Discover the essential ERP terms for Manufacturers
ERP systems come with their own terminology, and if you’re new to them, it can sometimes feel like you’re learning a whole new language.
If you work in manufacturing or operations, understanding these key concepts will make conversations easier, improve decision‑making, and help you use your system more effectively.
In this article, we break down the core manufacturing and operations terms you need to know!
Material Requirements Planning (MRP)
Material Requirements Planning (MRP) is a material planning tool used in the production process.
An MRP system, such as Sicon MRP, helps your business to manage inventory and production by using data from your current inventory levels, production schedule, and demand forecasts to determine what materials are required.
MRP systems calculate exactly how much of each raw material is required, check what’s already sitting in inventory, and figure out what needs to be ordered. By calculating the materials required for production, this helps ensure timely ordering and delivery of components, avoiding under or overstocking.
Manufacturing Resource Planning (MRP II)
Manufacturing Resource Planning (MRP II) is a software-based system that operates on a broader scale than Material Requirements Planning.
While Material Requirements Planning (MRP) focuses on materials, MRP II zooms out to manage the entire manufacturing operation. That means factoring in labour, machine capacity, scheduling, financial planning, and sales forecasts – all in one connected system.
A helpful way to think about it is MRP answers “what materials do we need?”, and MRP II answers “what materials, people, machines, time, and money do we need, and how do all those fit together?”
Work in Progress (WIP)
Work in Progress, or WIP, refers to partially completed goods in manufacturing. WIP is anything that’s currently being made but isn’t finished yet.
It includes the raw materials, labour, and overhead costs incurred for products that are at various stages of the production process. Monitoring WIP is important because it not only shows how efficiently your factory moves materials through production, but also helps you accurately understand your financial position.
Routings
Routings are the steps or operations required to manufacture a product. They lay out the sequence of steps a product needs to go through, including which machines or workstations it visits, in what order, how long each step should take, and which tools or workers are involved.
Routings are a key factor in working out scheduling and capacity in production, because you can’t plan when something will be done if you don’t know the steps it has to go through first.
Capacity Planning
Capacity planning is a strategic process to ensure you have adequate production resources to meet your current and future demand.
For example, do you have enough machine or labour hours to meet the demand you’re expecting? Capacity Planning helps you decide when to invest in new equipment, hire new staff, or push back a delivery date.
ERP systems, like Sage 200 and Sage Intacct, have capacity planning and resource management features embedded in the software, which help manufacturers to better manage resources, track workloads and prevent bottlenecks.
Key Performance Indicators (KPIs)
Key Performance Indicators, or KPIs, are the metrics used to monitor performance. Common KPIs used in manufacturing include:
- Production volume
- Production costs
- Downtime
- Throughput
- On-time delivery rate
Tracking the right KPIs lets you monitor progress, quickly spot issues, and provides you with measurable evidence of whether your business is achieving its goals. Plus, analysing trends helps leadership teams determine whether current strategies are working.
If you’re in manufacturing or operations and work with an ERP system like Sage 200 or Sage Intacct, understanding these key terms will help you get more value from your system and make smarter decisions for your business.
If you feel we might be able to help support you with your ERP system, please call us on 01332 959008 or visit our contact page here.
Written by: Lucy Andrews, Marketing and Content Assistant at PKF Smith Cooper Systems
Reviewed by: Julie Read, Marketing Manager at PKF Smith Cooper Systems
Last Updated: August 2026
