Whether you’re new to ERP or a seasoned expert, trying to keep up with all the jargon can sometimes make your head spin. This mini glossary should give you a list of commonly used ERP terms and industry buzzwords.


You can search for specific terms by using Control + F (PC) or Command F (Mac). 

3rd Party Application

Software that has been developed by an outside company and is sold through a vendor.

Accounts Payable – Any unpaid balances that your company owes to vendors.

Accounts Receivable – Any outstanding balances that your customers owe to your company.

Actual Cost– The actual amount of money either paid for material or charged as labor, material, or overhead to a work order.

Aging – when assets are organized and sorted according to how long they have existed.

Allocation – distribution of cost in a manufacturing process.

Assemble To Order (ATO) – a manufacturing strategy that allows users to combine a limited number of sub-assemblies into a large number of possible finished items. This strategy is designed to allow a wide variety of customization options, shorter lead times, and low inventory risk.

Business To Business (B2B) – when the vendor and consumer are both businesses, not end consumers.

Bill of Material- A list of the type and quantity of components needed to build a part.

Bottleneck – a machine or workstation through which many production items must flow and which when overloaded causes a delay in the production process.

Build To Stock – a build-ahead approach to production, where items are built ahead of time according to sales forecasts or historical demand. 

Capacity requirements planning (CRP) – the process of calculating the production capacity that a business requires to meet planned and actual demand. 

Cloud Computing – A process whereby users are connected to their ERP software via the internet rather than to computer equipment at their location thus eliminating the cost and need to have the hardware infrastructure located and maintained at their site. 

E-Commerce – the process by which goods and services are bought and sold via the internet utilizing web sites that are virtual stores. Examples include businesses from banking to baked goods and everything on between. 

Electronic Data Interchange (EDI) – EDI replaces paper mail, fax and email by electronically exchanging order and fulfillment/billing information in a standard format between trading partners. 

Engineer To Order – a production approach where components are designed, engineered and built to specifications after the order has already been received. 

Fixed Assets – assets that are necessary for production, but that are not going to generate cash within a year. These include assets such as equipment, vehicles, buildings, and more. 

Forecasting – a process that uses historical data to predict future outcomes. 

General ledger – A permanent, ongoing record that contains all of an organization’s financial transactions. 

Implementation – the process of installing and configuring ERP software. This process involves installing, configuring, testing, training and preparing an organization for the change.

Integrated Software – two or more software functions within the overall ERP application that share data and combine functions, such as order processing and inventory control, or invoicing and accounts receivable. 

Job cost – a method in which all costs associated with a project are recorded over time, totaled at the end, and where the actual and planned costs are compared to generate variances that can be fed to accounting systems. 

Job Shop – a manufacturing facility that produces discrete specialized, and fairly small manufacturing runs of products that are usually not repeated. 

Kaizen – in Japanese, the word means “improvement”. This is the philosophy of continuous process improvement using analytical tools and methods.

Kanban – a communication system that controls the flow of the shop, and synchronizes the level of production to customer demand, and normally uses standardized quantities and movement tickets which travel with the production pieces from operation station to operation station. 

Key Performance Indicator (KPI) – an approach to helping a business achieve its goals through the development of agreed upon critical performance targets and the measurement of progress towards those targets. It can be, and often is, applied at every level of the business. 

Lean Manufacturing – a manufacturing method that focuses on the elimination of waste within a manufacturing system.  This approach helps determine the right combination of value for the customer needs, and producing that value in the most efficient and effective manner possible. 

Liquidity – The degree to which capital can be turned into cash quickly. 

Lot Number – a number that is used to identify a specific quantity or lot of material from a manufacturer. 

Make-To-Order – a manufacturing process where manufacturing starts after receiving a customer’s order. 

Master Production Schedule – the schedule that a company uses to plan how many items need to be produced within a given timeframe. This time-phased production plan is comprised of forecasts, actual demand and supply and attempts to balance these components taking into account all resources. 

Material control management – associated primarily with moving, storing, and assessing materials used or consumed in manufacturing. Inventory management, quality assurance, production reporting, and cycle counting. Most material master data and inventory movements all fall within the scope of materials management.

Material requirements planning (MRP) – a system used to plan production, scheduling and inventory.  An MRP system ensures that enough materials are available for production, enough finished products are available to deliver to customers, and that the lowest amount of materials and products needed are on hand. MRP also plans manufacturing activities, delivery schedules and purchasing activities.

Materials Management – activities involved with transporting, storing, and evaluating materials used during the manufacturing process. 

Mixed Mode Manufacturers– In discrete manufacturing, the requirement to produce Make to Stock, Make to Order, Configure to Order, and Engine to Order products.  In order to accomplish this an ERP application must provide robust functionality for all modes simultaneously which can prove to be extremely challenging, and often requires creativity in configuration as well as flexibility on the business processes. 

Mobile data collection – a suite of mobile transactions designed for hand-held devices. This allows users to selectively deploy bar-code enabled, hand-held mobile devices. 

Network Administrator– the person who is responsible for managing the computer network of a business, including its security and performance. 

Operations Management – a group who is responsible for overseeing all aspects of a customer’s production resources. 

Opportunity Cost – the loss of potential gain from other alternatives when one choice is made.