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VAD: Value Added Distribution.
Value added: in the eyes of a customer, the value of something might be defined as its inherent worth to him - what he is prepared pay for it. One might become very philosophical at this point, and say that many things we find "valuable" can have no monetary value attached to them (eg good health). However, in the hard headed world of manufacturing, added value is often used as a measure of a company's productivity and may be defined as "sales revenue from a product, less the cost of its purchased materials & services". Two problems with this definition are (1) it does not isolate a change in added value due merely to price changes (affecting revenue), and (2) it does not distinguish a change in added value due merely to changes in costs, as opposed to changes in efficiency. A further definition of value is: Value = function of (satisfaction of needs)/(use of resources).
Value added time: in lean manufacture, that time over the production cycle during which actual, physical operation is taking place. See process cycle efficiency.
Value Analysis: value analysis is engineering and technical investigation of an existing manufactured product, and its constituent components, in order to find alternative designs or alternative materials that would improve its function or lower its cost of manufacture. In a supplier relationship (qv), the purchasing company expects the supplier to undertake value analysis on the items supplied, thereby enhancing their quality. A question to ask, however, is how can the buyer know whether a competent value analsis effort has been made by the supplier; after all, the effect of conducting value analsis might be zero - no improvement may be possible! Value Engineering is as value analysis, but carried out on a potential product still at the design stage.
Value Discipline: A notion put forward by Prof. Michael Porter in his book Competitor Strategy, a value discipline being a dominant area of management interest and expertise, usually being either product leadership, or operational excellence or customer intimacy. Porter contended that that a company will/can focus on only one of these three value disciplines, but that a balance should be struck - that is, some reasonable competence must be achieved in the other two.
VALPAK: A collective waste compliance scheme associated with Packaging Waste (qv).
VA:NVA Ratio: Value Added (£) / Non-Value Added (£).
VAN (Value Added Network): A communications network connecting computers distributed throughout the UK and used for switching messages from one computer (near to a message sender) to another designated point (near to the intended message recipient). Messages which are unread are stored until the receiver wishes to access incoming traffic directed to himself. There are four VAN networks in the UK: INS Tradanet, AT&T Istel, BT and IBM. The electronic form of messages must comply with a strict protocol, or format.
Variable Control Chart: In SPC, a small sample of manufactured parts is inspected at appropriate intervals of time, and some particular quality characteristic measured relating to each part. The mean (ie average) of the sample is calculated and also the sample range (this being the difference between the largest value in the sample and the smallest). The sample mean and sample range are plotted on a graph, in which the horizontal axis denotes the time of day and the vertical axis denotes the two measurements just described. This graph is a variable control chart. (The "variable", of course, is the measured quality characteristic.) See also Attribute Control Chart.
Variable Cost: See Cost (Variable).
Variable Costing: See Costing (Variable).
Variable Location Storage: A storage area in which products or SKUs are assigned to storage locations by a software program (often referred to as a putaway algorithm) at the moment the goods enter the facility requiring to be physically stored. The software will choose a free, or empty, location and direct the storeman to put the stock away in that location. The program may choose a location for an incoming product nearest to existing stock of that product and will also typically distinguish between easy-to-pick locations ("the golden zone") and less easy ones. Products having the highest pick densities will be allocated for storage in the golden zone. The system must be consulted in order to find the whereabouts of stock in the facility so that it can be picked. If the stock of a particular product is stored in several locations, the software will typically direct such picking on a FIFO basis - ie direct the picker to pick the oldest stock first. See honeycombing. For an effective way of maintaining the accuracy of stock records of stock held in in variable location storage, see Batch Progress Control. Also visit sub-section 5.11 of the on-line, free on-line 'course' at this site on achieving stock records accuracy. and sub-section 4.1 of the free on-line 'course' on stores/warehouse management at this site.
Variable Pay: "Pay at risk" - pay awarded to an employee for measurable, achieved results. Examples are the commission paid to salesmen based on achieved sales, and bonuses awarded to shop floor staff based on achieved production. The strict criterion for variable pay is that, in order for it to be obtained a second time, it must be earned a second time. (Note that performance related pay is based on the acquired skills of the employee, and is not therefore variable pay.)
Variance (In costing): as actual production is achieved over the year, it is inevitable that the quantities manufactured will vary from the forecasts for them made when the standard costs were originally calculated. (The forecasts for the sales products are exploded through the bill of materials to give production forecasts. It is on the basis of these that the costs of manufacture are worked out.) . A further variation of reality from what was assumed in the past in the original calculations is likely to be in the prices actually paid for materials, expenses and labour versus what it was assumed would be paid. The difference between standard, or forecast, expenditure and actual expenditure is termed a variance. The two variance types are volume variance and price variance (See Variance (Volume) and Variance (Price).)
