The following terms are provided solely as a reference tool, as some of these terms are used throughout this guide. They are also often utilized within Inventory Appraisals and Machinery & Equipment Appraisals, as well as by Accountants and various Industries in general.
Accounts: Major groupings of assets that are similar in character.
Activity-Based Costing System: A system that tracks costs based on the activities that are responsible for driving costs in the production of manufactured goods.
Ad Valorem Tax: Property taxes that vary with the value of the property.
Age Life: A method of calculating physical deterioration.
Aggregate Index: Considers quantity (a basket of goods), which may be weighted or unweighted. It measures a selected group of items whose average value at a point in time is compared with the average value in the base period.
Agile Manufacturing Strategies: Tools, techniques, and initiatives that enable a plant or company to thrive under conditions of unpredictable change. Agile manufacturing not only enables a plant to achieve rapid response to customer needs but also includes the ability to quickly reconfigure operations and strategic alliances to respond rapidly to unforeseen shifts in the marketplace. In some instances, it also incorporates "mass customization" concepts to satisfy unique customer requirements. Moreover, in the broadest sense, it includes the ability to react quickly to technical or environmental surprises.
Allocation of Purchase Cost: Refers to the allocation of the lump sum paid to each asset acquired.
Annual Inventory Turns: A measure of asset management that is calculated by dividing the value of annual plant shipments at plant cost (for the most recent full year) by the average total inventory value at plant cost. Total inventory includes raw materials, work-in-process, and finished goods. Plant cost includes material, labor, and plant overhead.
Appraisal: (noun) the act or process of estimating value; and estimate of value (Adjective) of or pertaining to appraising and related functions, e.g., appraisal practice services.
Appraisal Practice: The work or services performed by appraisers, defined by three terms in these standards: appraisal, review, and consulting.
Assessed Value: Value placed on property for local property tax purposes.
Asset: Property of all kinds can be tangible and intangible.
Auction: A method of sale in which all items are sold on a given day. This method is typically adopted after failure in which the owner is compelled to sell.
Average Cost: Cost weighted, and calculated on quantity purchases, which are typically updated each time a new lot is purchased to maintain a current average cost of each item. This costing method enables the company to measure performance, cost, and profit on an average rather than specific basis. This method tends to spread the effects of short-term price fluctuations.
Average Life: The mean or normally expected life of a property.
Base Year: An arbitrary starting point from which changes are measured.
Binding Requirement: All or part of a standards rule of USPAP from which departure is not permitted. (See DEPARTURE PROVISION.)
Book Value: The capitalized cost of an asset less the depreciation taken for financial reporting.
Bottleneck: Any point at which movement is slowed because demand placed on a resource is equal to or more than capacity.
Buffer Stock: That inventory that is typically warehoused inventory of semi-finished or finished goods that are maintained to handle unexpected surges in demand.
Business Assets: Tangible or intangible resources that are employed by a business enterprise in its operations.
Business Enterprise: A commercial, industrial, or service organization pursuing an economic activity.
Business Equity: The interests, benefits, and rights inherent in the ownership of a business enterprise or a part thereof in any form (including but not necessarily limited to capital stock, partnership interests, cooperatives, sole proprietorships, options, and warrants).
Capitalize (Accounting): The placement of an asset on a company's books for purposes of depreciation and reporting of property taxes. These items would be that which exceeds the expense limit typically set internally by each individual company.
Capitalize (Valuation): A technique in valuation for determining the present value of a future stream of income or cash flow.
Cash Flow Analysis: A study of the anticipated movement of cash into or out of an investment.
Category: A method of indicating assets by an alphabetic type, e.g., engine lathe, airplane, pickup, and injection molding machine. A category can also include a classification of a group of assets, e.g., metalworking, woodworking, laboratory, and inspection.
Cellular Manufacturing: A manufacturing approach in which equipment and workstations are arranged to facilitate small-lot, continuous flow production often in a U-shaped cell. In a manufacturing "cell", all operations necessary to produce a component or subassembly are performed in close proximity, thus allowing for quick feedback between operators when quality problems and other issues arise. Workers in a manufacturing cell are typically cross-trained and, hence, able to perform multiple tasks as needed.
Chronological Age: The actual physical age of an item.
Classifications: Represent a more finite breakdown of accounts.
Competitive Benchmarking: Formal programs that compare a plant's practices and performance results against "best-in-class" competitors or against similar operations.
