ERP Definitions

This glossary explains the meaning of key words and phrases that information technology (IT) and business professionals use when discussing ERP and related software products. You can find additional definitions by visiting WhatIs.com or using the search box below.

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  • #

    What is 3PL (third-party logistics)?

    A 3PL (third-party logistics) provider offers outsourced logistics services, which encompass anything that involves management of one or more facets of procurement and fulfillment activities.

  • A

    ABC classification

    ABC classification is a ranking system for identifying and grouping items in terms of how useful they are for achieving business goals.

  • advanced shipping notice (ASN)

    An advanced shipping notice (ASN) is a document that provides detailed information about a pending delivery.

  • Anaplan

    Anaplan is a web-based enterprise platform for business planning.

  • asset performance management (APM)

    Asset performance management (APM) is both a strategy and a set of software tools for tracking and managing the health of an organization's physical assets.

  • Automatic Identification and Data Capture (AIDC)

    Automatic Identification and Data Capture (AIDC) is a broad set of technologies used to collect information from an object, image or sound without manual data entry. The actual technologies involved, the information obtained and the purpose of collection vary widely. AIDC systems are used to manage inventory, delivery, assets, security and documents.

  • What is accounts receivable (AR)?

    Accounts receivable (AR) is an item in the general ledger (GL) that shows money owed to a business by customers who have purchased goods or services on credit.

  • B

    BAI2 file format

    BAI2 file format is a specialized and standardized set of codes used for cash management and bank reconciliations, and introduced by the Bank Administration Institute (BAI).

  • bank identifier code (BIC)

    A bank identifier code (BIC) is a unique identifier for a specific financial institution. A BIC is composed of a 4-character bank code, 2-character country code, 2-character location code and optional 3-character branch code.

  • barcode (or bar code)

    A barcode (sometimes seen as two words, bar code) is the small image of lines (bars) and spaces that is affixed to retail store items, identification cards and postal mail to identify a particular product number, person or location.

  • budgeting, planning and forecasting (BP&F)

    Budgeting, planning and forecasting (BP&F) is a three-step strategic planning process for determining and detailing an organization's long- and short-term financial goals.

  • What is a bill of materials (BOM)?

    A bill of materials (BOM) is a comprehensive inventory of the raw materials, assemblies, subassemblies, parts and components, as well as the quantities of each, needed to manufacture a product.

  • What is the bullwhip effect?

    The bullwhip effect is a supply chain phenomenon describing how small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer and raw material supplier levels.

  • C

    chart of accounts (COA)

    A chart of accounts (COA) is a financial, organizational tool that provides an index of every account in an accounting system.

  • cloud ERP

    Cloud ERP is a type of enterprise resource planning software that runs on a provider's cloud computing platform, rather than on premises on an enterprise's own computers.

  • What is computer numerical control (CNC)?

    Computer numerical control (CNC) is a manufacturing method that automates the control, movement and precision of machine tools through the use of preprogrammed computer software, which is embedded inside the tools.

  • What is computer-aided software engineering (CASE)?

    Computer-aided software engineering (CASE) describes a broad set of labor-saving tools and methods used in software development and business process modeling.

  • What is cost of goods sold (COGS)?

    Cost of goods sold (COGS) is the total of the costs directly attributable to producing things that can be sold.

  • What is cross-docking?

    Cross-docking is the practice of unloading goods from inbound delivery vehicles and loading them directly onto outbound vehicles.

  • D

    demand signal repository (DSR)

    A demand signal repository (DSR) is a database that aggregates sales and demand data at the merchant's point of sale (POS).

  • digital core

    A digital core is the technology platforms and applications that enable organizations to transform into digital businesses and meet the new needs of the digital economy.

  • digital manufacturing

    Digital manufacturing is a technology-based approach to production that links different data silos and processes in the manufacturing lifecycle so that stakeholders can make better business decisions both comprehensively and at each step.

  • digital supply chain

    A digital supply chain is a supply chain whose foundation is built on web-enabled capabilities.

  • digital thread

    A digital thread is a data-driven communication framework that connects traditionally siloed elements in manufacturing processes and provides an integrated view of an asset throughout the manufacturing lifecycle.

  • discrete manufacturing

    Discrete manufacturing is an industry term for the manufacturing of finished products that are distinct items capable of being easily counted, touched or seen.

  • distribution requirements planning (DRP)

    Distribution requirements planning (DRP) is a systematic process to make the delivery of goods more efficient by determining which goods, in what quantities and at what location, are required to meet anticipated demand.

  • What is a digital twin?

    A digital twin is a virtual representation of a real-world entity or process.

  • What is demand planning and why is it important?

    Demand planning is the process of forecasting the demand for a product or service so it can be produced and delivered more efficiently and to the satisfaction of customers.

  • What is dual sourcing?

    Dual sourcing is the supply chain management practice of using two suppliers for a given component, raw material, product or service.

  • E

    engineering bill of materials (EBOM)

    An engineering bill of materials (EBOM) is a product recipe structured from the design standpoint, rather than the manufacturing standpoint.

