Do you know your COGS from your COGM? Or your MoQ from your CoQ?
In manufacturing, getting a handle on industry-specific terminology is essential for business owners and sector newcomers. Manufacturing is littered with jargon that can be opaque, posing challenges for those within and new to the industry in understanding the intricacies of manufacturing operations, technology, and strategies.
To bridge this gap, we’ve carefully curated an extensive “Manufacturing Glossary,” aimed at demystifying the sector’s language.
This glossary spans a broad spectrum of concepts, from production techniques and technological advancements to MRP (Material Requirements Planning) systems, ensuring you have the requisite knowledge to “talk the talk” to your boss (or in the boardroom!).
The manufacturing landscape is constantly evolving, so this is an open invitation to you to contribute to this glossary.
Should you come across essential terms you believe we need to look into or find any definitions you disagree with, we welcome your suggestions and insights. Email your notes to hello@flowlens.com and add “MFG Glossary” in the subject line.
The Dictionary of Modern Manufacturing
3D Printing
Creating three-dimensional objects from a digital file using additive processes where material is laid down in successive layers to build the final object.
4M (Man, Machine, Material, Method)
A framework for analysing and improving manufacturing processes by considering the four key elements: man, machine, material, and method.
5 Whys
A problem-solving method that helps identify a problem’s root cause by repeatedly asking the question “Why?”.
5S
A workplace organisation method that uses five Japanese words: seiri, seiton, seiso, seiketsu, and shitsuke, transliterated into sort, set in order, shine, standardise, and sustain.
6Rs of Sustainability
Refers to Reduce, Reuse, Recycle, Recover, Redesign, and Remanufacture – principles aimed at minimising waste and promoting sustainable practices in manufacturing.
ABC Analysis
A method of categorising inventory items into three categories (A, B, and C) based on their value to the company and to prioritise management focus.
Accounts Package
Software used to manage and process accounting transactions within functional modules such as accounts payable, accounts receivable, journal, general ledger, payroll, and trial balance.
Additive Manufacturing
A process of making three-dimensional solid objects from a digital file, enabling the creation of complex shapes using less material than traditional manufacturing methods.
After Sales Service
Support provided after a product has been sold, including maintenance, repair services, and assistance with the product’s use.
Agile Manufacturing
A method emphasising flexibility and rapid response to changes in demand, enabling manufacturers to adapt to market needs quickly.
Assembly to Order (ATO) / Assemble To Order
A production strategy where components are assembled into finished products after an order is received, allowing for customised products with shorter lead times.
Automation
The technology by which a process or procedure is performed with minimal human assistance, increasing efficiency and consistency in manufacturing.
B2B (Business to Business)
Transactions or interactions that occur between two companies, as opposed to between a company and individual consumers (B2C).
Batch Production
A manufacturing technique where products are produced in groups or batches, with each batch going through the entire production process before moving on to the next stage.
Benchmarking
The practice of comparing business processes and performance metrics to industry bests and best practices from other companies.
A comprehensive list that outlines all the raw materials, parts, components, and assemblies required to produce a finished product, often structured in hierarchical levels.
Bill of Operations
A detailed list of all the operations required to produce a finished product, including equipment, labour, and processes, typically used in manufacturing planning.
Business Process Mapping
A tool used to visually depict the steps involved in a business process, facilitating analysis and process improvement.
CAD (Computer-Aided Design)
The use of computer software to create, modify, analyse, or optimise a design, facilitating the creation of detailed 2D or 3D models.
CAM (Computer-Aided Manufacturing)
The application of computer software to control machine tools and related machinery in the manufacturing of workpieces, improving efficiency and precision.
Capacity Management
The process of managing a business’s resources to ensure maximum production efficiency and meet production goals.
Capacity Planning
The process of determining the production capacity needed by an organisation to meet changes in product demand.
Circular Economy
An economic system aimed at eliminating waste and the continual use of resources, promoting recycling and reusability.
CNC (Computer Numerical Control)
The automated control of machining tools and 3D printers using a computer, where software pre-programmed with an object’s design dictates the movement of the machinery.
COGM (Cost of Goods Manufactured)
Represents the total production cost of goods completed during a specific period, including costs associated with materials, labour, and overhead used in the manufacturing process.
COGS (Cost of Goods Sold)
The direct costs attributable to the production of the goods sold by a company, including materials and labour costs, but excluding indirect expenses such as distribution costs.
An ongoing effort to improve products, services, or processes over time, with the aim of increasing efficiency and effectiveness.
Continuous Production
A manufacturing process where materials are continuously fed into the production system, and products are produced without interruption, suited for high-volume, standardised product manufacturing.