Computer-Aided Design (CAD): Computer-based systems for product design that may incorporate analytical and "what if" capabilities to optimize product designs. Many CAD systems capture geometric and other product characteristics for engineering-data-management systems, productibility and cost analysis, and performance analysis. In many cases, CAD-generated data is used to generate tooling instructions for computer-numerical-control (CNC) systems.
Computerized Process Simulation: Use of computer simulation to facilitate sequencing of production operations, analysis of production flows, and layout of manufacturing facilities.
Computer-Integrated Manufacturing (CIM): A variety of approaches in which computer systems communicate or "interoperate" over a network. Typically, CIM systems link management functions with engineering, manufacturing, and support operations. In the factory, CIM systems may control the sequencing of production operations, control operation of automated equipment and conveyor systems, transmit manufacturing instructions to equipment or operators, capture data at various stages of the manufacturing or assembly process, facilitate tracking and analysis of test results and operating parameters, or a combination of the above.
Client: Any party for whom an appraiser performs a service.
Computerized Maintenance Management: Software-based systems that analyze operating conditions of production equipment-vibration, oil analysis, heat, etc., and equipment-failure data, and apply that data to the scheduling of maintenance and repair inventory orders and routine maintenance functions, thus preventing unscheduled machine downtime and optimizing a plant's ability to process product at optimum volumes and required quality levels.
Computerized SPC: (see "statistical process control")
Consigned Goods: Goods owned by one person being offered for sale by another person.
Consignee: Person who receives the goods, and offers them for sale.
Consignment: Property sent to an agent for sale, storage, or shipment.
Consignor: Owner who delivers the goods for sale by another but retains title.
Cost Flow Assumption: An assumption regarding the flow of inventory costs through a firm’s accounting system.
Constraint: Anything that restricts a system's ability to reach its goal.
Continuous-Replenishment Programs: Arrangement with supplier companies in which the supplier monitors the customer's inventory and automatically replaces used materials, eliminating the need for purchase orders and related paperwork.
Cost of Goods Manufactured: The total of direct materials used, direct labor, and factory overhead plus the beginning work-in-process inventory less the ending work-in-process inventory.
Coinsurance: An arrangement under which the insured, in return for a reduced premium, agrees to share in the low of proportion that the insurance carrier bears to a specified percentage of the property insured.
Complete Appraisal: The act or process of estimating value without invoking the USPAP Departure Provisions permitted under certain circumstances.
Condemnation: The actual process of the taking of private property for public purposes by a public body through the lawful use of its power of Eminent Domain.
Consulting: The act or process of providing information, analysis of real estate data, and recommendations or conclusions on diversified problems in real estate, other than estimating value.
Cost of Goods Sold: The total cost of inventory that a company has sold during an accounting period.
Cost to Cure: An amount of money required to repair an item or a situation.
Core Competency: The processes, functions, and activities in a plant or company that are its "life blood", typically those activities from which the enterprise derives the greatest return for its investments or those that intrinsically align the enterprise with its core market.
Cpk: A statistical calculation of process capability based on the relationship between process variability and design specifications. A good Cpk value indicates that the process is consistently under control, i.e., within specification limits, and is centered on the target value. A Cpk value of 1.33 is typically considered a minimum acceptable process capability; as the Cpk value approaches 2.0, the process approaches Six Sigma capability (3.4 defective units per million). The ability to achieve high Cpk values is often related to how tight the specifications are set.
Cross-Functional Teams: Teams of employees representing different functional disciplines and/or different process segments who tackle a specific problem or perform a specific task, frequently on an ad hoc basis.
Cross-Training: Skill-development practices that require or encourage production workers and other employees to master multiple job skills, thus enhancing workforce flexibility.
Curable: A physical defect that is possible to repair without exceeding the economic value of the item.
Customer Lead-time: The time elapsed from receipt of an order until the finished product is either shipped or delivered to the customer.
Cycle Counting: Monthly reconciliation of physical inventory to perpetual inventory.
Cycle Time: See "manufacturing cycle time”.
Depreciation (Accounting): The mathematical procedure for spreading the original cost of an asset in consistent installments over the expected useful life.
Depreciation (Accumulated): Account in which depreciation provisions are recorded and totaled: the total depreciation accrued to a given date.
Depreciation (Appraisal): The actual loss in value or worth of a property from age, wear and tear, service, utility, obsolescence, etc.
