ERP definitions and terms decoded
Here is a growing list of terms and definitions that you may hear people use.
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accounts payable (AP): The value of goods and services acquired for which payment has not yet been made.
accounts receivable (AR): The value of goods shipped or services rendered to a
customer on which payment has not yet been received. Usually includes an allowance for bad debts.
advanced planning and scheduling (APS): Techniques that deal with analysis and
planning of logistics and manufacturing over the short, intermediate, and long-term time periods. APS describes any computer program that uses advanced mathematical algorithms or logic to perform optimization or simulation on finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand management, and others. These techniques simultaneously consider a range of constraints and business rules to provide real-time planning and scheduling, decision support, available-to-promise, and capable-to-promise capabilities. APS often generates and evaluates multiple scenarios. Management then selects one scenario to use as the ―official plan.‖ The five main
components of APS systems are demand planning, production planning, production scheduling, distribution planning, and transportation planning.
APICS: A nonprofit educational organization consisting of over 70,000 members in the production and operations, materials, and integrated resource management areas. application Software: A program that performs a task or process specific to a particular end-user’s needs, or solves a particular problem. Enterprise applications are typically
large-scale business systems that organizations use to manage their operations. application programming interface (API): A set of routines, protocols, and tools for
building software applications or for communicating with programs or other systems. A good API makes it easier to develop a program by providing all the building blocks that a programmer needs Although APIs are designed for programmers, they are ultimately good for users because they guarantee that all programs using a common API will have similar interfaces, which makes it easier for users to learn new programs. On the other
hand, many enterprise applications vendors provide APIs for integrating other applications with their systems.
application service provider (ASP): A third-party entity that manages and distributes
software-based leased services and solutions to customers across a wide area network from a central data center. In essence, ASPs are a way for companies to outsource some or almost all aspects of their information technology needs.
architecture: A structured set of protocols that implements a system’s functions.
available-to-promise (ATP): The uncommitted portion of a company’s inventory and
planned production, maintained in the master schedule to support customer order promising.
backflush- The calculated reduction of a component inventory balance based on the reported production of a parent item and the quantity of the component used per each parent. A system transaction that may not represent physical usage based on timing and bill of material accuracy issues.
back scheduling: A technique for calculating operation start dates and due dates. The schedule is computed starting with the due date for the order and working backward to determine the required start date and/or due dates for each operation. bill of material (BOM): A listing of all the sub assemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make an assembly.
business intelligence (BI): Sets of tools that provide graphical analysis of business information in multidimensional views thus enabling people to make better decisions and improve their business processes.
business-to-business e-commerce (B2B) (A): Business being conducted over the
Internet between businesses. Thhe implication is that this connectivity will cause businesses to transform themselves via supply chain management to become virtual organizations, reducing costs, improving quality, reducing delivery lead time, and improving due-date performance.
business-to-consumer sales (B2C) (A): Business being conducted between businesses
and final consumers largely over the Internet. It includes traditional brick and mortar businesses that also offer products online and businesses that trade exclusively electronically.
capacity requirements planning (CRP): The function of establishing, measuring, and
adjusting limits or levels of capacity. The term CRP in this context refers to the process of determining in detail the amount of labor and machine resources required to accomplish the tasks of production.
client: In information systems, a software program that is used to contact and obtain data from a server program on another computer. Each client program is designed to work with one or more specific kinds of server programs, and each server requires a specific kind of client. A Web browser is one type of client.
