The ERP Manufacturing Glossary

The ERP Manufacturing Glossary

Solutions Review has compiled the most comprehensive manufacturing Enterprise Resource Planning (ERP) glossary of terms available on the web. With over 50 terms defined and growing daily, this resource is sure to help keep you hip to all the latest and greatest lingo in manufacturing operations. Empower yourself with these definitions to increase communication and make informed decisions about your future ERP solution.

Arm yourself with this handy guide to best decipher the ERP vendors’ websites, brochures and salespeople and be sure to bookmark this page and check back on a regular basis as this page will see ongoing updates.

A

3rd Party Application: An application that works within your ERP system, but is designed and maintained by a
company other than your ERP vendor.

Actual Cost: The ever-changing real expense of each component in your manufacturing process.
Actual costing tends to be preferred by manufacturers with frequently changing part costs. The counter to actual costing is standard costing.

Ad Hoc Query: A one-time, on the fly query that does not occur on a regular basis. Unplanned, ad hoc
queries consist of dynamically constructed SQL.

Advanced Product Quality Planning (APQP): Developed originally for the automotive industry, the APQP framework serves as a guide to the product development process. Typically included in an ERP quality management suite.

Advanced Shipping Notice (ASN): A common EDI document, ASNs notify customers that a shipment is incoming so they can prepare to accept delivery.

B

Backflush: The removal of materials and parts from your inventory control module based on what was consumed during production.

Batch Upload: The transfer of data from one place (your shop floor) to another (your ERP system) in large groups at set intervals. Typically, batch uploads occur only a few times a day and are the counter to real-time reporting.

Best of Breed ERP: An ERP system made up of multiple, disparate third party applications bolted onto the core program. The counter to best of breed ERP is comprehensive ERP.

Bill of Lading (BOL): A required shipping document provided to the carrier with details of the shipment.

Bill of Material (BOM): The “recipe” for manufacturing an end product. The BOM contains important details such as the list and quantities of raw materials and subcomponents, the intermediate assembly processes and the specific process details, such as cycle time.

Bring Your Own Device (BYOD): The increasingly common practice of bringing personally owned devices (phones,
laptops, etc.) to work and using them to access privileged company information.

Business Activity Monitoring: A customizable, query-based advisory system that automatically alerts you (through text or email) of critical events and issues based on the capture and evaluation of your manufacturing data.

Business Intelligence (BI): Software tools that transform raw data into useful reports, email alerts, analytics, dashboards and more to help you evaluate your business data.

Business Process Management (BPM): The optimization of company processes to increase the efficiency of an organization. BPM tools can include workflow, business activity monitoring and more.

C

Capable to Promise (CTP): A realistic date of when demand will be satisfied and goods can be delivered based on material availability and capacity resources.

Certificate of Conformance (CoC): A document certifying that the manufactured good meets the required specifications.

Class I/II/III: A medical device regulatory classification that determines the level of control necessary to assure the safety and effectiveness of the device. Class I is for low risk devices and Class III is for parts with the greatest risk.

Cloud Computing: A multifaceted service platform involving remote servers and software networks that allow centralized data storage. Clouds can be public, private or hybrid. In the ERP world, the three most common cloud computing platforms are IaaS, PaaS and SaaS.

Comprehensive ERP: An ERP solution where every program needed to run your business, from the front
office to the shop floor, is natively developed by one company in one central database. Comprehensive ERP is counter to best of breed ERP.

Corrective Action Report/Corrective Action Preventative Action (CAR/CAPA): The systematic investigation of the root causes of non-conformities in a manufactured product to prevent their recurrence or occurrence. Typically included in an ERP quality management suite.

Cost of Goods Sold (COGS): The direct cost of a product determined by the materials, labor and overhead required
to produce it.

Customer Relationship Management (CRM): A program to help your sales, technical support, marketing and customer service teams manage your interactions with customers and prospects.

Cycle Count: The process of sample counting a subset of your larger inventory in a specific location on a specific day rather than performing a warehouse-wide physical inventory.

D

Database Administrator (DBA): In the ERP world, the DBA is typically the primary contact responsible for the installation, upgrades, administration and maintenance of your ERP solution.

Device History Record (DHR): A requirement for medical manufacturers, DHRs contain details about each batch, lot and unit produced during manufacturing. Typically included in an ERP quality management suite.

Discrete Manufacturing: A type of manufacturing. Discrete manufacturers typically produce distinct items that can be assembled or taken apart, such as toys, engine parts and furniture. The counter to discrete manufacturing is process manufacturing.

Dispatch List: A list of manufacturing work orders in priority sequence with assigned work stations. Dispatch lists are an alternate option to finite scheduling and typically preferred by assembly manufacturers.

Document Control: A document management solution that maintains critical manufacturing documents (procedures, work instructions, etc.) for adherence to quality regulations. Typically included in an ERP quality management suite.