Depreciation Method (Declining Balance): Under this method, an annual depreciation provision is computed at a fixed percentage applied to the unrecovered cost at the beginning of the period. The unrecovered cost is reduced each year by the prior year’s depreciation. (Accounting.)
Depreciation Method (Straight Line): The formula by which change is calculated by dividing the cost less salvage by the number of fiscal periods of useful life. (Accounting.)
Depreciation Method (Sum of the Years-Digits): The formula applies to a changing rate to the cost less salvage in which the rate is a fraction, the denominator remaining fixed equal to the sum of all the digits of the years of useful life and the numerator decreases each year and is equal to the years of the remaining life at the beginning of the year. (Accounting.)
Depreciation Rate: The rate or percentage used to calculate the depreciation charge. (Accounting or Actual.)
Direct Costing: A method that assigns only variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) to products; more appropriately termed variable costing.
Direct labor: The gross wages of personnel who work directly on the goods being produced.
Direct Materials: All materials that form an integral part of the finished product, and that can be easily traced to the finished product.
Discrete Manufacturing: The production or assembly of parts and/or finished products that are recognizable as distinct units capable of being identified by serial numbers or other labeling methods and measurable as numerical quantities rather than by weight or volume.
Downsizing: A reduction in the number of employees that occurs due to management decision, not associated with natural attrition.
Economic Life: The life of an item to the point where the cost of repairs or operation exceeds the value.
Economic Obsolescence:
Item Specific - Loss in value caused by unfavorable external conditions as a direct result of factors related to the item.
Industry Specific - Loss in value caused by unfavorable external conditions as a direct result of factors related to the industry.
Business Specific - Loss in value caused by unfavorable external conditions as a direct result of factors related to the business.
Effective Age: The chronological age of an item minus the added life from rebuilds and/or repairs. May be found by subtracting Remaining Useful Life from Normal Useful Life. Expired life is not typically the same as effective age.
Electronic Data Interchange: (EDI) links, information system linkages, based on communication protocols and document formats, which permit inter-company computer-to-computer communications. EDI links not only speed communication but also eliminate re-keying of information and reduce the opportunity to introduce errors. A typical EDI application might speed information exchange between a customer and supplier company for purchase orders, invoices, or other transactions. EDI communications are often facilitated through "electronic mailbox" systems on third-party value-added networks.
Eminent Domain: Term used to describe the power of a public body to take private lands for public purposes.
Empowered Work Teams: Empowered teams share a common workspace and/or responsibility for a particular process or process segment. Typically, empowered teams have clearly defined goals and objectives related to day-to-day production activities, such as quality assurance and meeting production schedules, as well as authority to plan and implement process improvements. Empowered work teams typically do not assume traditional managerial responsibilities.
Enterprise Resource Planning System (ERP): An extension of MRP II software. ERP systems typically claim the ability to achieve tighter (or "seamless") integration between a greater variety of functional areas, including materials management, supply-chain management, production, sales and marketing, distribution, finance, field service, and human resources. They also provide information linkages to help companies monitor and control activities in geographically dispersed operations; and, in a fully deployed mode, ERP systems facilitate capture of transactional data into data warehouses to support executive decision-making systems.
Equipment: Equipment includes all machinery and all other apparatus or implements used in an operation or activity. Thus, all machinery is equipment but not all equipment is not machinery.
Estimated Remaining Life: Period in years over which items or groups will be expected to remain in use.
Evaluation: Is a study of the nature, quality, or utility of a property or interest in, or aspect of, the property without reference to a value estimate.
Excess Capital Cost: The difference between reproduction cost new and replacement cost new. Excess capital cost is functional obsolescence.
Expired Life: Is the actual chronological age of an asset.
Extended Cost: Total cost for all units on-hand.
Extranet: A seclusionary internet-like network that securely connects customers and suppliers to a corporate or plant intranet in order to access information deemed shareable by the intranet operators.
Feasibility Analysis: A study of the cost-benefit relationship of an economic endeavor.
FIFO: First in, first out as an accounting method for inventory. It assumes that inventory costs will be incurred in chronological order of purchase. This means that the cost of the first goods acquired will be the first cost charged out.
Finished Goods: The inventory of completed production that is owned by a firm. The boxed and completely operable unit subject only to required consumer assembly.
Finite Capacity Scheduling: Software-based systems that enable simulation of production scheduling (and determination of delivery dates) based on actual unit/hour capacity at each step in the production routing. Finite scheduling systems, running on desktop computers, often compensate for the "infinite capacity" assumptions built into capacity-planning modules in traditional MRP II systems.
