Lower Manufacturing Costs through Better Planning

ERP Glossary

ABC Code

The segregation of parts into three tiers, with A representing the few that account for about 80% of the total inventory costs, B representing the next 15%, and C the remainder. Cost control can then focus on the few A items.

Bill of Materials (BOM)

A hierarchical list of all sub-assemblies, components, and raw materials that go into the making of a finished product.

Enterprise Resource Planning (ERP)

The process of managing the complete cycle of manufacturing, from taking a customer order through manufacturing to shipping the finshed product.

Inventory Carrying Costs

The cost associated with storing, insuring, and obsoleting parts.

Material Requirements Planning

A set of techniques that uses the part master, bill of materials, sales forecast, inventory levels, planned purchases, and the shop floor schedule to determine what purchase order and shop floor schedule changes need to be made to meet sales order commitments.

Inventory Level

The amount of a given part that is currently on hand and ready for use or sale.

Part Master

The complete set of information that describes a raw material, component, sub-assembly, or finished product.

Standard Cost

The labor, material, and overhead costs calculated as the average for building a finished product.

Yield

The amount (percentage) of raw material, component or sub-assembly that is successfully used to build a higher assembly. The remainder is waste.