Client/server systems A distributed computing system in which work is assigned to the computer best able to perform it from among a network of computers.
computerized maintenance management systems (CMMS): Automated software
systems for handling maintenance work orders, as well as associated inventory, purchasing, accounting, and human resources functions. In some industries—particularly
process production, in which manufacturers look to optimize use of capital-intensive equipment—maintenance management systems play a leading role as the enterprise system. Maintenance management systems have similar basic functionality, including:
1) use of work orders for preventive and predictive maintenance,
2) equipment recording and tracking,
3) inventory control,
4) scheduling labor and resources, and
contact management- Systems that track interaction between a sales force and customers or prospects, supply chain partners, or other relationships. Functions usually include call date tracking, notes files, followup reminders, birthday or anniversary date reminders, and other methods to provide systematic ways to initiate and track interaction over time. corporate performance management (CPM): An overarching term that describes the
methodologies, metrics, processes and systems used to monitor and manage the business performance of an enterprise. Applications that enable CPM translate strategically focused information to operational plans and send aggregated results. cost of goods sold (COGS): An accounting classification useful for determining the
amount of direct materials, direct labor, and allocated overhead associated with the products sold during a given period of time.
customer relationship management (CRM): Software systems that range from simple,
off-the-shelf contact management solutions to high-end interactive selling suites that combine sales, marketing, and executive information tools. These include product configuration, quote and proposal management, and marketing encyclopedias. Some systems extend functions to include complex pricing, promotions, commission plans,
team selling, and campaign management. Enterprise-level solutions installed at large companies with hundreds or even thousands of users have capabilities for call center and help desks; field service; forecasting; and analysis.
database: A data processing file-management approach designed to establish the independence of computer programs from data files. Redundancy is minimized, and data elements can be added to, or deleted from, the file structure without necessitating changes to existing computer programs.
database management system (DBMS): The software designed for organizing data and
providing the mechanism for storing, maintaining, and retrieving that data on a physical medium (i.e., a database). A DBMS separates data from the application programs and people who use the data and permits many different views of the data.
data warehouse: A repository of data that has been specially prepared to support decision-making applications.
discrete manufacturing: Production of distinct items such as automobiles, appliances, or
e-Business: The generic name given to any type of business conducted using the Internet from online trading to self-service.
engineer-to-order (ETO): Products whose customer specifications require unique
engineering design, significant customization, or new purchased materials. Each customer order results in a unique set of part numbers, bills of material, and routings. enterprise resources planning (ERP) system:
1) An accounting-oriented information system for identifying and planning the enterprise-wide resources needed to take, make, ship, and account for customer orders. An ERP system differs from the typical MRP II system in technical requirements such as graphical user interface, relational database, use of fourth-generation language, and computer-assisted software engineering tools in development, client/server architecture, and open-system portability.
2) More generally, a method for the effective planning and control of all resources needed to take, make, ship, and account for customer orders in a manufacturing, distribution, or service company.
flow manufacturing: A form of manufacturing organization, in which machines and
operators handle a standard, usually uninterrupted, material flow. The operators generally perform the same operations for each production run. A flow shop is often referred to as a mass production shop or is said to have a continuous manufacturing layout. Each product, though variable in material specifications, uses the same flow pattern through the shop. Production is set at a given rate, and the products are generally manufactured in bulk. G
(GUI) graphical user interface: A connection between the computer and the user
employing a mouse and icons so that the user makes selections by pointing at icons and clicking the mouse.
infinite loading: Calculation of the capacity required at work centers in the time periods required regardless of the capacity available to perform this work.
just-in-time (JIT): A philosophy of manufacturing based on planned elimination of all waste and continuous improvement of productivity. It encompasses the successful execution of all manufacturing activities required to produce final product, from design engineering to delivery and including all stages of conversion from raw material onward. L
1) A span of time required to perform a process (or series of operations). 2) In a logistics context, the time between recognition of the need for an order and the receipt of goods. Individual components of lead time can include order preparation time, queue time, processing time, move or transportation time, and receiving and inspection time.
lean production: A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with the customers. Lean producers employ teams of multi-skilled workers at all levels of the organization and use highly flexible, increasingly automated machines to produce volumes of products in potentially enormous variety. It contains a set of principles and practices to reduce cost through the relentless
removal of waste and through the simplification of all manufacturing and support processes.
mass customization: The creation of a high-volume product with large variety so that a customer may specify his or her exact model out of a large volume of possible end items while manufacturing cost is low because of the large volume. An example is a personal computer order in which the customer may specify processor speed, memory size, hard disk size and speed, removable storage device characteristics, and many other options when PCs are assembled on one line and at low cost.