Finished-Goods Turn Rate: A measure of asset management that typically is calculated by dividing the value of total annual shipments at plant cost (for the most recent full year) by the average finished-goods inventory value. Plant cost includes material, labor, and plant overhead.
Finished-Product First-Pass Yield: The percent of finished-products that meets all quality-related specifications at a final test point. In process industries, yield is often calculated as the percentage of output that meets target-grade specifications (excluding saleable "off-grade" product).
Fiscal Year: Any one-year period other than a calendar year - for example, July 1, 2001 - June 30. 2002
Fixed Assets: Permanent property synonymous with “Capital Assets'', usually consisting of land, buildings, machinery & equipment permanently employed in the rendering of a service or the production of a product.
Fixtures: Personal property attached or affixed to the real estate. The term also includes certain building quantities such as lighting or plumbing fixtures.
F.O.B. Destination: Freight terms indicating that transportation charges are borne by the purchaser.
Finite Capacity Scheduling: Software-based systems that enable simulation of production scheduling (and determination of delivery dates) based on actual unit/hour capacity at each step in the production routing. Finite scheduling systems, running on desktop computers, often compensate for the "infinite capacity" assumptions built into capacity-planning modules in traditional MRP II systems.
Finished-Goods Turn Rate: A measure of asset management that typically is calculated by dividing the value of total annual shipments at plant cost (for the most recent full year) by the average finished-goods inventory value. Plant cost includes material, labor, and plant overhead.
Finished-Product First-Pass Yield: The percent of finished-products that meet all quality-related specifications at a final test point. In process industries, yield is often calculated as the percentage of output that meets target-grade specifications (excluding saleable "off-grade" product).
Fiscal Year: Any one-year period other than a calendar year - for example, July 1, 2001 - June 30, 2002.
Fixed Assets: Permanent property synonymous with “Capital Assets'', usually consisting of land, buildings, machinery & equipment permanently employed in the rendering of a service or the production of a product.
Fixtures: Personal property attached or affixed to the real estate. The term also includes certain building quantities such as lighting or plumbing fixtures.
F.O.B. Shipping Point: Freight terms indicating that transportation charges are borne by the shipper.
Focused-Factory Production: A plant configuration and organization structure in which equipment and labor is grouped to create essentially self-contained "mini-businesses”, each with a specific product line or customer focus. A single plant may be divided into several focused-factory units, designed around process flows, each of which has control over such support activities as maintenance, manufacturing engineering, purchasing, scheduling, and customer service.
Forecast/Demand Management Software: Software that provides front-end input to master production scheduling systems and helps to optimize inventory planning. Such software not only takes into account historical demand trends but also may calculate the impact of planned sales promotions, price reductions, and other factors that cause spikes in demand levels.
Free on Board: Purchased goods placed on board the means of transportation at a specified geographic point free of any loading, and transportation charges to that point.
Functional Obsolescence: Loss in value due to factors inherent in the property itself and changes in design, materials, or process resulting in inadequacy, over capacity, excess construction, lack of functional utility, use of materials or excess operating costs.
Furniture: Is a particular type of equipment utilized in ancillary functions of an operation. It is designed to provide a convenient and efficient work location for personnel or necessary storage facilities.
Goodwill: The advantage or benefit acquired by an establishment because of public patronage and encouragement, which it receives from repeat customers.
Gross Profit: Net sales less cost of goods sold.
Historical Cost: The initial capitalized cost of an asset at the time it was first put into service.
Incurable: A physical defect that is impossible to repair without exceeding the economic value of the item.
Independent & Dependent Demand: Dependent demand is the demand for a product or service caused by the demand for other products or services. Independent demand is also the demand for a product. However, its demand cannot be derived directly from that of another product. In other words, with dependent demand it can be determined how many wheels would be needed to produce a certain amount of lawnmowers. Whereas, with independent demand, the demand of lawnmowers cannot be determined by the number of wheels.
Index: A factor consisting of numbers, which are utilized to reflect change that has occurred over time.
Weighted - Considers all components as being of equal importance.
Unweighted - Does not consider all components as being of equal importance.
Indirect Cost: A cost that is not easily traced to a business segment.
Indirect labor: The wages of factory employees who do not work directly on the product; treated as part of factory overhead.