Cost of Quality (CoQ)
The sum of costs incurred in maintaining acceptable quality levels plus the costs resulting from providing poor quality products or services, including prevention, appraisal, and failure costs.
CRM (Customer Relationship Management)
A system for managing a company’s interactions with current and potential customers, using data analysis about customers’ history with a company to improve business relationships.
CRP (Capacity Requirements Planning)
A process used to determine the amount of labour and machine resources needed to meet the production demand.
Customisation
The process of modifying a product or service to meet the specific needs or preferences of individual customers, often seen in engineer-to-order or assemble-to-order manufacturing environments.
DDMRP(Demand Driven Material Requirements Planning)
An inventory management strategy that positions inventory based on actual demand signals rather than forecasts.
Demand Forecasting
The process of estimating the quantity of a product or service that consumers will purchase in the foreseeable future.
Demand Planning
The process of forecasting customer demand to make informed production and inventory management decisions, aiming to balance supply and demand efficiently.
Digital Twin
A virtual representation of a physical object or system across its lifecycle, used for simulation, analysis, and control.
Downtime Tracking
The process of recording and analysing periods when production is not occurring, often due to machine maintenance, failures, or scheduling issues, aiming to minimise such occurrences.
E-commerce Integration
The coordination between a company’s e-commerce site and back-end accounting and inventory (ERP) system, allowing for real-time updates to inventory, pricing, and orders.
E-procurement
The business-to-business purchase and sale of supplies and services through the Internet and other information and networking systems.
EAM (Enterprise Asset Management)
The process of managing the lifecycle of physical assets to maximise their use, improve quality and efficiency, and reduce maintenance costs.
A manufacturing process designed for highly customised or complex projects, where products are engineered, designed, and built to specific customer specifications.
ERP (Enterprise Resource Planning)
Software systems that manage core business processes, such as finance, HR, manufacturing, supply chain, services, procurement, and others, in an integrated manner.
FIFO (First In, First Out)
An inventory management strategy where the oldest stock (first in) is sold first (first out), to maintain inventory freshness.
FMEA (Failure Modes and Effects Analysis)
A systematic, proactive method for evaluating a process to identify where and how it might fail and assessing the relative impact of different failures.
Forecasting
The process of making future predictions based on past and present data and trend analysis.
Gantt Chart
A type of bar chart that illustrates a project schedule, showing the start and finish dates of a project’s various elements and summary elements.
GMP (Good Manufacturing Practice)
Regulations that require manufacturers, processors, and packagers of drugs, medical devices, some food, and blood to take proactive steps to ensure their products are safe, pure, and effective.
Heijunka (Production Leveling)
A technique used to reduce business and manufacturing variability through the production of goods at a constant rate, so that further production is not needed.
IoT / The Internet of Things
The networking of various devices, machines and equipment which relay information across the internet or other networks.
Industrial IoT (IIoT)
The use of Internet of Things technology in manufacturing, enabling the acquisition and accessibility of far greater amounts of data, at far greater speeds, and far more efficiently than before.
The supervision over the supply, storage, and accessibility of items in order to ensure an adequate supply without excessive oversupply.
The supervision of non-capitalized assets, or inventory, and stock items, ensuring that the right amount of each item is held at the right time to meet demand.
Inventory Optimisation
The process of having the right inventory, at the right levels, in the right places, at the right time, and at the right cost and price.
ISO 9001
An international standard that specifies requirements for a quality management system (QMS), helping organisations ensure they meet customer and other stakeholder needs within statutory and regulatory requirements related to a product or service.
Jidoka (Automation with a Human Touch)
A manufacturing process that integrates human intelligence with machinery to automate tasks, ensuring quality and efficiency by automatically stopping when issues are detected.
JIT (Just-In-Time)
An inventory strategy that strives to improve a business’s return on investment by reducing in-process inventory and associated carrying costs.
A record of the work to be performed on a particular job, detailing tasks, materials needed, and time allocations for production processes.
Just-In-Sequence (JIS)
A manufacturing process where the assembly line is supplied with parts exactly when they are needed and in the order they are needed, reducing inventory levels and increasing efficiency.
Just-In-Time (JIT) Production
A strategy that strives to improve a business’s return on investment by reducing in-process inventory and associated carrying costs, delivering materials just as they are needed.
Kaizen
A continuous improvement strategy that involves employees at all levels of an organization working together to achieve regular, incremental improvements to the manufacturing process.
Kanban
A scheduling system for lean manufacturing and just-in-time manufacturing (JIT), which signals the need to move materials within a production facility or to move materials from an outside supplier into the production facility.
