Manufacturing is one of the fields with the highest terminology density. The following set of concepts groups terms into seven thematic groups. Each concept must correspond to an object, a field, or a rule within a broad, functionally complex system.
3.1 Organization and Resources
Facility/Production Site (Plant): The organizational unit where production actually takes place, with its own inventory, schedule, and planning parameters. The basic framework for planning and costing.
The Production Area (Work Area) is the physical section within the facility; it encompasses one or more work centers.
Work Center: The resource where the operation takes place: machine, workbench, assembly station, or group of workers. Capacity, cost, and scheduling are defined at this level.
A production resource is the machinery, labor, molds, equipment, or energy used by a production center. It is a carrier of capacity and cost.
A production line is a structure consisting of interconnected workstations that generate continuous flow. Speed is determined by the slowest station on the line.
Capacity is the amount a resource can produce in a specific period of time. Theoretical, planned, and actual capacity differ from each other.
Factory Calendar: Definition of working days, holidays, and exceptions. Timeline for all planning calculations.
Shift Model: Defines daily work periods, breaks, and handover schedules.
Production Network: A structure where multiple facilities, warehouses, and subcontracting workshops support each other; modeling which facility produces the material and to which facility it is delivered.
The scope for which the material requirements calculation is performed within the planning area can be defined on a facility, warehouse, or supplier basis.
3.2 Product and Process Definition
A Bill of Materials (BOM) is a structure that defines the components of a product and the quantities in which they are made. It is fundamental to costing, planning, and procurement.
Multi-Level Product Tree: Semi-finished products have their own product trees; allowing the final product to be traced back to the lowest raw material level.
Bill of Materials (BOM) Usage: Different tree views of the same product for engineering, manufacturing, cost, or spare parts purposes.
Alternative Product Tree: A second recipe for the same product, defined according to different raw materials or a different facility.
Phantom Assembly : An intermediate level that is not physically stockpiled, but defined solely for configuration purposes.
Routing: Defining which operations the product will pass through, in what order, and at which work centers.
The operation route can be a single step; it can have its own duration, source, materials, and quality control.
Standard Times: Preparation, processing, waiting, and transportation times. Input for capacity and cost calculations.
A recipe/master recipe is a combined version of the product tree and route in process production; it also includes process parameters.
Production Version: A configuration that matches a specific product tree with a specific route. It allows tracking which batch was produced with which identifier.
Waste and Scrap Rate: Expected loss per operation or component. Used in calculating planned quantities.
By-products and Co-products are other outputs that arise along with the main product; cost allocation requires a special rule.
An Engineering Change Order (ECO) is a documented, dated, and traceable implementation of a change to the product description.
Integrated Product and Process Engineering (IPPE) defines product structure, process structure, and factory structure in a single integrated model. It prevents the duplication of separate trees in highly variable production.
3.3 Planning Concepts
Sales and Operations Planning (S&OP): Reconciling demand, production, inventory, and financial plans in a monthly management cycle.
Demand Management: Combining forecasts and actual orders to create production requirements.
Planning Strategy: The rule that determines whether a product will be produced for stock, to order, or using an assembly-to-order model.
The Master Production Plan (MPS) is a high-level plan that determines how much of each critical product will be produced and when.
Material Requirements Planning (MRP) is a method that calculates when and how much of each material is needed and the difference between current stock levels by opening the product tree.
Gross and Net Requirements : Total requirements minus current inventory and open orders, resulting in the actual requirement remaining.
Lead time is the time it takes for a material to become available from the time it is ordered or manufactured.
Lot Sizing Rule: The size of order to determine the required quantity: fixed quantity, as needed, periodic batch, economic batch.
Safety stock: A buffer amount held against uncertainty.
Demand-Driven Planning (DDMRP) is an approach that replaces classical needs planning with strategically located and dynamically adjusted buffers that manage the flow of operations.
Predictive Planning (pMRP) involves simulating medium-term capacity and material scenarios to identify bottlenecks in advance.
Rough Capacity Planning: A quick assessment at the master plan level of whether critical resources are sufficient.
Detailed Scheduling: Sequencing work orders along machine and time axes; advanced planning that takes constraints into account.
