the receipt transaction has been received (- 7 + 22 = 15). It is important for inventory controllers to know how their systems deal with this situation. Some systems will not accept a transaction that creates a negative balance, but instead will "hold" the offending transaction in the background until there is sufficient stock to avoid the negativity. If negatives are allowed, planners should also know what their planning systems will do if they read negative balances. In general, planning systems should behave normally and merely plan sufficient production to overcome the degree of negativity. Note that, finally under this heading, negative inventory balances can also result due to a plain transaction mistake, such as raising a transaction for a stock withdrawal and specifying the wrong location or the wrong amount. Glossary readers wishing to pursue this subject further should visit sub-sections 5.8, 5.9 and 5.11b of the free on-line Stock Records Accuracy course at this site. (2) Negative Safety Stock is also permissible. When a safety stock amount is calculated, the underlying calculation is based among other things on the probability of a sales forecast error. The error, of course, could be positive or negative. If it is negative - ie if actual sales are larger than forecast - the safety stock will be needed to protect customer service. If it is positive - ie if actual sales are smaller than forecast - the company will be left with excess stock. If stock is both very expensive and particularly vulnerable to being made worthless if not sold (eg fashion goods), the company may set a negative safety stock ... ie deliberately make or stock less material than it calculates it would sell if demand were to be average ... in the hope and expectation that all stock will be sold and none will be left on the shelf. (With a negative safety stock, of course, customers will not obtain the service and stock availability they would like. A similar effect can be obtained by ignoring safety stock provision altogether.) (3) Phlogiston, if it were to exist and could be stocked, would also result in a negative stock balance. When natural philosophers of olden times weighed material and then re-weighed it after burning, they found its weight had increased. We know, of course, that the reason for this is that the material has combined with oxygen to form an oxide, which is heavier than the starting substance. In olden times, before Priestley's discovery of oxygen, the startling conclusion was reached that the burning had released an invisible "substance", which they called phlogiston, and that, because the new weight after burning was greater than before, the phlogiston which escaped must therefore have had a negative weight. The notion of phlogiston was once widely taught and universally accepted by received society. We should reflect on that when we consider certain "accepted" theories and ideas put about nowadays, which result in our ridicule by the chattering classes if we refute them as being nonsense like phlogiston - modern art, Enron in its heyday, psychoanalysis, the demonisation of DDT, socialism, multiculturism, the risks of passive smoking, the Kyoto treaty and Global Warming ...
Negotiation: In sales or purchasing, a negotiation may be defined as 'a discussion between a vendor and buyer intended to result in an agreement to sell / purchase and over which either party has the power of veto'. Negotiation is not about achieving a "fair" agreement (eg a "fair" price), since a fair price cannot be defined. Fair is a moral concept having no direct relevance to the conditions of sale / purchase of a business agreement. Instead, in negotiation, the only logical objective of a participant is to secure for himself maximum advantage, although advantage may be judged by other criteria merely than the price paid. Note that the full text contents of the former GMCS training course on "Successful Negotiation" have been placed on the Internet for the benefit of glossary visitors. Visit free on-line 'course' at this site.
Neighbour: In discussing the duty of care in relation to health and safety, the term 'neighbour' is used. Who is my neighbour, the manufacturer might ask. He is (legally) anyone who he might reasonably have in mind when contemplating an action. In Bourhill v. Young (1943, AC92), Young was a motorcyclist killed in a collision with a car, the accident being caused by his own negligence. Bourhill, who was pregnant, heard the crash from some distance, and later lost her unborn child from shock when she reached the scene of the accident. It was held that at the time of causing the accident, Young could not reasonably have foreseen injury to someone so far away.
Nemawashi: Allegedly, Japanese to prepare a tree for transplanting, a term used in lean production to denote the review of a strategic plan with all affected parties prior to its implementation.