Kitting
The process of grouping, packaging, and supplying multiple individual items together as one unit, which then becomes a single inventory item, often used to streamline assembly and shipping processes.
KPI (Key Performance Indicator)
A measurable value that demonstrates how effectively a company is achieving key business objectives.
Lead Time
The amount of time that elapses between the start and completion of a process, such as the time from order placement to delivery.
Lean IT
The application of Lean manufacturing principles to the development and management of information technology (IT) products and services.
An approach to manufacturing that focuses on minimizing waste within manufacturing systems while simultaneously maximizing productivity.
Lean Six Sigma
A methodology that combines the waste reduction principles of Lean Manufacturing with the process improvement tools of Six Sigma to eliminate waste and increase efficiency.
LIFO (Last In First Out)
The opposite of FIFO – when most recently arrived / manufactured stock is used or sold first.
Make to Order (MTO)
A manufacturing strategy where production starts only after a customer’s order is received, allowing for customisation of products to customer specifications.
Make-to-Stock / Manufacture to Stock (MTS)
A manufacturing strategy where products are produced based on demand forecasts and stocked in anticipation of customer orders, aiming to quickly fulfill customer demand from existing inventory.
Manufacturing KPIs
Key Performance Indicators in manufacturing measure the effectiveness and efficiency of production processes, tracking performance in areas such as quality, cost, delivery, and safety.
Manufacturing Scheduling Strategies
Approaches used to allocate production resources, sequence operations, and prioritise production orders to optimise manufacturing processes and meet delivery deadlines.
Mass Customisation
The process of producing goods and services to meet individual customer’s needs with near mass production efficiency.
Master Production Schedule (MPS)
A plan for individual commodities to be produced in each time period, serving as a bridge between the business plan and the production plan by translating forecasted demand and order requirements.
MES (Manufacturing Execution System)
A control system for managing and monitoring work-in-process on a factory floor, ensuring effective execution of manufacturing operations.
MoQ (Minimum Order Quantity)
The smallest quantity of a product that a supplier is willing to sell, ensuring that the production costs are covered.
MRP (Material Requirements Planning)
A system for calculating and managing inventory and production planning, ensuring materials are available for production and products are available for delivery to customers.
MRP II (Manufacturing Resource Planning) / MRP2
An expanded approach to production resource planning, including materials, labour, and machine capacity planning.
Muda (Waste)
A core concept of Lean manufacturing, referring to any activity that consumes resources without adding value in the eyes of the customer.
Non-Value-Added Activities
Processes or actions that take time, resources, or space but do not add any real value to the product or service.
OEE (Overall Equipment Effectiveness)
A metric that identifies the percentage of manufacturing time that is truly productive, combining measures of availability, performance, and quality.
OPEX (Operational Expenditure)
The ongoing costs for running a product, business, or system, as opposed to capital expenditures (CAPEX) which are the costs of developing or providing non-consumable parts for the product or system.
Order Management
The administration of business processes related to orders for goods or services, encompassing order entry, administration, and fulfillment.
Outsourcing
The practice of transferring portions of work to outside suppliers rather than completing it internally, often to cut costs or access specialized expertise.
PDM (Product Data Management)
The use of software to manage product data and process information in a single, central system, improving the organisation and efficiency of product information management.
Performance Metrics
Quantifiable measures used to gauge a company’s performance over time, including production efficiency, quality levels, and customer satisfaction.
PLM (Product Lifecycle Management)
The process of managing the complete lifecycle of a product from initial conception, through design and manufacture, to service and disposal.
Poka-Yoke
A Japanese term for “mistake-proofing,” it involves techniques that help to eliminate defects by preventing, correcting, or drawing attention to human errors as they occur.
Process Optimization
The discipline of adjusting a process to optimize some specified set of parameters without violating some constraint.
Process Reengineering
The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance such as cost, quality, service, and speed.
Procurement
The process of finding, agreeing to terms, and acquiring goods, services, or works from an external source, often via a tendering or competitive bidding process.
Production Capacity
The maximum amount of work that a manufacturing facility can complete in a given period under normal operating conditions, determining the scale of output possible.
Production Control
The systematic planning, coordination, and direction of all manufacturing activities and resources to achieve production efficiency and meet specified production targets.
Production Planning
The planning of production schedules, work assignments, machine requirements, and materials needed to meet production targets efficiently and effectively.
Production Planning with Excel
Utilising Microsoft Excel for scheduling production processes, tracking inventory levels, and managing resources, offering a flexible and accessible tool for small and medium-sized manufacturers.
Production Routing
The path that a production process takes through the sequence of operations and machines needed to create a product, detailing the flow of materials and work.