  • enterprise asset management (EAM)

    Enterprise asset management (EAM) is the process of managing the lifecycle of physical assets to maximize their use; save money; improve quality and efficiency; and safeguard health, safety and the environment.

  • ERP (enterprise resource planning)

    ERP, or enterprise resource planning, is software designed to manage and integrate the functions of core business processes like finance, HR, supply chain and inventory management in a single system.

  • ERP finance module

    The ERP finance module is the software component that handles the main accounting and financial management functions of an enterprise resource planning system.

  • What is Epicor Software Corp.?

    Epicor Software Corp. is a global business software vendor that sells enterprise resource planning (ERP) and other software to small and medium-sized businesses (SMBs) and large enterprises.

  • F

    Fast Guide to acronyms used in manufacturing

    The following glossary or acronyms are those most used in internal communications within the manufacturing industry.

  • What is financial analytics and why is it important?

    Financial analytics is the creation of ad hoc analysis to answer specific business questions and forecast possible future financial scenarios.

  • G

    go-live (go live)

    Go-live is the time at which something becomes available for use.

  • GR/IR clearing account (goods receipt/invoice receipt clearing account)

    A GR/IR clearing account (goods receipt/invoice receipt clearing account) is a bookkeeping device that can be used when goods arrive before the invoice is generated or when an invoice arrives before the goods are delivered.

  • What is a general ledger (GL)?

    A general ledger (GL) is a set of numbered accounts a business uses to keep track of its financial transactions and to prepare financial reports.

  • H

    hybrid ERP

    Hybrid ERP is a combination of on-premises enterprise resource planning systems for managing essential business processes, such as financials and manufacturing, and cloud software for more specific functions.

  • hybrid manufacturing

    Hybrid manufacturing is a term that describes combining additive manufacturing and subtractive manufacturing in a single machine system.

  • I

    Industry 4.0

    Industry 4.0 refers to the fourth industrial revolution and the cyber-physical transformation of manufacturing.

  • integrated accounting system

    An integrated accounting system is a type of software that combines major financial accounting functions into one application.

  • inventory turns (inventory turnover)

    Inventory turns, also referred to as inventory turnover and inventory turnover ratio, are a popular measurement used in inventory management to assess operational and supply chain efficiency.

  • What is IFS AB?

    IFS AB (Industrial and Financial Systems) is an enterprise resource planning (ERP) software vendor that specializes in asset-intensive, project-centric industries, such as manufacturing and distribution.

  • What is Infor?

    Infor is a New York-based vendor of ERP and other enterprise business software.

  • What is inventory management?

    Inventory management is the component of supply chain management that tracks and supervises noncapitalized assets -- or inventory -- and stock items.

  • J

    What is Blue Yonder (formerly JDA Software)?

    Blue Yonder, formerly JDA Software, is a software and consultancy company that specializes in selling supply chain management products and services to businesses.

  • K

    Kaizen (continuous improvement)

    Kaizen is an approach to creating continuous improvement based on the idea that small, ongoing positive changes can reap significant improvements.

  • L

    logistics

    Logistics is the process of planning and executing the efficient transportation and storage of goods from the point of origin to the point of consumption.

  • logistics management

    Logistics management is the governance of supply chain management functions that helps organizations plan, manage and implement processes to move and store goods.

  • What is a lean water spider?

    Lean water spider, or water spider, is a term used in manufacturing that refers to a position in a production environment or warehouse.

  • What is lean manufacturing?

    Lean manufacturing is a methodology that focuses on minimizing waste within manufacturing systems while simultaneously maximizing productivity.

  • M

    manufacturing execution system (MES)

    A manufacturing execution system (MES) is an information system that connects, monitors and controls complex manufacturing systems and data flows on the factory floor.

  • material requirements planning (MRP)

    Material requirements planning (MRP) is a system for calculating the materials and components needed to manufacture a product.

  • O

    order management

    Order management is the administration of business processes related to orders for goods or services.

  • What is Open Platform Communications (OPC)?

    Open Platform Communications (OPC) is an interoperability standard for secure data exchange in industrial automation and other areas.

  • What is order to cash (OTC or O2C)?

    Order to cash, or OTC or O2C, is a business process that involves receiving and fulfilling customer requests for goods or services.

  • P

    pick to light

    Pick to light is order fulfillment technology that employs alphanumeric displays and buttons at storage locations to guide the manual picking and recording of items for shipment.

  • poka-yoke

    A poka-yoke is a mechanism that is put in place to prevent human error.

  • process manufacturing

    Process manufacturing is a production method in which goods are created by combining supplies, ingredients or raw materials using a predetermined formula or recipe.

  • product data management (PDM)

    Product data management (PDM) is the process of capturing and managing the electronic information related to a product so it can be reused in business processes such as design, production, distribution and marketing.

  • profit and loss statement (P&L)

    A profit and loss statement (P&L), also called an income statement or statement of operations, is a financial report that shows a company's revenues, expenses and net profit or loss over a given period of time.

  • prototype

    A prototype is an early version of a product from which future versions are developed.