Nervousness: In MRP, especially as it is applied in a manufacturing environment with relatively small planned lot sizes, continual changes in requirements, even small changes, are likely to give rise to the need to make equivalent continual adjustments to the supporting schedules of plans. (As the US manufacturing guru Hal Mather put it in a witty article many years ago: Reschedule the Reschedules you just rescheduled - a Way of Life for MRP?) Change presents little difficulty with regard to what MRP terms "planned orders", since these are automatically rescheduled by the system (*). For the MRP "open orders" and "firm planned" orders, however, which the system is not permitted to reschedule, such constant changes in the timings of the plans will result in rescheduling messages for them and the consequent need for the planner to give effect to the changes demanded by rescheduling these plans himself. The situation of constant plan changes arising in this way is referred to as nervousness. Proprietory MRP software systems therefore almost always allow the user to "suppress" nervousness, in so far that the software will suppress the output of any rescheduling message if the extent of change calculated is less than a user-specified length of time (say, 3 days). The number of days chosen by the user is known as "leeway" (qv). (* Even though the planned order dates are replanned automatically, much may still need to be done to change the practical work-to schedule.)
Net Change: One view of an overall material plan is of plans created at one level of the bill of materials giving rise to requirements at the next level lower in the Bill. Plans for components at this lower level are then created to cover the net requirements for them themselves - see Closed-Loop MRP. When data arising from plan amendments and completions are fed back into the overall materials plan, clearly the lower level net requirements are also liable to have changed. If so, the plans that had been formulated to satisfy these net requirements may also now have changed, and so on down the bill of materials. Net change is essentially a data processing solution to this problem: when a change occurs that might affect plans and lower level requirements, action by the system is not taken immediately. Instead, the product potentially affected by the change is "flagged", and any repercussions of the change dealt with later *. When they are so dealt with, change is confined to the product directly affected. (In MRP, any change will include the recalculation of planned orders and the recalculation of their corresponding lower level requirements.) * In a continuous net change system, the localised recalculation of change is performed continually, the advantage then being that the system is always largely up to date; in batch net change system, recalculation is performed from time to time. Contrast Regenerative MRP.
Net Piece Variance: in relation to stock records accuracy, qv.
Net Present Value: See NPV.
Net Requirements: Defined as : gross requirements less on-hand stock (on-hand stock is thereby said to have been netted off). In the example given under gross requirements (qv), if gross requirements are 27 motors and the stock of motors is 8, the net requirements are 19 units. See also Partial Requirements.
Nettable Locations: For a particular product, nettable locations are all of the locations where any stock of it held can be netted against the product's gross requirements to determine its net requirements. (Remember that gross requirements less stock = net requirements.) Thus a storage area holding stocks of components reserved for direct sale as spare parts will be a non-nettable location as far as the parts are concerned, since the parts are reserved for spares, while an off-site emergency depot holding the parts would be a nettable location.
Netting Logic: See Manufacturing Logic.
Neural Computer: See Neural Networks.
Neural Networks: The human brain consists of a very large number of interconnected cells termed neurons, these being stimulated by chemical and electrical impulses. This arrangement - or neural network - is essential to the recognition of previously encountered situations and external patterns. Attempts have been made to emulate the brain's neural network by the arrangement of processors within a computer. Neural computers may one day be useful in sales forecasting, market research and even in the scrutiny of security video images. London University in 1996 constructed a neural computer (MAGNUS); neural networking software is available from Right Information Systems, London. See also NLP.
Nielson A.C.: see under retail audit.
Nimble Manufacturing: (1) The efficient, low cost manufacture of small quantities of product, allied with an ability to change product mix easily and quickly - in short, lean manufacture. See agile manufacturing and lean manufacturing. (2) The manufacture by RHM (Rank, Hovis, McDougall) of a particular brand of bread at their factory in Windsor, in the UK.
NIST: National Institute of Standards and Technology. (US).
NLP: Neuro Linguistic Programming - programming of the mental procedures that we invoke when we perform the various tasks in our lives. What hidden factors make the critical difference between success and failure? And how can these crucial factors be incorporated into new programs in the future?
Node (Distribution): A formally established point within a supply and distribution network which is brought into account when the movement and storage of material is under consideration. Usually, especially within simpler distribution systems, the node will be a stocking point - perhaps a local depot or a regional warehouse. In more complex networks, a node may be used for stock consolidation, to allow crossdocking or for breakbulk. However, nodes in the network may not physically exist. That is, they could be points introduced purely for planning or calculative purposes - see Depot (Logical). The premises of major customers may also be considered to be network nodes.
Noise: random disturbance intruding on some measured phenomenon. See White Noise.
Nominal Ledger: see Ledger.