Variance (Price): In costing, a difference (ie variance) between standard (budgeted) expenditure and actual expenditure due solely to a difference in price between the price assumed in standard costing and what transpired in practice. Price variance is defined as (Actual Quantity) x (Standard Price minus Actual Price per unit). See The Manufacturing Manager, Ch 17.
Variance (statistical): One way of obtaining an appreciation of the composition of a set of numbers is to calculate their average value, or mean, denoted by "xbar" (ie an x written with a short line over it). For example, the mean xbar of the group of numbers 8, 3, 5, 5, 6, 9, 2, 3, 1, and 8 is 5.0. A second way of appreciating the numbers might be to state their range ... ie the difference between the smallest and the largest (in this case a range of 8 ... ie 9 - 1). The most widely accepted method of gaining an appreciation, however, is to calculate the variance of the numbers, denoted by s SQUARED. The variance of n numbers is defined as s SQUARED = SUM from i = 1 to i = n of ((x subscript i - x bar) SQUARED) / (n - 1). In the example of the ten numbers above, the variance is 68 / 9 = 7.55. Note that in the example, if the values all related to some metric such as inches, the variance in such a case would be inches squared; a handy expression which avoids square measurements is therefore to take the square root of the variance, s. The square root of the variance is better known as the standard deviation, s. In the ten number example, s = 2.75 inches. (Note that the term (n - 1) denotes the degrees of freedom, qv.) Variance is synonymous with mean square (ie mean squared deviation from the mean) - the term mean square is more usually used in ANOVA.
Variance (Volume): In costing, the difference (ie variance) between the standard (budgeted) expenditure and actual expenditure, due solely to a difference in volume between the amount it was assumed would be made or purchased (in calculating the standard originally) and what was, in practice, actually made or bought. Volume variance is defined as (Standard Price) x (Standard Volume minus Actual Volume Made).
VAT (Value Added Tax): A flat-rate tax levied on all services and on almost all goods (*) by the UK government, acting through HM Revenue & Customs. The tax is added to all invoices as they are raised from one stage to the next, starting with the original supplier and paid by the various buyers along the supply chain, to the ultimate purchaser at the final stage. The VAT paid, however, is claimed back from the government each quarter by each participant in the chain except for the consumer or company constituting the final link. VAT was introduced in the UK in the 1970s, and replaced a previous multi-rate sales tax, levied only at the final stage, termed "purchase tax". To claim back VAT, a participant in the supply chain must be registered with HMR&C (to obtain a VAT number), and be in possesion of a "VAT invoice" relating to the payment being claimed back. A VAT invoice is merely an invoice showing the amount paid and the VAT registration number of the company raising the invoice. (* In the UK, the current rate of VAT is 17.5%, but the tax is not levied on: foodstuffs, children's clothes, apparatus for disabled people, restaurant meals, books or newspapers.). Before paying a VAT invoice of a supplier not known to the company, the wise accountant should check that the VAT number is a valid one, duly issued by HMR&C. One way of checking is to phone the VAT National Advice Service on 0845-010-9000.
VBR (Vendor Base Reduction): In the 1980s and the coming to prominence of Japanese manufacturing techniques, Just-in-Time companies such as Toyota were seen to operate with far fewer suppliers (or "cooperating companies" as Taiichi Ohno called them). In the JIT company, because of the amount of work needed to arrange for daily material deliveries from very many suppliers and to put in place quality accreditation schemes based on SPC and process capability indexes, the retention of a very large supplier base would not have been practical. Thus two reasons for initiating a Vendor Base Reduction programme are: to keep in check communications costs and to keep in check the staff time needed to administer quality schemes. Others reasons include the need to limit the staff time necessary to manage cooperative ventures on technical matters (continuous improvement and value analysis), to ensure contract security (with fewer vendors to track) and (because of larger volumes springing from sole supply) to obtain significant price reductions. In initiating a VBR drive, the purchasing manager should be aware that if buyers in the past have been competent and industrious, the VBR scheme will inevitably destroy the refinements of choice they have made over the years due to the abandonment of smaller, specialised suppliers in favour of fewer large suppliers. A target aimed for by the manager such as to cut the number of suppliers by 50%, which is set outside the context of other major company initiatives in lean manufacturing, logistics, kaizen and quality, suggests a shallow understanding of the principles on which VBR is based. Thus VBR is not of itself "good". Instead, it may merely be necessary in order to support and make practical the other programmes. A particular problem spoken of by many buyers in companies which have set up formal vendor schemes is the sheer bother and difficulty which usually results in later getting rid of suppliers who are not performing well and replacing them with alternatives - in other words, with VBR, lean may not turn out to be "agile".
