Manufacturing costs are the costs of direct materials, plus the cost of employees directly involved in production, plus manufacturing overhead (such as depreciation of equipment, factory rent and utility bills, maintenance and repair costs, costs of supervisory staff).
For internal management accounts, production costs are usually all costs incurred in the manufacturing facilities, and are sometimes also called manufacturing costs.
US GAAP accounting rules require external financial statements to assign all manufacturing costs to units produced. The resulting unit costs are used for both inventory valuation, and to calculate the cost of goods sold.
The manufacturing cycle time (Throughput Time) assumes an order exists for a product and measures the amount of time from the start of production until the product is shipped.
The cycle time includes actual time for production processing, inspection, material movement and queuing times. Only processing time adds value. The others are non value-add activities that can be reduced or eliminated in continuous improvement, Lean and Six Sigma programs.
A Manufacturing Execution System (MES) is an information system which helps convert production plans for the whole plant into coordinated and tracked operations for each individual production process.
MES encompasses functions as planning and scheduling, production tracking and monitoring, equipment control, maintaining product histories (verifying and recording activities at each stage of production), and quality management.
The growing scope of MES is recognized in development of its name:
(1) to Manufacturing Enterprise System (quite rare),
(2) to MES/MOM, where the MOM refers to the whole scope of Manufacturing Operations Management (quite common).
The first widely used production planning software had the same acronym but with a different meaning. The original MRP meant material requirements planning. This takes target dates for finished products, and works backwards to determine a production plan and raw material purchasing plan.
MRP II (spoken as “MRP-two”) extended MRP by handling at least financial and forecast data, and sometimes engineering and human resources. MRP II translates forecasts into master production schedules; maintains bills of material (lists of product components); creates work orders for each step in the production routing; tracks inventory levels; coordinates materials purchases with production requirements; and generates reports.
The progression from MRP to MRP II continued, and the next generation gained the name ERP (Enterprise Resource Planning).