Non Conforming Unit: A manufactured part not conforming to specifications. The ISO definition of a non-conformity is a non-fulfilment of a requirement. See also Defective Unit.
Non Consuming Demand: Sales demand received by the company which is radically different in origin from the demand which normally constitutes sales orders. Because it is radically different, it is over and above the demand from the normal sources forecast in the usual way. Because it is separate and extra, non-consuming demand should be isolated and should not take part in the mechanism of "Consuming the Forecast" (qv) in Master Schedule Management. One way of recognising non-consuming orders is to examine each individual order received and apply a set of rules for deciding whether it is non-consuming. If that is not possible, a method for spotting unusually large orders likely to be non-consuming would be to track each product's average order size and its standard deviation, and declare any order which is (say) 4 standard deviations larger than the mean as being non-consuming. Two examples of non-consuming demand are: (1) An order from France, although the vast bulk of customer orders are from within the UK, and it is these on which the the forecasting system is based; and (2) a big one-off order for 15 units from the Ministry of Defence although most other orders from normal customers are for ones and twos.
Non Severable Agreements / Deliveries: see Stage Deliveries.
Normal (noun): a slang term for a standard cost.
Normal Cost: synonymous with standard cost. See Cost (Standard).
Normal Curve: see Distribution (Normal).
North West Corner: A term used in the operation of the transportation algorithm (the starting point of the solution at the top, left corner of the "initial tableau").
Note: US for Bill of Exchange, qv.
Notional Cost: See Cost (Standard).
Np chart: See Number Rejected Control Chart.
NPV: Net Present Value, a method of evaluating a stream of costs and benefits over time assuming a nominated rate of interest applying to the value of money. For example, if a rate of interest of 20% pa were to be assumed, a £100 cost now would need to be matched by a benefit of £120 in one years time for the cost (£100 now) and benefit (£120 in Year 1) to be equal. Consider a project that costs £500 to start and which will yield returns of £600 in year 1 and £400 in year 2, then finishes. Assuming an interest rate of 20% pa, the net present value of the start up amount is £500 (obviously!), the net present value of £600 in one year is £500 (ie £500 for 1 year at 20% equals £600), and the net present value of £400 in two years is £278 (ie £278 for 2 years at 20% pa equals £400). Thus the net present value of the project at this rate of interest is - £500, + £500, and + £278, = £278. The DCF rate of return is the interest rate whereby the NPV equals zero. As an example of a DCF rate of return, consider the following "cost/benefit stream" - ie complete succession each year for the life of a project of costs less benefits ... +£1000; -£500; -£600; -£500; -£300. If this stream of costs less benefits related to a particular project, we could evaluate it assuming various alternative rates of interest. For example, if we used 10% pa, the resulting value of the the project works out as - £532. (Note however that the chief executive of the company might have stated that all company projects are to be evaluated at some interest rate specified by him - say 20% pa., not 10% pa, the specified percentage being his strategic investment target.) However, it may be preferable to work out the DCF of the project instead. In the instance given, this is 34.5% pa. That is, if we use a rate of interest of 34.5% pa, the stream of costs less benefits given previously work out as +£1000; -£371; -£332; -£205; -£92. The total of these five figures is zero. One advantage of using DCF is that it makes the comparison of projects more meaningful, especially from a historical perspective. See especially cost/benefit analysis for a brief critique of the pitfalls of these comparative methods.
NRDC: National Research Development Corporation, a UK government institution intended to promote the commercial exploitation of scientific advances.
Nuisance Variable (or lurking variable, or extraneous variable): A term used in data analysis to denote an unknown background variable possibly present during the conduct of a process or experiment. The variable is a nuisance because it can affect the response of a response variable.
Null Hypothesis, The: The starting assumption in ANOVA (qv), namely that there is no statistical significant difference between two or more populations - ie that any difference between them is due purely to random causes.
Number Rejected Control Chart (Np Chart, or sometimes pn Chart): In tracking the on-going stability of a manufacturing process with respect to the incidence of non conformancies, it is usual to calculate and record the percentage of items produced which are non conforming (see p chart under attribute control chart). However, provided that the samples of output taken are strictly of fixed size, for some processes it may be more natural to track the actual number of non conforming items instead. (If the samples were not of fixed size, it would be constantly necessary to redraw the chart's control limits - an impractical imposition.)