E

Electronic Data Interchange (EDI): A document exchange program that sends information (purchase orders, ASNs, etc.) between business partners in a standard electronic format without human intervention.

Engineering Change Order (ECO): A document outlining (typically last minute) changes in components, assemblies, specifications, processes and work instructions. Typically included in an ERP quality management suite.

Enterprise Resource Planning (ERP): Business management software that helps run your company through an integrated view of your core enterprise operations.

F

Failure Mode Effects Analysis (FMEA): A step-by-step approach to identify all possible failures in a design, product or process. Typically included in an ERP quality management suite.

Finite Scheduling: A scheduling engine that recognizes actual plant capacity limits in real time by automatically taking into account material constraints, BOM complexity, WIP processes, tooling conflicts and priority orders, while simultaneously evaluating the resources required to meet demand and allow for unplanned events.

First In, First Out/Last In, First Out (FIFO/LIFO): Asset management tools that facilitate the financial tracking of inventory. FIFO means the oldest inventory items are recorded as sold first, while LIFO marks the most recently produced items as first.

Forecasting: In your ERP solution, forecasting tools help to project manufacturing plant throughput, resource requirements, revenues and profitability.

G

General Ledger (GL): The central repository for all accounting data transferred from different modules (such as accounts payable, accounts receivable, fixed assets, etc.) and the backbone of any financial management system.

H

Hosted ERP: An ERP solution that is installed, managed and run at a remote site, such as a server farm or your ERP vendor’s facility. The counter is on premise ERP.

Human Machine Interface (HMI): The graphics-based user interface of a manufacturing or process control system. For example, the computer program that communicates with your programmable logic controllers (PLCs)

Human Resource Management (HRM): Applications designed to maximize and manage employee assets through ERP tools such as payroll, time and attendance, benefits, recruitment, etc.

I

Infrastructure as a Service (IaaS): IaaS is the lowest service level in Cloud Computing. With IaaS, a third party manages the basic components of a functioning computer environment such as virtualization technologies, raw storage, firewall options and other network connectivity infrastructure. The manufacturer is responsible for managing the platform and applications.

International Organization for Standardization (ISO): An international group of 163 member countries that develop and publish international manufacturing standards to ensure quality, safety and efficiency.

Internet of Things (IoT): The concept of connecting everything imaginable to a network so that information can be quickly and easily shared through network connections with everything else.

J

Job Shop Manufacturing: A type of manufacturing. Job shops manufacture a variety of custom products in small batches. As these jobs are typically a customized, one-time run, the manufacturing set up is unique.

K

Kanban: A scheduling tool to support just in time production that maintains inventory levels at the work center by aligning the rate of demand with the rate of production.

Key Performance Indicator (KPI): A type of performance measurement that evaluates how effectively a company is achieving key business objectives. Most ERP solutions offer customizable KPIs with drill down capability as part of their Business Intelligence package.

Kitting: The grouping and packaging of separate but related items into one unit.

L

Line Clearance: The clearance of an assembly line by a trained employee before the start of a new job.

M

Machine to Machine (M2M): Technology that allows wired and wireless devices to exchange information and perform actions with each other. M2M is an integral component to the Internet of Things. The remote monitoring of work centers is an example of M2M in a manufacturing environment.

Maintenance, Repair and Overhaul (MRO): In your ERP solution, the MRO module facilitates scheduled and preventative maintenance in order to increase work center availability and reduce cost and repair times.

Make to Order Manufacturing: A type of manufacturing. Make to Order manufacturing only begins after a customer’s order is received, allowing for order customization, but increased customer wait time. Make to Order manufacturing supports lean inventory practices.

Manufacturing Execution System (MES): A software package that monitors and manages production on your shop floor. Originally a self-contained solution, MES software is now increasingly integrated with ERP systems.

Master Production Schedule (MPS): The plan for all future production with details such as what is to be produced, when and with what materials. In an ERP solution, the MPS tool considers sales and forecast demand, inventory levels, production lead times, resource capacity and more, then translates that data into a comprehensive manufacturing schedule.

Material Requirements Planning (MRP): The predecessor to ERP, MRP now refers to a set of features inside your ERP software that manage your production planning, scheduling and inventory control.

Material Review Board (MRB):A group of people who decide the proper treatment of a non-conforming material. Typically included in an ERP quality management suite.

N

Non-Disclosure Agreement (NDA): A binding confidentiality agreement (for example, between an ERP vendor and a manufacturer) that forbids the dissemination of private information gained while working with the manufacturer

O

On Premise ERP: An ERP solution that is installed, managed and completely run at the manufacturer’s physical site. The counter to on premise ERP is hosted (cloud) ERP.

Original Equipment Manufacturer (OEM): 1) A manufacturer that makes components for another company’s own product. 2) Value-added resellers who resell another company’s product under their own name and branding.

Out of the Box: An ERP solution that requires little customization, configuration or integration after installation.

Outsource: The process of farming out aspects of your production to a third party contract manufacturer. ERP solutions typically offer an Outsource module to manage this process.