  • What is procure-to-pay (P2P)?

    Procure-to-pay (P2P), also known as purchase-to-pay, is the process organizations use to obtain essential resources.

  • What is product as a service?

    Product as a service (PaaS) is the concept of selling the services and outcomes a product can provide rather than the product itself.

  • What is production planning and why is it important?

    Production planning is the act of developing a guide for the design and production of a given product or service.

  • R

    replenishment

    Replenishment is the controlled and regular movement of inventory from an upstream point on the supply chain to a downstream location that requires sufficient stock to cover demand.

  • reverse logistics

    Reverse logistics is the set of activities that is conducted after the sale of a product to recapture value and end the product's lifecycle.

  • What is RFI (request for information)?

    A request for information (RFI) is a formal process for gathering information from potential suppliers of a good or service.

  • S

    SaaS ERP

    SaaS ERP is a type of cloud-based enterprise resource planning (ERP) software that runs on the vendor's or cloud provider's servers, is sold through subscription and delivered as a service over the internet.

  • sales and operations planning (S&OP)

    Sales and operations planning (S&OP) is a process for better matching a manufacturer's supply with demand by having the sales department collaborate with operations to create a single production plan.

  • service lifecycle management (SLM)

    Service lifecycle management (SLM) describes the strategy and software for managing the maintenance and repair of products and maximizing the profit opportunities from these activities.

  • strategic sourcing

    Strategic sourcing is an approach to supply chain management that formalizes the way information is gathered and used.

  • supplier relationship management (SRM)

    Supplier relationship management (SRM) is a systematic approach to evaluating and partnering with vendors that supply goods, materials and services to an organization, determining each supplier's contribution to success, and developing strategies to improve their performance.

  • supply chain analytics

    Supply chain analytics refers to the processes organizations use to gain insight and extract value from the large amounts of data associated with the procurement, processing and distribution of goods.

  • supply chain finance

    Supply chain finance is a set of technology-enabled business and financial processes that provides flexible payment options for a buyer and one of their suppliers at lower financing costs.

  • supply chain management (SCM)

    Supply chain management (SCM) is the optimization of a product's creation and flow from raw material sourcing to production, logistics and delivery to the final customer.

  • supply chain planning (SCP)

    Supply chain planning (SCP) is the process of anticipating the demand for products and planning their materials and components, production, marketing, distribution and sale.

  • supply chain security

    Supply chain security is the part of supply chain management that focuses on the risk management of external suppliers, vendors, logistics and transportation.

  • supply chain transformation

    Supply chain transformation is the addition and integration of technology to improve supply chain performance, optimize costs and mitigate risks.

  • SWIFT FIN message

    SWIFT FIN is a message type (MT) that transmits financial information from one financial institution to another.

  • What is a smart factory?

    A smart factory is a highly digitized and connected production facility that relies on smart manufacturing.

  • What is service supply chain?

    The service supply chain is the part of the supply chain dedicated to providing service on products.

  • What is supply chain sustainability (SCS)?

    Supply chain sustainability (SCS) is a holistic view of supply chain processes, logistics and technologies that affect the environmental, social, economic and legal aspects of a supply chain's components.

  • What is supply chain visibility and why is it important?

    Supply chain visibility (SCV) is the ability to track parts, components, raw materials or products as they move from the manufacturer to the final destination.

  • T

    traceability

    Traceability, in supply chain traceability, is the ability to identify, track and trace elements of a product or substance as it moves along the supply chain from raw goods to finished products.

  • transportation management system (TMS)

    A transportation management system (TMS) is specialized software for planning, executing and optimizing the shipment of goods.

  • two-tier ERP

    Two-tier ERP is a technology strategy taken by large, multinational enterprises that uses tier 1 ERP for financials and other core common processes at the corporate level and tier 2 ERP for divisions, subsidiaries and smaller locations of the company to address specific needs.

  • U

    What is an upcharge?

    An upcharge is an additional fee that is added to a bill after a contract has already been negotiated.

  • V

    value driver

    A value driver is an activity or capability that adds worth to a product, service or brand.

  • value stream mapping

    Value stream mapping is a lean manufacturing tool that visualizes every repeatable step required to deliver a product or service to the customer.

  • vendor-managed inventory (VMI)

    Vendor-managed inventory (VMI) is an inventory management technique in which the supplier of goods, usually the manufacturer, is responsible for optimizing the inventory a distributor holds.

  • What is a voice user interface (VUI)?

    A voice user interface (VUI) is a type of interface that relies on speech recognition technology to enable users to interact with an application or device through voice commands.

  • W

    Warehouse control system (WCS)

    Warehouse control system (WCS) is a software application for orchestrating activity flow within a warehouses and distribution center.

  • warehouse management system (WMS)

    A warehouse management system (WMS) consists of software and processes that allow organizations to control and administer warehouse operations from the time goods or materials enter a warehouse until they move out.

  • work in progress (WIP)

    Work in progress (WIP) refers to the number of tasks or projects that are currently in the process of being completed.

  • working capital

    Working capital is the difference between a business's current assets and current liabilities.