Bill of Materials (BOM)
A comprehensive list of the raw materials, ingredients, packaging components, and quantities required to manufacture a finished product. In food manufacturing, BOMs must often account for yield loss, moisture loss, and variable ingredient substitutions.
Co-Packer (Contract Manufacturer)
A company that manufactures and packages foods or similar products for their clients. Many small to mid-size food brands use co-packers to scale production without investing in their own manufacturing facilities.
Cost of Goods Sold (COGS)
The direct costs attributable to the production of the goods sold by a company. For food brands, true COGS includes the cost of raw materials, packaging, direct labor, co-packer fees, inbound freight, and the financial impact of yield loss during production.
FSMA Rule 204
Section 204 of the FDA Food Safety Modernization Act, which establishes additional traceability recordkeeping requirements for persons who manufacture, process, pack, or hold foods included on the Food Traceability List (FTL).
Lot Traceability
The ability to track the movement of a specific batch (lot) of raw materials, work-in-progress, or finished goods through every step of the supply chain. In food manufacturing, this requires tracing a finished product back to its raw material origins, or tracing a raw material forward to every finished product it was used in.
Material Requirements Planning (MRP)
A production planning and inventory control system used to manage manufacturing processes. MRP ensures that materials are available for production, products are available for delivery to customers, and the lowest possible material and product levels are maintained in store.
Organic Mass Balance
The process of reconciling the volume of certified organic raw materials purchased against the volume of organic finished goods sold, accounting for production usage and yield loss. Required by the USDA National Organic Program (NOP) to prove that conventional ingredients are not being substituted for organic ones.
Organic System Plan (OSP)
A detailed, written management plan that outlines the practices and procedures a certified organic operation will use to comply with USDA organic regulations. It serves as the foundational document for organic certification and must be updated annually.
Work in Progress (WIP)
Partially finished goods awaiting completion. In food manufacturing, this could be a blended bulk ingredient waiting to be packaged, or a fermented product resting before final processing. Tracking WIP is critical for accurate inventory valuation and lot traceability.
Yield Loss
The difference between the theoretical amount of finished product a batch of raw materials should produce and the actual amount produced. Common in food manufacturing due to moisture loss (e.g., baking, freeze-drying), prep waste (e.g., peeling, coring), and processing inefficiencies.
ERP (Enterprise Resource Planning)
A category of software that integrates core business processes — purchasing, production, inventory, sales, and finance — into a single system. For food manufacturers, ERP replaces disconnected spreadsheets with a unified operational data model.
CPG Brand (Consumer Packaged Goods)
A company that manufactures and sells packaged goods sold to consumers through retail, ecommerce, or foodservice channels. CPG brands typically manage raw material sourcing, production (in-house or via co-packers), inventory, and distribution.
USDA Organic Certification
A certification issued by USDA-accredited certifying agents that verifies a food product meets the requirements of the National Organic Program (NOP). Certified organic handlers and processors must maintain lot traceability, mass balance records, and an approved Organic System Plan.
Purchase Order (PO)
A formal document issued by a buyer to a supplier authorizing the purchase of specific goods at agreed quantities and prices. In food manufacturing, purchase orders are the starting point for lot traceability — linking incoming raw materials to specific supplier transactions.
Finished Goods
Products that have completed the manufacturing process and are ready for sale. In food manufacturing, finished goods inventory must be tracked at the lot level to support recall readiness, COGS calculation, and organic certification compliance.
Landed Cost
The total cost of a product after all expenses required to bring it to its destination are included — raw materials, freight, customs duties, co-packer fees, and any handling charges. Landed cost is the foundation of accurate COGS for food brands sourcing internationally.
Demand Planning
The process of forecasting customer demand for finished goods in order to plan production runs, raw material purchasing, and inventory levels. Effective demand planning prevents both stockouts and excess inventory, which is especially critical for food brands with shelf-life constraints.