ERP & Manufacturing Glossary of Terms and Definitions
This glossary includes commonly used terms and definitions for topics associated with the use of ERP (Enterprise Resource Planning) software and systems for manufacturing and other industries.
A
Accounts Payable (AP)
Accounts payable (AP) is an account within a business' general ledger that represents money owed by a business to its creditors or suppliers shown as a liability on a company's balance sheet. It is distinct from notes payable liabilities, which are debts created by formal legal instrument documents. Examples of accounts payable include accounting services, legal services, utilities, supplies, etc. which can be reviewed and reported manually, or by automation software.
Accounts Receivable (AR)
Accounts receivable (AR) is the amount that represents money owed to a company or business for purchasing goods and/or services on credit that is not yet been paid for. These are legally enforceable claims for payment, usually sent from the business in the form of invoices that are delivered to a customer for payment within an agreed-upon time frame.
Actual Cost
Actual cost refers to the amount of money that was paid and/or spent to acquire a product or asset. This is also known as an actual expenditure, which can include inventory calculations for materials and labor required in its production, as well as costs to deliver, set up, and/or test an asset. Budgeted/Estimated costs can vary from the actual cost, which accurate accounting and/or automated financial software solutions can help with providing more accurate predictions.
Assemble-to-Order (ATO)
Assemble-to-order (ATO) is a business and manufacturing production strategy in which products are assembled from components and/or sub-assembly parts from available inventory once an order has been created. This allows for customization of products to better fit a customers' specifications, and are generally used with products in which assembly time may be negligible, but the time to manufacture and/or source component parts is significant. Having accurate visibility into inventory over items and its components in certain warehouse or facility locations are necessary for efficient production.
B
Build To Stock (BTS)
Build to stock (BTS), or make to stock (MTS) is a business and manufacturing production strategy in which products are built ahead of actual orders and are stored as inventory to meet future demand. Production plans may be based upon internal sales forecasts, historical demand, warehouse capacity, and/or other external factors such as production costs, consumer demands, consumer preferences, shipping and transportation logistics, etc. Manufacturers that utilize digital technologies can make smart forecasts based of automated and/or connected data from their partners and facilities.
C
Capacity Requirements Planning (CRP)
Capacity requirements planning (CRP) is a planning technique based on the available production capability and whether it can meet its production goals. CRP process and/or methods can utilize planned order releases from material requirements planning (MRP) to estimate capacity needs and provides an operational level overview of the production to access a company's planned manufacturing schedule.
Cloud ERP
Cloud ERP is enterprise resource planning (ERP) software deployed “as a service” in the cloud. Cloud-based ERP simplifies providing ERP to users who can access the solution from any internet-connected device from any location. It also eliminates the need for a cloud-based ERP customer to invest and maintain the infrastructure for ERP and to more easily keep up with software updates. When using cloud-based ERP software, like QAD Adaptive ERP, a manufacturer can implement ERP more quickly and easily add new users and sites.
Cloud ERP for Manufacturing
A cloud-based manufacturing ERP system is specifically designed for the manufacturing industry, providing advanced functionality for manufacturing-specific needs. Manufacturing ERP software integrates core business processes with manufacturing processes, allowing full visibility and control over a manufacturing business and production objectives. Learn more about manufacturing ERP and how it's used in manufacturing.
Configure-to-Order (CTO)
Configure-to-Order (CTO) is a manufacturing process where products are assembled and configured based on customer requirements which are selected from a predefined set of possible values and/or combinations. The CTO process is broken down into modular activities and workflows which are pre-set to allow for customization of a product. CTO is a customer customizable sub-set of Make-to-Order (MTO)/Build-to-order (BTO), which is often used with Just-in-Time (JIT) fulfillment strategies.
Customer Relationship Management (CRM)
Customer relationship management (CRM) is the principles, practices, guidelines and/or processes of managing relationships and interactions with past, existing, and/ or potential customers. CRM refers to the software productivity tools and technologies used to help manage and analyze external customer interactions, reduce manually intensive information logging efforts and improve interactions with customers and prospects.
D
Dispatch Lists (DPL)
Dispatch Lists, also known as dispatch priority lists (DPL) refer to a production tool that typically consists of a document or list of orders of all products, assets, and/or components that need to be produced based on the priority. Dispatch lists can include detailed information about each job, including quantity, priority, order number, location, part number, due dates, job status, and outstanding work that needs to be done. DPLs may be created by manually generating a report through spreadsheets, though there are now software tools that help automate and efficiently generate accurate reports to help reduce potential human errors.