VDSL: Very High Speed Digital Subscriber Line.
VDU: Visual Display Unit, UK English for the American "CRT".
Velocity Ratio: a measure of the speed at which material moves through a supply chain, and defined by (total duration of all stages in the supply chain during which value is added) / (total elapsed time).
Vendor: A word best reserved for an organisation offering items for sale, but not necessarily selling to a particular company. The word supplier, by contrast, might best be taken to means a vendor that is actually selling to the customer. For example, one must merely speculate as to the probable delivery performance of a vendor; the delivery performance of a supplier, however, is directly measurable.
Vendor Base Reduction: see VBR. Also see the free on-line purchasing 'course' at this site.
Vendor Hub: A warehouse holding stock supplied and owned by many supplying companies, the stock being for delivery on request to a small number (or one) customer. The warehouse is operated by an independent third party storage/distribution company, these services being paid for jointly by the companies whose stock is being stored. By giving the arrangement a smart, modern name ("vendor hub"), the participants are able to close their minds to the waste inherent in the practice.
Vendor Managed Inventory: see VMI and Stock (Consignment).
Venture Capital: any share capital or loan subscribed to a company requiring money, usually to enable the company to invest in novel, high risk enterprises. Venture Capital is provided by financial specialists in the City of London as well as by commercial banks, usually dealing in riskier undertakings and smaller amounts of money than private equity firms.
VESEL: Vertical Cavity Surface Emitting Laser.
VFD: Video Fluorescent Display.
VHIIP: Virtual Factory Information Interchange Project.
Vicarious Liability: Liability assumed (ie taken on) by one person on behalf of another - in the context of manufacturing industry, this can be taken to mean the liability of the company for the tort, or wrong doing, of its employee. (It will be recalled that the company is a legal entity consisting of the body of its directors and staff acting according to its own rules and going about its everyday business.) The vicarious liability of the company for the action of its employee can only arise when (1) the tort, or wrongfull act, was authorised by the employer, (2) the tort is committed by the employee doing something which was authorised, but in an unauthorised way, and (3) when ther tort was committed by the employee, the action was then ratified by the employer. A defence in court by the company is often that the tort, or crime, was not committed in the course of the employee's job, or employment.
Vineyard Economics: a somewhat off-beat term that recognises that for some investments, the capital cost incurred in the start-up of an enterprise is insignificant compared to the operating and materials costs that will later be incurred and the sales revenue that will later be generated. (The cost of the land on the hillside in Burgundy and the purchase and planting of the vines v. the time and care to nurture the vines over a couple of hundred years, and, each year, the necessity to harvest, press and ferment the grapes ... thus in regard to the original capital to buy the hill, what is important is not the payback relating to its cost, but the economics of the subsequent activities.)
Viscious Circle: In the context of shop floor control,a viscious circle is the unending sequence of activities which lead to a very lengthy, permanent queue of work waiting at a work centre. The viscious circle starts with the release to the work centre of more work than it can handle. The consequence is that the leadtimes of jobs there rise and complaints are heard from customers. The company now increases its official leadtime to quell the complaints. As a result of the increased leadtime, the work that customers were intending to submit in the future is now seen by them to be past due. This new work is all released to the company. The company responds to the surge of this new work by again releasing it to the work centre, which becomes even further overloaded, and begins missing its new, longer leadime. More complaints are heard, and in response the company yet again increases its official leadtime. Once more, customers replace the old leadtimes with the revised values, and once more then discover that work they were going to release in the future has become past due. This new work is once more released to the company, overloading it even further. The viscious circle stabilises only when the leadtime become so great that it is out of the horizon of customers' planning systems, or customers find alternative suppliers. The viscious circle can be reversed by the virtuous circle. Here, the company reduces its official leadtimes and informs its customers. Work which customers were to have released in the future is now seen by them to be no longer due, and is held back. As orders temporarily dry up, the company takes advantage of the lull and clears up some of its outstanding queue. When this has been achieved, it announces yet a further reduction in its official leadtime, and again customers find that work that was to have been released is no longer due and need not be submitted. The viscious circle can be avoided in the first place through Input/Output control - the strict management of queues at gateway work centres.
Visual Management: a lean production term related to the 'visual workplace' - ie a work environment that is self-explaining, self-ordering and self-improving, being, perhaps, based on the Visual Management Triangle. The visual management triangle comprises (1) seeing, as a group (what is the production status and what are inventory levels?); (2) acting as a group (concensus on rules and objectives, involvement in improvement activities), and (3) knowing as a group (delivery commitments, goals and schedules, management rules). See The Visual Factory, book by Michel Greif.