Production Scheduling
The allocation of resources, planning of production processes, and arrangement of manufacturing tasks, with detailed timelines to ensure that production goals are met.
Productivity
The ratio of the output of goods and services to the input of resources used in the production process, a measure of efficiency.
Push System vs. Pull System
Push systems initiate production based on forecasted demand, while pull systems are driven by actual demand, with production closely aligned to specific customer orders.
Quality Assurance (QA)
A way of preventing mistakes and defects in manufactured products and avoiding problems when delivering solutions or services to customers.
Quality Control
The process by which entities review the quality of all factors involved in production, focusing on identifying defects in the actual products produced.
Quality Management
The act of overseeing all activities and tasks needed to maintain a desired level of excellence, including the determination of a quality policy, creating and implementing quality planning and assurance, and quality control and quality improvement.
RACI Chart (Responsible, Accountable, Consulted, Informed)
A matrix used to describe the roles and responsibilities of people in a project or process, ensuring clarity and alignment in teams.
Rework
The process of correcting or redoing products or services that are defective or not up to standards.
RMA (Return Merchandise Authorisation)
A part of the process of returning a product to receive a refund, replacement, or repair during the product’s warranty period.
SaaS (Software as a Service)
A software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the internet.
Safety Stock
Additional inventory that is kept to prevent stockouts typically caused by fluctuations in demand or supply chain disruptions.
Sales Funnel
A model that represents the customer’s journey from awareness of a product or service to the purchase decision, highlighting stages like interest, evaluation, and commitment.
A visual representation of where prospects are in the sales process, from initial contact to the final sale, illustrating the journey of potential sales.
SCM (Supply Chain Management)
The management of the flow of goods and services, involving the movement and storage of raw materials, of work-in-process inventory, and of finished goods from point of origin to point of consumption.
SCM Software (Supply Chain Management Software)
A broad range of software tools used in executing supply chain transactions, managing supplier relationships, and controlling associated business processes.
Six Sigma
A set of management techniques intended to improve business processes by greatly reducing the probability that an error or defect will occur.
Six Sigma DMAIC
A data-driven quality strategy for improving processes, standing for Define, Measure, Analyze, Improve, and Control.
SKU (Stock Keeping Unit)
A unique identifier for each distinct product and service that can be purchased in business, aiding in inventory management.
SKU Management
The process of monitoring and managing stock-keeping units within a company’s inventory, ensuring optimal stock levels and product availability.
SPC (Statistical Process Control)
A method of quality control which employs statistical methods to monitor and control a process, helping to ensure that it operates at its fullest potential.
Supply Chain Management
The handling of the entire production flow of a good or service — starting from the raw components all the way to delivering the final product to the consumer.
Supply Chain Optimisation
The application of processes and tools to ensure the optimal operation of a manufacturing and distribution supply chain, including materials sourcing, production, and logistics.
Sustainability
The practice of manufacturing goods in a way that is environmentally sustainable and responsible, minimizing environmental impact and conserving energy and natural resources.
Takt Time
The maximum amount of time in which a product needs to be produced in order to satisfy customer demand.
Theory of Constraints
A management approach that emphasizes the importance of identifying the bottleneck or constraint that limits the output of a process and systematically improving it.
Throughput Time
The total time taken to manufacture a product, from the start of production to the finished goods being ready for delivery, including processing, inspection, and queue times.
TQM (Total Quality Management)
An organisation-wide effort to infuse quality into every activity in a company through continuous improvement.
Uptime
A measure of the time a machine, system, or factory has been working and available for use, indicating reliability and effectiveness.
Value Stream Mapping
A lean-management method for analyzing the current state and designing a future state for the series of events that take a product or service from its beginning through to the customer.
Vendor Managed Inventory (VMI)
A supply chain initiative where the supplier is responsible for maintaining the client’s inventory levels, improving supply chain efficiency.
WMS (Warehouse Management System)
A software solution that offers visibility into a business’s entire inventory and manages supply chain fulfilment operations from the distribution centre to the store shelf.
Work Order
A task or job for a customer that can be scheduled and assigned to someone, typically specifying the product, quantity, and due date, as well as other requirements.
Work-in-Progress (WIP) Tracking
The monitoring of goods that are in the production process but are not yet complete, an important aspect of inventory management.
X-efficiency
The effectiveness with which a given set of inputs are used to produce outputs, when the inputs are not used in a technically efficient way.
Yield Management
A variable pricing strategy based on understanding, anticipating, and influencing consumer behavior to maximise revenue or profits from a fixed, perishable resource.
Zero Defects
A management tool aimed at the reduction of defects through prevention and the goal of achieving a defect-free production process.
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