ERP Glossary - R: R&D to ROI

R&D (Research and Development)

Research and development is the activity or functional area responsible for envisioning and creating new products; to documenting and protecting intellectual property; and to engage in pure research in the hope of discovering concepts which might eventually result in commercial products.

Rapid Application Development

A programming philosophy in which getting a program or application written and installed very quickly - even with bugs and without understanding all of the final requirements - because it is considered preferable to the longer time needed to figuring everything out in advance, designing, testing, and not releasing to production unless every known problem has been resolved.


References, in ERP, refer to the same basic concept as references on an employment-seeking resume: contact information for people and businesses that will vouch for the performance of a product or service. Checking references - people who are using a system or service - should be a standard part of any ERP purchase decision.

Reorder Point

Reorder point is the mathematical limit which triggers either an internal manufacturing work order or an external purchase order to be created, because inventory has decreased to a calculated level below which operations are adversely impacted.

Requirements Definition

Requirements definition refers to a painfully detailed list of business functions and processes which an ERP system must be able to support. The requirements definition typically accompanies an RFP; the RFP is the *ERP vendor's answer to how well or completely they will be able to meet the requirements.

Retained Earnings

Profits not distributed as dividends. Ideally, there are enough profits to pay a dividend while still retaining enough to invest in future growth.

Return on Sales

A financial measurement which is the percentage calculated by dividing net income by revenue


An inflow of cash (or accounts receivable) resulting from the sales of a product or service.

RFID (Radio Frequency Automatic Identification)

Functionally similar to a bar code, RFID is a small electronic chip with an antennae that stores information which can be read with radio waves. RFID chips are technically superior to bar codes, because they can be read from several feet away, and do not need line of sight with the reader to ensure success. The downside is that RFID is more expensive per unit, so not every tracking application can justify the additional expense.


In process manufacturing, a recipe serves the same function that a bill of materials does in discrete manufacturing, detailing the quantity and components required to produce a batch of something. Recipe management generally provides features to track and maintain more short term, flexible variations to the recipe.

RFP (Request for Proposal)

An RFP is a formal invitation for a vendor to participate in a bidding process when a company intends to purchase a product or service. Vendors are expected to submit a formal business proposal for fulfilling the stated requirements, including price. The winning supplier's RFP will generally serve as the basis for the "statement of work". An RFP typically occurs after an ERP vendor shortlist is created.

RFQ (Request For Quote)

An RFQ is similar to an RFP, but used for less complicated purchasing situations. It does not require any supporting discussion or alternative strategies; it is a straightforward request for the price required to deliver a specific product or service.

RMA (Return Merchandise Authorization)

A Return Merchandise Authorization (RMA, also commonly referred to as an RA, return authorization), is a unique document with an identifying number, that grants customers permission to return goods to a manufacturer. RMAs tend to be more common in B2B relationships than B2C; big retailers have more lenient return policies than most manufacturers.

ROI (Return on Investment)

A standard financial measurement intended to assess the profitability effectiveness of investments, calculated - in general terms - by dividing the expected return (profit, cost savings, etc.) by the financial outlay. ROI can be used to estimate the return on a project or as a measurement of a total organization’s effectiveness.


A routing is a detailed sequential description of the work centers, machines, or assembly steps that one or more raw materials goes through in order to be transformed into a finished or semi-finished product.

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Tom Stephenson

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Tom Stephenson

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