MAD (Minimum Absolute Deviation): A measure of statistical error defined as the average absolute deviation between the forecast and the actual, or perhaps alternatively between the mean and the actual. Contrast this with standard deviation, which measures the average squared difference. If our costs (e.g., shortage or inventory) are simply proportional to our overage or underage, then MAD may be a more useful measure of error. One of the early motivations for using the MAD in forecasting systems was that the MAD takes about half as much work to compute as the standard deviations. For random variables with a Normal distribution, the standard deviation is approximately equal to 1.25*MAD.
Manifest: A list of the contents of a shipment (e.g., passengers on a flight) contents of a shipping container, etc.
MAPE (Mean Absolute Percentage Error): The mean absolute forecast error divided by the average demand times 100. It is always non-negative and may be greater than 100.
Maquiladora: Mexican manufacturing plant on the U.S. border.
MaxiCode: A two-dimensional bar code used by UPS and other firms in the transportation industry. The code has a distinctive bullseye in the center. Other popular 2-D codes are PDF 417 and Data Matrix. For more details, see www.aimglobal.org.
Metcalfe’s Law: The observation that the usefulness of some products increases with the square of the number of users of the product, because of a networking effect. Such a product is useful mainly because other people also have the product. Examples are telephones, the internet, and data format standards. Named after Robert N. Metcalfe, an early designer of the internet, Ethernet, and founder of 3Com Corporation. His most riginal work was done at Xerox PARC.
METRIC (Multi-Echelon Technique for Recoverable Item Control): A model for determining stock levels
at a single DC serving multiple outlets. Both the DC and the outlets follow a base stock policy. It was developed initially for setting spare parts inventory levels for the U.S. military and NATO. See Sherbrooke, C.C.(1992), Optimal Inventory Modeling of Systems: Multi-Echelon Techniques, John Wiley & Sons.
Metric ton: 1000 kilograms, 2,204.6 pounds.
MHz (Mega Hertz): Million cycles per second.
Milk run: A trip with either several pickups or several delivery stops. See also LTL.
Milling-in-transit: A form of quantity discount sometimes offered by railroads. If a food processor ships wheat from Kansas to St. Louis, where the wheat is converted into flour, and then ships the flour to New York on the same railroad, the railroad might give a reduced rate as if it were a single shipment from Kansas to New York.
Mixing center: A DC whose main purpose is to recombine inbound shipments into outbound shipments containing the proper mix of products.
Monte Carlo: The use of random numbers to analyze the behavior of a probabilistic system. The term was coined by Stan Ulam, while working on the Manhattan Project, in honor of the Mediterranean city famous for its games of chance.
Moral hazard: Suppose firm or individual X must make a decision that in part determines how much risk to ncur. Now, suppose X and firm or individual Y reach an agreement whereby Y bears some of the risk ssociated with X’s decision. An example of such an agreement is if manufacturer X buys fire insurance for its manufacturing plant from insurance company Y. The fact that as a result of the agreement, X may not be as diligent in preventing fire as it would be if X had to bear all the risk, is an example of moral hazard. Another example is if a manager receives substantial reward if a new product is successful in a new market, but is not penalized proportionately for the cost of failure if the product fails in a market, then the manager is not as motivated to do a good analysis beforehand of which markets are likely to be successful.
Moveable aisle storage: A storage system in which the storage modules are on tracks, so that adjacent modules, banks, or racks can be moved together with no gap, eliminating the aisle. A system with n banks could, at maximum density, be set up to use only one aisle, rather than n-1. Thus, if aisles are as wide as banks, one could get up to n-2 additional banks by switching to a moveable aisle system, thereby almost doubling the storage density. The disadvantages are the additional cost and the fact that one cannot pick simultaneously from all banks. Thus, it tends to be useful mainly for low demand rate items, such as in libraries.
MRO (Maintenance, Repairs, & Operations) Usually used as an adjective, as in MRO inventory, to indicate materials that need to be purchased and stocked to support maintenance and repairs. This is in contrast to material that is purchased to be assembled into a product and shipped to a customer.
MRP (Material Requirements Planning) A computational procedure for converting a multiperiod forecast of finished good demand for all our products into a production plan for every sub-assembly and component that goes into our finished products by, a) “exploding” a BOM for each product and sub assembly into requirements for lower level sub-assemblies and components, b) spreading these derived demands backwards in time using estimated lead times, and c) netting out existing inventories to get the net amount needed to be put into production each period of each sub-assembly.
MRP II (Materials Resource Planning-II) A generalization of MRP to include financial aspects of the production process, as well as some attempts at taking into account capacity. See also ERP.
MTBF: Mean Time Between Failures. This measure does not include repair times. E.g., suppose a machine works properly for six weeks, then fails and needs one week to repair, then works properly for six weeks, then fails and needs one week to repair, etc. Its MTBF is six weeks, not seven. See also IFR, DFR, and bathtub curve.
multi-echelon: multi-level, as in manufacturer, distributor, retailer.
Multi-modal: Using more than one mode of transportation, most commonly picked up from the shipper in a trailer truck, the trailer is then carried piggy-back on a train and then again the final step, the trailer is pulled behind a tractor.