Vitiating Factor (legal): A contractual term which is void - ie legally unenforceable. There are many instances where signed agreements are either partly or wholly void. Thus in the UK, all contracts involving betting, or wagering, are void, as are all contracts which involve violation of criminal law. See also Unfair Contract Terms, and Exclusion Clauses.
VMI: Vendor Managed Inventory, being (1) a means of fooling customers that stockholding and associated costs are bourne by the vendor, and are not surreptitiously passed on to the custmers in numerous ways, and (2) an inducement to customer complacency in such matters as quality and inventory management. More seriously, a definition of VMI is merely inventory at the customer's premises, but controlled by the supplier. Importantly, VMI is paid for and financed by the buyer and is "off the supplier's books". A further common feature of VMI is that the schedule of the stock replenishment is directly determined by the supplier himself, not by the buyer. In these two important respects, VMI is different from Consignment Stock (qv).
VNA: Very Narrow Aisle - a close-packed warehouse storage arrangement. Among other things, a VNA arrangement must be supported by "super flat" flooring.
Vocabulary (of Stores): Not the cheerful, ever polite discourse of storemen discussing technical and philosophical matters, but the means of coding stored items. Like all codes, those of stored items must be (1) unique for each item stored, (2) meaningful (if possible) and (3) succinct. There is clearly a clash between succinctness and meaning. To support the case for meaningful codes, we note that storemen cannot always be closely familiar with the vast range of goods and package types that they are required to store, and wish to avoid mistakes in picking and putting away. To support succinctness, it is noted that the human brain cannot easily memorise and recall codes greater than 7 digits in length at a single glance. If codes of 8 or more digits are used, stock recording mistakes are inevitable unless technology is employed - see voice directed picking below, or see barcoding or RFID tags.
Voice Directed Picking: The picker of goods (in a stores or warehouse) wears apparatus on his head that enables him to hear picking instructions transmitted by the system and to respond by voice to the system after a successful pick.Voice directed picking is a highly effective, highly accurate and increasingly popular technology that has many advantages in both stores and warehouse operations. As stated, workers wear a headset, earphones and a belt-attached portable computer which enable them to hear instructions from the computer and to speak words of confirmation as to action taken. The computer communicates with the company's Warehouse Management System (WMS) to retrieve the locations from which picking is required, then the identities and quantities of items to be picked, and transmits this information as speech to the system. The worker proceeds to the designated location, reads out a check digit to confirm its correctness and receives further instruction as to the identity and amount of what is to be picked. He confirms the pick by voice and the system proceeds to the next location/item. One advantage of voice directed picking operations is that the storeman or warehouseman has his hands and eyes free. Another is the ability to cater for foreign language speaking warehousemen - in the UK, Polish workers, for example. Picking accuracy with voice directed picking is far higher than with a paper based system. As well, productivity is substantially higher and accidents are reduced. A popular commercial system in Vocollect.
Voice of the Customer: This phrase refers to the precept that during the design and development of a new product, those responsible should never forget that the product must be wanted by the customer and must be attractive to him. See especially "Quality, function, deployment".
VOIP: voice over Internet protocol - ie the technical procedure which permits the use of the Internet for free (or cheap) voice telephony.
Volenti Non Fit Injuria (legal): (Latin: no harm can be done to a willing person) The principal that if someone is fully aware of the risks of an action, but nevertheless willingly undertakes it, he alone is liable for any injury he subsequently sustains. A duty of care is not owed to such a person.
Volme Taler: a type of schwundgeld originating in October 2005 in Hagen, west Germany.
Volume Movement: a metric used in stores and warehouse planning, being "the volume of an item stored and picked per month". In storage planning, volume movement is of greater importance than pick popularity - see pick density. Two typical statistics relating to volume movement in the store/warehouse are that 15% of all items account for 80% of total volume movement, and 50% of items account for less than 0.5% of volume movement.
Volume Variance: See Variance (Volume).
VOR: vehicle off (the) road, implying the need for immediate spares availability and fast attention by those making repairs.
VPM: (1) Virtual Product Model; (2) Value Per Million opportuniities.
VRML: Virtual Reality Modelling Language.
VRP: Variability Reduction Process. Procedures and techniques aimed at increasing the reliability of a process and reducing the variability of manufactured units. Kaizen and Six Sigma on the shop floor!
VSM: Value Stream Mapping. a tool used in lean production by which a manufacturing operation is analysed and the steps involved represented by standard symbols. There are some 20 symbols in the VSM 'language' . A Value stream map is referred to by Toyota simply as a material and information flow diagram.
