ERP Glossary: MRP, MES, BOM and OEE Defined

ERP is software that brings production, inventory, procurement, sales, finance and HR onto a single data model. Its purpose is to end the situation where each department keeps its own spreadsheet: enter one stock movement and cost, the accounting entry and the delivery date all move with it.

MRP is the method that calculates material requirements from the bill of materials together with open orders, stock on hand and lead times. Its output answers two questions: how much of each material is needed, and the latest date it can be ordered. It reruns whenever the production plan changes.

MRP II extends classic MRP with machine capacity, labour and financial impact. MRP asks only whether there is enough material; MRP II also asks whether there is capacity to process it and cash to pay for it. The idea of ERP is a continuation of that widening.

The master production schedule sets which finished goods are produced, in what quantity, in which period. MRP feeds off it: material requirements do not change until the master schedule does. It is where the sales forecast and available capacity meet.

A bill of materials is the hierarchical list defining which components a product is made from and in what quantities. It can be multi-level: a product is built from sub-assemblies, which are built from raw materials. It feeds both the requirements calculation and the standard cost.

An MES executes work orders at shop-floor level and collects data from machines. The ERP decides what will be built; the MES tracks how that build is progressing on the floor. The boundary shifts by product — many ERPs carry shop-floor control themselves.

OEE is availability multiplied by performance multiplied by quality rate. It collapses three losses into one number: did the machine stop, did it run slow, did it produce defects. It is not a target in itself but a way of splitting a loss into where it came from.

Lead time is the elapsed time between placing an order and the goods being available to use. In procurement it is the supplier delivery time; in production it is how long a work order takes to complete. It is the main input to safety stock and reorder point calculations.

A WMS manages physical movement inside a warehouse: where to put stock away, the picking route, dispatch preparation. The ERP knows how much stock exists; the WMS knows where it sits and how to retrieve it. For small and mid-sized warehouses, an ERP inventory module is usually enough.

A lot number identifies a group of goods produced or received under the same conditions; a serial number identifies a single unit. Food and pharmaceuticals track by lot, machinery and electronics by serial. It is the only thing that makes a recall traceable to where the goods went.

These are stock issue methods. FIFO issues the oldest received goods first, LIFO the newest, and FEFO the ones expiring soonest. For products with a shelf life the correct method is FEFO; FIFO can generate waste there by picking older stock that happens to last longer.

Safety stock is the buffer held against variability in demand or lead time. It is not there to cover average consumption but to cover deviation from the average. Too much ties up capital, too little raises stockout risk; the balance is set by a service level target.

Dead stock is inventory that has not moved for a long time and is not expected to be used soon. It occupies space and capital and usually leaves below its book value. Catching it early requires movement speed to be tracked per item and continuously.

SPC compares production measurements against control limits to show whether a process is stable. Its purpose is not to sort out defective units but to reveal a trend before the process leaves its limits. A control chart measures the behaviour of a process, not a product.

CAPA is the process run when a non-conformance is found, to both fix the present problem and stop it recurring. The corrective part repairs what happened; the preventive part addresses the root cause. It is a mandatory element of ISO 9001 and sector quality standards.

A CMMS holds equipment records, maintenance schedules, breakdown history and spare parts in one place. By tying maintenance to a calendar or a running-hours threshold, it aims to move an operation from reacting to failures towards planned maintenance.

CRM software manages customer records, sales opportunities, quotes and the after-sales relationship. The difference between CRM inside an ERP and a standalone one is where the information comes from: inside an ERP, stock and production capacity are on the screen while the quote is written.

A current account is the running record of what is owed to and by a customer or supplier. Invoices, collections and payments accumulate in the same account and produce the balance and its ageing. It is the base input to any cash flow projection.

Three-way matching compares the purchase order, the delivery note and the invoice on quantity and price. When the three disagree the invoice does not proceed to payment and a discrepancy list is raised. It is the control that catches an unordered line or an off-contract price before money moves.

An e-Fatura is an invoice issued in the format set by Turkey’s Revenue Administration and delivered electronically. It is not a digital copy of a paper invoice but a distinct legal document. It is issued through an authorised integrator or the tax authority portal; the ERP supplies the data.

An e-İrsaliye is the electronic form of a dispatch note, documenting the physical movement of goods. Unlike an e-Fatura it is a logistics rather than a commercial document: it records when goods were dispatched and to where. It is mandatory above a defined turnover threshold.

KVKK is the law governing the processing of personal data in Turkey. In an ERP, employee records, customer contact details and supplier contacts are all personal data; why they are processed, how long they are kept and who they are shared with must be documented.