Finite and Infinite Capacity: Whether the plan considers capacity limitations. Infinite capacity is fast but unrealistic.
Planning Forward and Backward: Scheduling forward from the start date or backward from the delivery date.
A bottleneck is a limited resource that determines the overall flow rate. The bottleneck is the main focus of planning.
Setup Optimization: Streamlining the production sequence to reduce setup time during product transitions.
Kanban is a visual and system signaling system that triggers production or replenishment based on consumption.
Availability Check (ATP/CTP): Determining the delivery date by checking stock and capacity at the time of ordering.
3.4 Concepts of Execution
A planned order is a production proposal generated by planning that has not yet been approved.
A Production Order is an approved production instruction that defines the material, operation, quantity, and date. It is a cost aggregate document.
A process order is a type of order used in process production that carries recipes and process instructions.
Order Status: Stages such as Created, Released, Initiated, Partially Completed, Technically Closed, Financially Closed.
Material Staging: The process of moving the necessary materials from the warehouse to the production line for the order.
Backflush: The automatic deduction of material consumption from the recipe along with the production notification, rather than individually.
Production Confirmation: Recording in the system that the operation has been completed, the amount of product and waste, and the time spent.
Goods Receipt: The process of taking the manufactured product into stock and determining its cost.
Batch/Lot: A set of products manufactured under the same conditions; a carrier of traceability.
Serial number is a unique product identifier; the basis for warranty and service traceability.
Rework refers to correcting a product that does not meet specifications; this incurs additional costs and consumes extra capacity.
Downtime refers to a planned or unplanned production interruption; this should be coded along with the cause.
Orderless Production refers to a notification made without opening a work order, referencing a defined production method. It is used in lean and iterative manufacturing.
The Work Order List (Dispatch List) is a sequenced list of tasks displayed to the operator.
The Manufacturing Execution System (MES) is the layer between the field and planning; it provides data collection, monitoring, and operator guidance.
3.5 Performance and Measurement
Overall Equipment Effectiveness (OEE) is the product of availability, performance, and quality ratios. It is a single summary indicator of production.
Availability refers to how much of the planned production time the equipment is actually operational.
Performance Rate: The percentage of the theoretical speed achieved during the run.
Quality Rate: The percentage of the produced quantity that meets the requirements on the first attempt.
Right First Try (RFC) is the percentage of products that pass the test without requiring rework.
Cycle Time: The time it takes to produce one unit.
Production Lead Time is the total time elapsed from the creation of a work order until the product enters the inventory.
Schedule Adherence: The rate at which planned work is completed within the planned timeframe.
Capacity Utilization Rate: The percentage of available capacity that is being used.
Waste and Scrap Rate: The percentage of material that has become unusable.
Productivity (Yield) is the ratio of usable output obtained from input; it is a key indicator in process production.
A scorecard is a management tool that summarizes indicators based on goals, periods, and roles.
The Production Dashboard is a display that provides real-time indicators to users in the field and in management.
3.6 Cost Concepts
Standard Cost: Planned cost calculated at the beginning of the period. A reference point for comparison.
Actual Cost: The cost calculated from actual consumption, time, and expenses.
Cost Components: Direct materials, direct labor, machinery, energy, subcontracting, and general manufacturing expenses.
The Cost Center is the organizational unit where expenses are collected; they are then transferred to the business center as a percentage.
Activity Type and Rate: Unit price based on measures such as machine hours, labor hours, or installation hours.
General Production Costs: The allocation of production costs that cannot be directly traced to the product.
Activity-Based Costing (ABC) is the allocation of overheads based on the proportion of activities that products actually consume.
Cost Accumulator : The object on which costs accumulate: work order, product, period, or process.
Variance Analysis: Breaking down the differences between the standard and the actual output into their causes: quantity, price, efficiency, capacity, installation, waste.
Work-in-Process Valuation: The valuation of unfinished production at the end of the period.
Contribution Margin: Sales revenue minus variable costs; the basis for product and customer decisions.
Byproduct Cost Allocation: The rule for sharing the costs of multiple products resulting from a common process.
3.7 Lean and Continuous Improvement
Lean Manufacturing is an approach that systematically reduces all activities that do not generate value.