mass production: High-quantity production characterized by specialization of equipment and labor.
master production schedule (MPS): The anticipated build schedule for those items
assigned to the master scheduler. It is a set of planning numbers that drives material requirements planning (MRP). It represents what the company plans to produce expressed in specific configurations, quantities, and dates.
material requirements planning (MRP): A set of techniques that uses bill of material
data, inventory data, and master production schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for materials. Further, because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase.
manufacturing instructions- The detailed process parameters and operating data
required for a specific production operation, which may include both basic production rate data and detailed engineering specifications and notes.
manufacturing resource planning (MRP II): A method for the effective planning of all
resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer what-if questions. It is made up of a variety of processes, each linked together: business planning, production planning (sales and operations planning), master production scheduling, material requirements planning, capacity requirements planning, and the execution support systems for capacity and material. Output from these systems is integrated with financial reports such as the business plan, purchase commitment report, shipping budget, and inventory projections in dollars. Manufacturing resource planning is a direct outgrowth and extension of closed-loop MRP.
negative inventory- An error condition resulting from a transaction that drives the perpetual inventory below zero. Systems that allow negative inventory usually provide
exception reports for cycle counting and analysis, and specify how the negative is handled in modules such as MPS and MRP.
nested- A process or activity self-contained within a larger entity, that retains its identity and characteristics for reporting and analysis.
net assets- Total assets less total liabilities.
net cash flow- Cash inflow (sales revenue) less cash outflow (payments).
net change- An MRP or other planning system generation that only recalculates requirements for items that have changed since the last generation, due to the addition or changes in order quantities and dates, inventory levels, bill of material or routings, lead times or other parameters. A flag is usually set by programs that initiate changes for those items, which is used by MRP as the basis to regenerate them. It typically reduces generation time and is most useful for companies that have many part numbers, a small percentage of which are active in a given week.
net requirements- The requirements for an item based on its gross requirements (from forecasts, customer orders or upper level demand), minus stock already on-hand and scheduled receipts. If the total is below the specified safety stock, a planned order is generated based on the lot size. The generation of a new planned order for a given net requirement is normally done only after calculating the effect of rescheduling all incoming receipts to the dates required.
net sales- Gross sales less allowances for returns and discounts.
netting- Deducting requirements (orders, allocations, planned run hours, etc.) from an available resource (inventory, work center capacity, etc.).
network diagram- The depiction of a system in terms of individual points (which may represent a location, resource, status or task) and the links between them used to pass goods, services, data or other communications. It helps model the relationships of the links and the timing and direction of the flows between them.
node- 1) An individual point within a network that represents a separate entity and is linked to other nodes within the overall system. In a supply chain, individual companies and locations can be considered nodes. 2) A decision point in a decision tree. nominal data- Data described by a value that assigns it to a category, but does not provide for a ranking or ordering of the values.
nonconformance- The status of a process or product that does not meet specification and requires attention or corrective action.
non-inventoried item- Normally, a supply item purchased and received but whose
on-hand quantity is not calculated.
nonlinear- A product or process that exhibits an uneven distribution, or wide variations in terms of quantity and timing.
nonrecurring- An event or cost not considered to be part of normal, ongoing business operations that is separated or filtered out when forecasting future events or reporting financial information.
non-significant part number- A part number composed of characters that do not imply
anything about the characteristics of the part or the family it belongs to. Separate code and description fields are used to convey associated information instead of building it into the part number itself.
non-stationary demand- A pattern in which demand is not constant for each time frame but varies due to seasonality, trend or other factors.
non value-added- Activities and costs that can be eliminated without reducing performance, function or value as perceived by the customer.
normalized data- Data that has been adjusted or reduced to eliminate redundancies and anomalies.
numerical control (NC)- A machine tool that uses machine-readable sets of numeric
codes that control the activities used in its operation.
