ERP Glossary

If you are new to using ERP systems, the jargon around them can be bewildering. This article looks at a handful of the terms used with most ERP systems. Our intention is that you better understand the basic building blocks that make up an ERP system.

Workcentres

A workcentre is a resource that you use to make your production orders. This can be a collection of machines, a team of crafts people or a production cell. The ERP system uses a workcentre to assign work and help you manage capacity.

In many systems, you associate the manufacturing operations with workcentres.

Parts and Bill of Materials (BOMs)

To produce a finished item you will need to buy raw materials and process them. Defining the parts that your business will use is the first step to setting up an ERP system.

The Bill of Materials (BOM) is the collection of parts required to create the finished product. Think of the BOM as the ingredients in a cake recipe.

Manufacturing Routes 

Continuing the cake analogy, the recipe's instructions are the manufacturing route. Here you define the sequence of production operations, the setup time and cycle times. These times will help you to manage production output and capacities.

Quotes and sales orders 

You handle enquiries from customers via a quotes function. When you win the order, you convert the quote to a sales order.

Analysis of lost quotes should help you to improve sales conversion rates in the future.

Work Orders

The order to produce goods is the work order. This will include the delivery date, the quantity and the product in question. If the sales order has multiple products then multiple work orders are usual.

The work order will request you to kit parts against it. This information comes from the BOM. The operations listed on the work order will come from the manufacturing route.

Purchasing demand and goods received

Work orders create demand for materials. Creating purchase orders on your suppliers aims to meet this demand. When the materials arrive in the business you can inspect them and receive them into stock.

Stock control

Keeping stock levels right is essential to delivering on time. Stock control often involves:

  • Transferring stock between locations.
  • Issuing stock to work orders.
  • Receiving stock from purchase orders, or sub-assemblies.
  • Cycle counting / stock taking.

Scheduling

Creating a BOM and a route are planning activities. Determining when a work order's operations should be undertaken is called scheduling.

Some systems offer automated scheduling and complex scheduling rules. Other systems offer simpler interfaces to help you schedule your workloads.

Capacity management

Ensuring that your schedules aren't overloading your business' production capacity is key. Capacity management includes the planning of your available hours by workcentre.

Flexing your resources to meet demand (both up and down) is a key activity in this area also. Capacity management should form part of an ongoing management routine.

Shop floor tracking and SFDC

Knowing where your production orders are, at any time, is the purpose of shop floor tracking. Shop Floor Data Collection (aka SFDC) is the means to enable shop floor tracking.

Production staff log onto work orders to start SFDC. This captures time and completed operations against the work orders. This data is  then centralised to allow the production team to track progress.

SFDC is great to use with exception reporting. This reduces the time tracking every order on your shop floor.

Despatch and Shipping

Once you have completed production, it is time to despatch the item and ship it to your customer. The despatch activities are most likely tied into the manufacturing route. Coordinating shipping with your preferred delivery service is possible via many ERP systems.

Invoicing

Raising an invoice and getting paid by your customer is the final step in this ERP overview. Many ERP systems allow you to raise invoices with a few clicks. Others integrate with financial packages, allowing you to complete the sales order.

There is more to an ERP system than just purchasing software and logging in. If you want to find out more then download our free guide. Or, if you want to find out how Fraction ERP can help you to become more productive, sign up for a free demo below.

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