Manufacturing ERP Glossary: Terms Every Factory Owner Uses
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By
TranZact Solutions Team
· Published
Manufacturing ERP glossary: how to use this page
A manufacturing ERP glossary explains the words you meet when you run a factory on software. These include BOM, MRP, work order, GRN, job work, WIP and e-way bill. Each term below has a one-line meaning in plain words and a link to a full guide written for Indian manufacturers. Terms are grouped by where they show up in your factory: stores, production, purchase, sales and dispatch, and costing.
Jump to: Inventory · Production · Purchase and job work · Sales and GST · Costing · ERP software
Term | Full form | What it means |
|---|---|---|
BOM | Bill of Materials | Parts and quantities needed to make one unit |
MRP | Material Requirements Planning | What to buy and when, from orders and BOMs |
PO | Purchase Order | Your written order to a supplier |
GRN | Goods Receipt Note | Stores record of material received against a PO |
WIP | Work in Process | Material started on the floor but not finished |
IRN | Invoice Reference Number | The number that registers a GST e-invoice |
Inventory and stock terms
Opening stock and closing stock: stock at the start and end of a period. See how the two differ.
Stock levels: the minimum, maximum, reorder and safety stock for each item.
Raw materials, semi-finished goods and finished goods: inputs, part-made items, and goods ready to sell.
Intermediate goods: items made or bought to go into another product.
WIP inventory: material issued to production that is not yet finished.
ABC, FSN, VED and HML analysis: ranking items by value, movement, criticality and unit price.
EOQ and MOQ: the order size with the lowest total cost, and a supplier's smallest accepted order.
Holding costs and slow-moving inventory: the cost of keeping stock, and stock that rarely gets used.
Stock reconciliation: matching system stock to a physical count. A gap is a stock discrepancy, fixed by an inventory adjustment.
Inventory write-down: lowering the book value of stock that has lost value.
TranZact's inventory module covers stock in, bin card, issue, multi-store, reorder and AI stock alerts.
Production and planning terms
BOM: the parts, materials and quantities needed to make one unit.
MRP: working out what to buy and when, from orders, BOMs and stock.
MPS (master production schedule) and aggregate planning: what you will make and when, item by item or in broad totals.
Work order: an instruction to the shop floor to make a set quantity.
Routing: the steps and machines a product passes through, set during process planning.
Capacity planning: checking whether machines and people can handle the planned load.
Line balancing and cycle time: spreading work evenly across stations, and the time to finish one unit.
ATO and JIT: assembling after the order arrives, and bringing in material only when needed.
Batch production vs job order production: a set quantity at a time, versus making to each order.
Production planning and control: deciding what to make, then checking it gets made on plan.
TranZact is manufacturing AI software trusted by 10,000+ manufacturers. Its production module covers multi-level BOM, work orders, process routing, sub-contracting and production costing. The MRP engine runs through your orders and BOMs, then tells you what to buy and when.
Purchase, stores and job work terms
Indent: an internal request for material to be bought.
RFQ (request for quotation): asking suppliers for price and delivery dates.
Purchase order: your written order to a supplier. See PO vs proforma invoice.
GRN: the stores record of what arrived. Use our GRN format template.
Warehouse receiving: unloading, counting and checking material before it enters stock.
Purchase invoice and purchase return: the supplier's GST bill, and material sent back to the supplier.
Job work (subcontracting): sending your material to another unit for a process, then taking it back.
ITC-04: the GST form for goods sent to and received back from job workers.
In TranZact's purchase module, the MRP report, indent, RFQ, PO and GRN run as one flow. See our guide to purchase management.
How a purchase moves in TranZact
MRP report shows what to buy
Indent raised for the material
RFQ sent to suppliers
PO issued to the chosen supplier
GRN records what arrived
Sales, dispatch and GST document terms
Quotation: your price offer to a customer.
Proforma invoice: an advance bill before supply, not a GST tax invoice.
Tax invoice vs bill of supply: a tax invoice charges GST; a bill of supply does not.
Delivery challan: moves goods without a sale, such as for job work. Use our challan format; see challan vs invoice.
Delivery note: a list of goods delivered, signed by the buyer.
E-way bill: the GST document needed when you move goods above a set value.
E-invoice (IRN): a B2B invoice registered on the government invoice portal, which gives it an IRN.
GST state code: the two-digit code at the start of a GSTIN.
TranZact generates the e-way bill from the GST invoice, with e-invoice (IRN) in the same flow, on all plans.
Costing and accounts terms
Direct costs and indirect costs: costs tied to one product, like material, and shared costs, like factory rent.
Prime vs conversion cost: direct material plus direct labour, versus direct labour plus factory overhead.
Product costs vs period costs: costs held in stock until sale, versus costs charged when they occur.
Process costing: cost per unit worked out stage by stage.
Cost centre: a part of the business whose costs you track separately.
Incremental cost: the extra cost of one more order or batch.
Cost of revenue: the total cost of making and delivering what you sold.
Sundry debtors and sundry creditors: customers who owe you, and suppliers you owe.
TranZact does not replace your accounting. Accounts stay in Tally while operations run in TranZact, with a one-way sync and no double entry.
Terms to know before your ERP demo
BOM and multi-level BOM
Stock levels and reorder
PO, GRN and purchase invoice
Job work and ITC-04
Delivery challan and e-way bill
E-invoice (IRN)
ERP and factory software terms
ERP: one system for sales, purchase, inventory, production and accounts. See key ERP features.
Cloud ERP: ERP used in a browser or app, with data on the vendor's servers.
ERP implementation: setting up the software, moving data and training team members. See common challenges.
MES (manufacturing execution system): software that tracks shop-floor work as it happens.
PLM and BI: managing product design data, and reports built from operating data.
AI ERP: software where AI reads, matches and logs entries people used to type.
Paper to digital: turning register entries into system entries.
Same short form, different meaning
MRP: in a factory, Material Requirements Planning. On a product label, Maximum Retail Price.
BOM: in a factory, Bill of Materials. In banking, Bank of Maharashtra.
GRN: Goods Receipt Note and Goods Received Note name the same stores document.
Questions people ask about ERP terms
What is the definition of ERP?
ERP means enterprise resource planning. It runs sales, purchase, inventory, production and accounts on one system, so everyone sees the same numbers.
Is Excel an ERP system?
No. Excel only holds what someone types in. It does not link an order to the BOM, stock and purchase.
What does GRN stand for?
GRN stands for goods receipt note, also called goods received note.
What is a goods receipt note (GRN)?
It is the record your stores makes when material arrives. It lists the PO number, items, quantity received and quantity rejected.
What is the difference between GRN and invoice?
Your stores makes the GRN to record what arrived. The supplier sends the invoice to ask for payment. Match the PO, GRN and invoice before you pay.
What is a multi-level bill of materials?
It is a BOM where some parts have their own BOMs. A pump BOM may list a motor assembly with its own parts list. TranZact supports multi-level BOM.
From terms to a running factory
Compare software, starting with the best manufacturing ERP for MSMEs and how to choose ERP for a small business. Then read about production management software and when you've outgrown Tally. Plans are on our pricing page.
Want to see your own BOMs, GRNs and e-way bills in one system? Don't be the bottleneck. Become the AI-Run Factory.