Indirect Materials: Minor material items (such as glue, varnish, and nails) used in manufacturing a product; treated as part of factory overhead.
Inventory: Goods acquired for resale to customers. All items of personal property that are to be bought, and sold for the principal purpose of making a profit are called merchandise, and make up merchant's or manufacturer's stock or inventory.
Inventory Supplies: Items used concerning the operation of a business or profession but are not for sale are called supplies. This can include items such as business and professional supplies, manufacturing supplies, and shipping containers.
Inventory Turn Rate: A measure of asset management capability (see "annual inventory turns").
Intangible Property (Intangible Assets): Non physical assets, including but not limited to franchises, trademarks, patents, copyrights, goodwill, equities, mineral rights, securities, and contracts, as distinguished from physical assets such as facilities and equipment.
Intranet: A secure, internal corporate Internet-based network.
Investment Analysis: A study that reflects the relationship between acquisition price and anticipated future benefits of a real estate investment.
Invoice: A source document used to record sales of merchandise.
Invoice Price: List price less applicable trade discounts.
ISO 9000: An international quality-process auditing program, based on a series of standards published by the International Standards Organization in Geneva, Switzerland, through which manufacturing plants receive certification attesting that their stated quality processes are adhered to in practice.
ISO 14000: Standards and guidelines defined by the International Standards Organization for environmental-management systems.
JIT/Continuous-Flow Production: Implementation of "just in time" techniques to reduce lot sizes, reduce setup times, slash work-in-process inventory, reduce waste, minimize non-value-added activities, improve throughput, and reduce manufacturing cycle time. JIT production typically involves use of "pull" signals to initiate production activity, in contrast to work-order ("push") systems in which production scheduling typically is based on forecasted demand rather than actual orders. In many "pull" systems, a customer order/shipment date triggers final assembly, which in turn forces replenishment of component WIP inventory at upstream stages of production.
JIT Delivery: Delivery of parts and materials in small lots, and on a frequent basis, timed to the needs of the production system.
Labor Turnover Rate: A measure of a plant's ability to retain workers, expressed as a percentage of the production workforce that departs annually-or an annualized rate of employee departures. High turnover rates often indicate employee dissatisfaction with either working conditions or compensation.
Last Year’s Sales/Usage: Total units sold last year for each product/style code.
Level of Trade: Manufacturer, wholesaler, distributor, or retailer.
LIFO: Last in, first out as an accounting method for inventory. The most recently incurred costs are charged off first, leaving the earlier incurred cost in the ending inventory.
LIFO Reserve: The difference between LIFO values, and replacement cost. Current value equals LIFO plus LIFO reserves less obsolescence.
Limited Appraisal: The act or process of estimating value performed and resulting from invoking the USPAP Departure Provision. However, there are certain binding requirements under USPAP that cannot be departed from under any circumstances.
Linking: A means by which the transition is made between periods of different product definition - or different product mixes or ``market baskets'' - or changes in a base year.
List Price: The basic catalog price for merchandise.
Lower-of-Cost-or-Market: A method that allows investments, and inventories to be accounted for at acquisition cost or market value, whichever is lower. An accounting method where inventory is reported in the financial statements at the lower of what the inventory actually cost or market value, which is typically what it would cost to replace the inventory on the balance sheet date.
Machinery & Equipment: Is defined as ``the physical facilities available for production, including the installation and service facilities appurtenant, with all other equipment designed for or necessary to its manufacturing and industrial purposes, regardless of method of installation, and not excluding those items of furniture and fixtures necessary for the administration and proper operation of the enterprise.''
Machinery: Is a term encompassing man-made mechanical devices, usually powered, which are designed to create a product or in some manner alter the state of a material or partial product.
Manufacturer’s Inventory: Typically includes raw materials, work-in-process, and finished goods.
Manufacturing Cost: Includes quality-related costs, direct and indirect labor, equipment repair and maintenance, other manufacturing support and overhead, and other costs directly associated with manufacturing operations. It typically does not include purchased-materials costs or costs related to sales and other non-production functions.
Manufacturing Cycle Time: The length of time from the start of production and assembly operations for a particular (finished) product to the completion of all manufacturing, assembly, and testing for that product or specific customer order. (Does not include front-end order-entry time or engineering time spent on customized configurations of nonstandard items.)
Manufacturing Execution Systems (MES): Software-based systems that provide a link between planning & administrative systems and the shop floor. It can link MRP II-generated production schedules to direct process-control software. An element of computer-integrated manufacturing, MES encompasses such functions as planning and scheduling, production tracking and monitoring, equipment control, maintaining product histories (verifying and recording activities at each stage of production), and quality management.