E
Electronic Data Interchange (EDI)
Electronic Data Interchange (EDI) is the concept of businesses electronically communicating information that was once communicated manually on paper that uses an automated electronic format between business partners. This is generally a machine-to-machine and/or computer-to-computer exchange of business documents and/or information, such as sending/receiving purchase orders and invoices, aided by software technology and EDI standards to help organizations and partners streamline logistics and business processes to be more efficient.
Engineer-to-Order (ETO)
Engineer-to-Order (ETO) is a type of manufacturing process in which a product is designed, engineered, manufactured and finished after an order has been received. Engineer-to-Order processes are generally used for complex and/or specialized products that are engineered to meet the specifications of a customer. The ETO model is commonly seen in special orders from defense, aerospace, and industrial machinery manufacturing industries where many products are designed for innovative and/or complex customer projects.
Enterprise Resource Planning (ERP)
ERP stands for Enterprise Resource Planning and refers to software and systems used to plan and manage all the core supply chain, manufacturing, services, financial and other processes of an organization. Enterprise Resource Planning software can be on-premise or in the cloud and can be used to automate and simplify individual activities across a business or organization, such as accounting and procurement, project management, customer relationship management, risk management, compliance and supply chain operations. Learn more about ERP and why it is used in a company.
ERP Application Modules
In software, a module refers to part of a software program that is independently developed to address a particular functionality. An ERP software program can be comprised of modules to build an entire system, and/or be used as additional components to an ERP system to allow for interchangeable or buildable software functionality that can allow for customization of features and/or interfaces to better fit customers' needs and allow for future scalable growth.
ERP Implementation
ERP Implementation is a process and steps involved to successfully install and use ERP software in a business. This generally requires operation planning prior to installation of a system, such as the gathering of a business' requirements, selecting the ERP software and ERP Application Modules that best fit the business and industries involved, as well as potentially managing processes after software deployment, such as migration of data, training users, managing support, and connecting non-ERP systems that will be utilizing an ERP system's functionality.
I
Industrial Manufacturing
Industrial manufacturing refers to the industry that is responsible for the fabrication, process and preparation of assets and/or products intended for industrial use from raw materials and/or goods. Industrial Manufacturing is commonly the foundation of mass manufacturing in many other manufacturing industries that rely on components or products produced to build their own products.
Inventory Management
Inventory management refers to the systematic process used to source, store, organize, and track all of a company's goods. This can include raw material components and/or finished goods/products. This is an activity across the supply chain that can be efficiently managed using digital technologies and software to help automate and/or share data with other parts of the company and/or to suppliers and partners for better production and forecasting.
K
Kanban
Kanban is a workflow management method developed by Taiichi Ono that is commonly used with lean manufacturing practices to manage and improve work across human systems. Kanban focuses on meeting continual delivery demands without overburdening the working team. This approach is often used with scheduling to help organize the workflow process and promote real-time communication to help balance and manage inventory with available capacity and improves handling of system-level bottlenecks
Key Performance Indicator (KPI)
A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a company or business is achieving key business objectives. KPIs can be used at multiple levels and are usually created after analyzing established baseline performance levels and monitor efforts for improvement. KPIs are established as benchmarks in a business for many different reasons and at different levels of a business, with the ultimate goal of evaluating business success.
L
Lead Time
Lead time is the amount of time that passes between the start and completion of a process or project. Lead times can apply to many processes in a business, such as inventory, manufacturing, shipping, procurement, (etc.). In manufacturing or production processes, a lead time may refer to the time taken between receiving an order to when the order is ready to ship.
Lean Manufacturing
Lean manufacturing, also known as lean production, is a system of techniques and activities for running a manufacturing or device operation. Originally derived from Toyota's 1930 operating model (Toyota Production System, TPS), the TPS process was documented as a process that could be applied in any industry in any country, and was renamed "lean" production. Lean manufacturing methodology reduces waste in a manufacturing system while maximizing productivity. Many lean manufacturing models rely on a digital software suite or system of tools that help effectively manage and regulate the manufacturing systems and processes
M
Make-to-Order (MTO)
Make-to-order (MTO), or made-to-order, is a business manufacturing process and production strategy where a customer can customize a product to their specifications and place an order, and the product is not built until a confirmed order is received. Products are built and made according to actual customer demand.
Make-to-Stock (MTS)
Make-to-Stock (MTS), is a production strategy used by businesses to match the inventory with anticipated consumer demand. This method is reliant on accurate forecasts of the demand to determine stock and can be streamlined with the introduction of connected digital technologies, like ERP software, to provide accurate real-time data to help manufacturing and supply chain businesses make smart production decisions.
