Ontology application is widely used for different purposes and areas. This paper presents the difference between taxonomy and ontology, the steps of ontology development and an example of ontology development for raw materials management. Raw materials management is a process that is considered to be part of the overall supply chain management process and focuses on the tasks of securing the highest quality materials at the lowest rates possible, while also working within the company structure to make sure those materials provide the best possible benefit within the production process.