Overall Equipment Effectiveness (OEE): A consistent way to measure the effectiveness of a machine or process through the three sources of manufacturing productivity loss (availability, performance and quality).

Overrun: The manufacturing of more product than is required, resulting in excess inventory and lost profits.

P

Packing Slip: A document that accompanies shipments to alert recipients of the items and quantity in the shipment.

Physical Inventory: The process of physically counting your entire inventory. Warehouse management tools in your ERP solution can greatly reduce physical inventory time and greatly increase inventory accuracy.

Platform as a Service (PaaS): PaaS builds upon the IaaS level in Cloud Computing where a third party provides not only the necessary IaaS components, but also operating environments such as fully ready database systems, web servers, rendering farms, software development environments and more. The manufacturer is still responsible for managing the applications.

Process Manufacturing:  A type of manufacturing. Process manufacturers typically produce items that cannot be broken down into their component parts, such as cheese, paint or pharmaceuticals. The counter to process manufacturing is discrete manufacturing.

Product Lifecycle Management (PLM): A module in your ERP solution that manages the entire lifecycle of a product from inception and design through manufacture and disposal.

Production Reporting: A report, either keyed into the ERP solution or captured automatically, with the production
details from a particular work station during a shift. Production report details can include number of parts made, number of rejects, etc.

Programmable Logic Controller (PLC): A digital computer used for automation and control of machines in manufacturing work centers. PLCs can collect detailed process data and relay it back to your ERP solution.

Purchase Price Variance (PPV): When purchasing materials, the PPV is the price difference between the assigned
standard cost of the material and the actual cost of the material.

Q

Quality Management System (QMS): A toolbox of applications designed to help manufacturers manage every quality and compliance requirement.

R

Radio Frequency Identification (RFID): Intelligent tags or labels that talk to a networked system to track products and assets without the line of sight scanning limitations required of barcodes.

Real-Time Reporting: The ability to instantaneously collect and analyze enterprise data with your ERP solution.

Return Material Authorization (RMA): The process of returning a product for repair, replacement or refund. ERP tools should manage RMAs for both customer and supplier returns.

S

Safety Stock: Extra inventory that is held as a buffer to mitigate the risk of stock-out.

Self-Service Portal: A website allowing users to access specific business details. In manufacturing, self service portals can exist for employees, customers, vendors/suppliers, consumers and much more.

Serial/Lot Traceability: Through barcodes and labels, serial/lot tracking provides end to end traceability for every step in the production of a part. In highly regulated industries, such as medical, automotive and food and beverage, comprehensive traceability is a requirement.

Shelf Life: The length of time a material or product may be stored before becoming unsuitable for use or consumption.

Software as a Service (SaaS): SaaS is the topmost service level in Cloud Computing with a third party that provides
all IaaS and PaaS services, plus all required maintenance, configuration and updates to your ERP system. With a SaaS contract, you do not own any part of your ERP system, but rather rent the program from a service provider on a monthly basis.

Standard Cost: The assigning of predetermined estimated values to each of your materials, labor and overhead.

Statistical Process Control (SPC): In manufacturing, statistical process control is a methodology for measuring and
controlling quality. Typically included in an ERP quality management suite.

Structured Query Language (SQL): A programming language used to communicate with a database.

T

Time and Attendance: A module in your ERP solution designed to facilitate timely and consistent labor reporting
for payroll and job costing.

Total Cost of Ownership: A financial estimate that determines the direct and indirect costs of a product.

U

Unit of Measure (UOM) Management: Manufacturers deal with multiple UOMs per inventory item (For example, you stock in one UOM but produce in another). ERP software manages and converts UOMs so you can manufacture, order and receive items with ease.

V

Value-Added Reseller (VAR): A company that takes a product, adds features or services of its own, then resells it as
a new product.

Vendor Managed Inventory (VMI): A supply chain model where the manufacturer (rather than the distributor) is responsible for generating orders and maintaining the distributor’s inventory levels.

W

Warehouse Management System (WMS): A toolbox of applications designed to help manufacturers manage every aspect of their inventory and warehouse. Specific tools can include directed pick up and put away distribution, wave management, dock scheduling, shelf life management and more.

Work Order: Internal authorization to manufacture a specific amount of a specific product. Manufacturers use work orders to create the master production schedule.

Workflow: An important tool in BPM, ERP workflows automatically facilitate the routing, tracking and approval of documents and processes.

X

Y

Z


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Elizabeth Quirk

Liz is a leading enterprise technology writer covering Enterprise Resource Planning (ERP), Business Process Management (BPM) and Talent Management Suites (TMS) at Solutions Review. She writes to bridge the gap between consumer and technical expert to help readers understand what they're looking for. Liz attended Massachusetts College of Liberal Arts, where she obtained her Bachelor of Arts Degree in English and Communications. You can reach her at equirk@solutionsreview.com
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