Manufacturing Operations Management (MOM)
Manufacturing Operations Management (MOM) is a collection of systems for managing end-to-end manufacturing processes with a view to optimizing efficiency. There are many types of MOM software, including for production management, performance analysis, quality and compliance, and human machine interface (HMI). For example, production management software provides real-time information about jobs and orders, labor and materials, machine status, and product shipments. And, performance analysis software displays metrics at the machine, line, plant and enterprise level for situational or historical analysis.
Master Production Schedule (MPS)
Master Production Scheduling (MPS) is the overall plan to assess the production of final items. This proactive production process helps manufacturers plan which products, staffing, inventory and related quantities to produce during certain production periods to manage and adapt to the forecasted impact of seasonality, unexpected disruptions, fluctuating demand and other factors.
MMOG/LE
The Materials Management Operations Guideline/Logistics Evaluation (MMOG/LE) is a comprehensive manufacturer and supplier self assessment and is widely recognized as a key standard for automotive supply chain excellence. This continuous improvement tool and its correlating training course focus on the improvement of materials management efficiency and accuracy while reducing costs from errors and waste.
O
On-Premise ERP (Legacy ERP)
On-Premise ERP is an enterprise resource planning (ERP) software and/or system that is implemented onsite and maintained in a physical office space within an organization, hosted on the company’s own computers and servers for full control, support and ownership of the entire system once implemented. The first ERP systems were introduced in the 1990s and started as early solutions based on previous MRP-modeled systems and were created during a time where on-premise was a faster solution as commercial internet systems of the 1990's did not have reliable, high-volume information transfer speeds. With the introduction of high speed internet, "smart" digital technologies that connect businesses in real-time, as well as adaptable cloud-based ERP software systems that are more agile and scale more quickly than on-premise solutions, on-premise ERP systems are sometimes referred to as "legacy ERP" software.
P
Point of Sale (POS)
Point of Sale (POS) system, or point of purchase system, a system designed to register the time and place where a transaction takes place between a customer and a merchant, and payment is provided in exchange for goods and services. A POS transaction can occur in person or online, and sales tax may become payable at the time. POS software can be on-premise, though cloud-based POS systems are also becoming commonplace in some businesses. Cloud-based software often has an advantage to on-premise POS because of it's ability to create a transaction anywhere. This portability, compatibility with other businesses and software, as well as connectivity to suppliers and networks provide transparent up-to-date information, like order tracking, to their business and customers for an improved experience.
S
SaaS (Software as a Service)
Software as a Service (SaaS) is a way of delivering software or applications through the internet as a service. Users can access software or applications over an internet connection on a compatible device of their choice without having to install and maintain hardware/servers and/or IT resources that are typically required to support a legacy on-premise software system. The software provider manages access to the application, which can include IT resources, security monitoring, software updates, customizations, availability, up-to-date compliance and regulatory practices, as well as continuous performance improvements.
Sales and Operations Planning (S&OP)
Sales and Operations Planning (S&OP) is a cross-functional business management process with a goal to create a functional business plan balanced by supply and demand. The process focuses on key supply chain drivers from a broad range of input and key functional areas, including marketing, sales, manufacturing, finance, executive and distribution. The cross-functional collaboration allows all stakeholders to commit to the forecasting process and contribute/commit to a plan to support the business.
Strategic Sourcing
Strategic sourcing is the process of developing channels of supply at the lowest total cost, and looks at other contributors that may factor into the cost instead of just looking at the lowest purchase price. This supply chain management approach formalizes the way information is gathered and used, and expands upon traditional purchasing activities to embrace all activities within the procurement cycle, from specification to receipt and payment of goods and services.
Supplier Relationship Management
Supplier Relationship Management (SRM) is the systematic, enterprise-wide assessment of suppliers’ assets and capabilities with respect to overall business strategy, determination of what activities to engage in with different suppliers, and planning and execution of all interactions with suppliers. The focus of SRM is to develop two-way, mutually beneficial relationships with suppliers to deliver greater levels of innovation and competitive advantages.
Supply Chain Management (SCM)
Supply Chain Management (SCM) is the active management of operations involved in the flow of goods and services. SCM streamlines business processes and includes all processes involved in procurement and transformation of raw materials into final products and distribution to the end customer. Businesses can use software to automate SCM tasks, like collecting real-time supply chain data, as well as connect and relay information to other parts of the supply chain process for strategic collaboration and to maintain relationships with suppliers, carriers, customers, 3PLs and other supply chain partners.
W
Work Order
A work order is a formal negotiated document (digital or paper) identifying a task or a job that has been approved for execution and is to be assigned to someone to complete. Work orders are commonly used to authorize work for services and/or maintenance tasks, and can contain instructions to adhere to during a job. Work order management software in manufacturing can help accurately schedule and prioritize work orders to the shop floor based off sales orders and demand to increase productivity and manufacturing efficiency.