Market Analysis: A study of real estate market conditions for a specific type of property.
Mass Appraisal: The process of valuing a universe of properties as of a given date utilizing standard methodology, employing common data, and allowing for statistical testing.
Mass Appraisal Model: A mathematical expression of how supply and demand factors interact in a market.
Materials Price Variance: The difference between the actual and standard prices multiplied by the actual quantity of materials purchased, and put into production.
Materials Quantity Variance: The difference between actual and standard quantities of materials used multiplied by the standard price.
Mean: The arithmetic mean as an average.
Median: That number - or value - which divides the group into two equal parts. There are as many numbers above as below.
Merchandising System: A system that processes the transactions and events related to a merchandising business - specifically, the sales, and purchases of inventory.
Mix: Various items within a group utilized for measurement, which is considered in an index.
Mode: That number - or value - which is represented most often in the distribution.
MRP II: Software-based Manufacturing Resources Planning systems that translate forecasts into master production schedules, maintain bills of material (lists of product components), create work orders for each step in the production routing, track inventory levels, coordinate materials purchases with production requirements, generate "exception" reports identifying expected material shortages or other potential production problems, record shop-floor data, collect data for financial reporting purposes, and other tasks depending on the configuration of the MRP II package.
Normal Useful Life: The mean or normally expected life of a property (same as average life).
Obsolescence: The loss in value due to internal or external factors inherent to an asset. These factors are measured by analyzing what is known as functional and economic elements.
On-Time Delivery Rate: The percentage of time that ordered products are received by customers by the specified time or date. Some plants will base this calculation on the date "promised" to customers but better facilities typically will calculate it against dates "requested" by customers.
Operating Cycle: The period of time it takes a firm to buy merchandise inventory, sell the inventory, and collect the cash.
Optimal Replenishment System: Outsourcing: Shifting of production work or support activities to an outside (third-party) supplier.
Original Cost: The initial capitalized cost of the asset in the hands of its present owner.
OSHA: Occupational Safety and Health Administration - A government agency responsible for setting standards and guidelines that impact safety. Can impact values as equipment that is not in compliance.
Period Cost: A cost unrelated to the acquisition or manufacture of inventory; it is expensed when incurred.
Periodic inventory System: A system of accounting in which purchases and sales of inventory are not recorded in the inventory account.
Perpetual inventory System: A system of accounting for inventory in which the inventory account is respectively increased, and decreased for each purchase, and sale of inventory made during the period.
Personal Property: Identifiable portable and tangible objects that are considered by the general public as being "personal", e.g., furnishings, artwork, antiques, gems and jewelry, collectibles, machinery & equipment; all property that is not classified as real estate.
Physical Deterioration: The loss in value due to physical wear and tear (use) and exposure to the elements.
Planning & Scheduling Technologies: A variety of software-based advanced planning, scheduling, and optimization systems.
Plant-Level Return on Net Assets: Where possible, this should be calculated as: plant-level profitability (PLP) divided by average net assets (ANA) employed. PLP can be calculated as annual value of shipments minus materials costs and manufacturing costs. ANA should include fixed assets, inventory, receivables, and cash minus accounts payable and other current liabilities.
Predictive Maintenance: Practices that seek to prevent unscheduled machine downtime by collecting and analyzing data on equipment conditions. The analysis is then used to predict time-to-failure, plan maintenance, and restore machinery to good operating condition. Predictive maintenance systems typically measure parameters on machine operations, such as vibration, heat, pressure, noise, and lubricant condition. In conjunction with computerized maintenance management systems (CMMS), predictive maintenance enables repair-work orders to be released automatically, repair-parts inventories checked, or routine maintenance scheduled.
Preventive Maintenance: Maintenance activities often performed by machine operators at regularly scheduled intervals to keep equipment in good working condition.
Price Relative Index: Considers prices or value, which can be weighted or un-weighted. It is an average of a series of numbers, which are "shown as" percentages.
Principle of Substitution: Based on the premise that a prudent purchaser would pay no more than the cost of acquiring an equally desirable substitute.
Process Manufacturing: The manufacturer of products such as chemicals, gasoline, beverages, and food products that typically are produced in "batch" quantities rather than discrete units. Many process operations require inputs such as heat, pressure, and time (for thermal or chemical conversion).