online analytical processing (OLAP): A category of software tools that provides
analysis of data stored in a database. OLAP tools enable users to analyze different dimensions of multidimensional data. For example, it provides time series and trend analysis views. The chief component of OLAP is the OLAP server, which sits between a client and a database management systems (DBMS), and which understands how data is organized in the database and has special functions for analyzing the data. There are OLAP servers available for nearly all the major database systems.
order entry: The process of accepting and translating what a customer wants into terms used by the manufacturer or distributor. The commitment should be based on the available-to-promise line (ATP) in the master schedule. This can be as simple as creating shipping documents for finished goods in a make-to-stock environment, or it might be a more complicated series of activities, including design efforts for make-to-order (MTO) products.
product data management (PDM): A system, which controls all product-related data
and associated workflow processes within an enterprise. Product data management systems replace paper-based processes and information storage with a single, centralized data repository that enables authorized users throughout a company to access and update current product information, while ensuring they follow specific procedures. PDM vendors recently have emphasized the similarities between PDM and groupware technology appropriate to a range of business environments. Besides ensuring data integrity using relational database technology, both include workflow and web-based applications that ease collaboration efforts.
product configurator: A system, generally rule-based, to be used in design-to-order, engineer-to-order, or make-to-order environments where numerous product variations exist. Product configurators perform intelligent modeling of the part or product attributes and often create solid models, drawings, bills of material, and cost estimates that can be integrated into CAD/CAM and MRP II systems as well as sales order entry systems. product life cycle:
1) The stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) The time from initial research and development to the time at which sales and support of the product to customers are withdrawn.
3) The period of time during which a product can be produced and marketed profitably. product lifecycle management (PLM): A process for guiding products from idea
through retirement to deliver the most business value to an enterprise and its trading partners. The applications that support the business activities enabled through PLM includes product ideation, design, engineering, manufacturing process management, product data management, and product portfolio management.
packing department- The area that prepares picked material for shipment by performing the consolidation, packing, marking and documentation tasks required. The packing department may also be responsible for locating and picking materials for outgoing shipments.
packing slip- The paperwork thata shipment, pallet or smaller unit and describes its contents and quantities, and normally references the order number or numbers involved. paradigm shift- A complete change in thinking or belief systems that allows the creation of a new condition previously thought impossible or unacceptable. (ex.- the change in thinking created by Just-in-Time that views inventory as a liability, not an asset).
parallel- The simultaneous performance of related activities or tasks, normally using different resources, that enables completing those activities faster than if they were done in a serial manner.
parallel conversion- A project implementation technique in which an existing system is run in parallel with the new system, with the comparison of operations and results to verify that the new system will properly replace the functions of the old. Parallel conversions are often difficult due to the time, expense and viability of operating two systems and problems in comparison and verification when functions have changed significantly. A parallel is often not necessary when the conference room pilot and issue identification and resolution phases are done well, and adequate resources are made available at cutover time.
parent- An upper level item that uses a component or material (child).
part number- The set of characters, normally alphanumeric, that identifies a specific manufactured or purchased item and is used in all database, order, inventory and other functions.
part period balancing (PPB)- A lot size technique that uses look ahead and look back
functions to consider additional periods in modifying an initial calculation based on least total cost.
parts list- A listing of all components used in the production of a parent item that does not reflect its structure or intermediate levels, and is not useful in time- phasing requirements based on lead time offsets.
parts per million (PPM)- A quality measure of the number of defective items observed or projected out of a population of one million.
past due- Line items and orders expected or promised for dates prior to the current date. Past due orders are an integral part of evaluating delivery performance and normally are prioritized when reviewing exception messages.
path- A series of connected events, nodes or resources that indicates the links, direction of data flow, timing dependencies and positions of those items. .
pegging- Tracing the source of requirements in a materials plan, caused by dependent demand from an upper-level item, independent demand from a customer or interplant order, or to replenish a desired inventory stock level.
percent complete- The estimated or measured completion status of a process or project used to analyze the probability of meeting a projected date, or in initiating a contracted progress payment.