Product Data Management (PDM): Software-based systems that link, manage, and organize product-related data from various sources-both internally and externally (from suppliers) across various computer platforms, divisions, departments, and geographic locations. PDM incorporates CAD files, manufacturing data, and documents to reduce engineering design times; ensures timely access to consistent up-to-date product information; and improves information flow, cross-functional communications, and support services.
Product Group: Any group of categories utilized by a company such as a product line.
Product No/Style Code: Identifying codes used to differentiate between different stock-keeping-units (SKU's) in an inventory.
Productivity: The primary definition here is annual dollar value of shipments per employee.
Purchase Order: A document that itemizes the details (such as catalog numbers, descriptions, quantities, and prices) of merchandise that a purchaser desires to acquire.
Purchase Discounts: A discount secured by the purchaser of merchandise for prompt payment of invoices.
Purchasing System: A system that handles the record keeping for acquisitions of merchandise inventory, and ensures that adequate stock levels are on-hand to meet demand.
Purchased/Manufactured Code: Codes used to distinguish manufactured versus purchased raw materials or component parts.
Quantity On-Hand: Total units for each stock-keeping-unit (SKU).
Quick-Changeover Techniques: A variety of techniques, such as SMED (single-minute exchange of dies), which reduce equipment setup time and permit more frequent setups, thus improving flexibility and reducing lot sizes and manufacturing cycle times.
QS 9000: A common quality certification program for auto industry suppliers. Developed by the Big Three automakers, it includes ISO 9000 as a baseline.
Range: Difference between the lowest and the highest number within a group, which is sometimes referred to as dispersion.
Raw Material: The items to be processed into saleable goods - specifically, the direct and indirect materials owned. The original source from which goods are manufactured.
Raw-Materials Turn Rate: A measure of asset management that typically is calculated by dividing the value of total annual shipments at plant cost (for the most recent full year) by the average raw-material value at plant cost. Plant cost includes material, labor, and plant overhead.
Real Estate: An identified parcel or tract of land, including improvements, if any.
Real Property: The interests, benefits, and rights inherent in the ownership of real estate.
In some jurisdictions, the terms real estate and real property have the same legal meaning. The separate definitions recognize the traditional distinction between the two concepts in appraisal theory.
Real-Time Feedback: Instantaneous (or nearly instantaneous) communication of electronically captured data (typically quality data) to process operators or equipment to enable rapid or automated adjustments to keep production processes operating within quality parameters.
Remaining Useful Life: The life remaining after considering actual use, maintenance standards and procedures and any added life due to rebuilds.
Report: Any communication, written or oral, of an appraisal, review, or consulting service that is transmitted to the client upon completion of an assignment.
Most reports are written and most clients mandate written reports. Oral report guidelines (See Ethics Provision: Record Keeping) are included to cover court testimony and other oral communications of an appraisal, review or consulting service.
The types of written reports listed below apply to real property appraisals:
Self-Contained Appraisal Report: a written report prepared under Standards Rule 2-2(a) of a Complete or Limited Appraisal performed under Standard 1.
Summary Appraisal Report: a written report prepared under Standards Rule 2-2(b) of a Complete or Limited Appraisal performed under Standard 1.
Restricted Appraisal Report: a written report prepared under Standards Rule 2-2(c) of a Complete or Limited Appraisal performed under Standard 1.
Residual Value: Concerning a tangible asset, the term refers to the value of the asset after expiration of its normal useful life.
Restricted Appraisal Report: The least detailed report format in that the presentation of descriptive detail, reasoning, and conclusions of the appraiser is minimal. The intended use of a report of this type is for the exclusive use of the client and, therefore, must contain a prominent use restriction that limits reliance on the report to the client. Such a report cannot be properly understood without additional information contained in the master file maintained by the appraiser.
Retail Method: An inventory estimation method widely used by retail establishments; derives a cost to retail ratio, and applies the ratio to the total retail value of inventory.
Return on Net Assets: See "plant-level return on net assets”.
Review: The act or process of critically studying a report prepared by another.
Safety-Improvement Programs: Practices intended to constantly improve safety within a plant or across a company, including but not limited to, safety teams, safety awareness programs and communications, safety "days," safety training, and setting of continuous-improvement goals targeting safety metrics, such as OSHA reportable or lost-workday rates.
Safety Stock: That inventory which is maintained at a certain level to take into account process, and/or machine reliability.
