Inventory management can be pretty intimidating especially if you’re new in this role. We have come up with 44 commonly used inventory terms that you can familiarize yourself with. Committing these inventory terms to memory and understanding them may help you sound intelligent when discussing inventory management.
3PL = Third-party logistics – is a third-party company that your business hires to manage product transportation, warehouse, customer order fulfilment, or all three.
ABC Analysis – Is an approach for classifying items by dividing them up in three categories.
AIDC = Automatic identification and data collection – is a range of technologies that are used to identify, record, communicate, and verify products, examples are barcodes, QR codes, RFID tags, etc.
B2B – (business-to-business) where businesses make deals with another business
B2C – (business-to-customer) where a customer buys a good from a business
Backorder – A scenario where the product gets all sold out even in the warehouse, making the customer having to wait until it comes back into stock.
Break Bulk – the operation in which an item is broken down into smaller amounts before delivery to customers.
Business Strategy – the strategic concepts ideas, and decision that are made and executed that affect a business as a whole
Carrying Cost – refers to the expenses that come with storing inventory.
Causal Forecast – is an approach that is used to measure the relationship between dependent and independent variables
Consumables – are a group of materials used to affiliate the order through but is not in the final product.
CRM = Customer Relationship Management – is a software that helps manage and maintains current and potential customers.
Cross-Docking – likes delivery from one semi-truck to the next, this system is like a relay with no storage in-between.
Demand – the amount of goods wanted by customers
Destock – reduce by removing the amount of stock held
DSD = Direct-to-store delivery – Companies that use DSD do not wish to use a warehouse or distribution center to house their inventory. Instead products are being shipped straight from supplier to retailer.
EOQ = Economic Order Quantity – is the order size a company should purchase to minimize the storage costs
Electronic Data Interchange – a process of transferring data directly between remote computers
FIFO = First-in-first out – is when the oldest inventory good is shipped out first
Forecast – a future estimation that could happen
Forecast Value – the difference between actual value and forecast value
Holding Cost – the amount it costs to keep units of inventory in stock
Information System – An organizations system that is responsible for the control of information that flows through it
Inventory – good that are in stock
Item Coding – is a way of identifying every single item in inventory
Lead Time – the difference between the time of the initial order and the time of delivery
LIFO = Last-in-last-out – is when the newest inventory good is shipped out last
Lost Sales – when customers do not proceed to checkout because they find a better deal else where
Mass Customization – an operation that requires a mass collection of customized goods
Master Schedule – the detailed schedule of each commodity such as production, inventory, staffing, etc.
Material Requirements Planning (MRP) – is a computer-based software that keeps track/manages the process of planning, production, and storing inventory
Mean Error – the difference between the true value and the measured value
Noise – not normal time series variations
Outsourcing – utilizing a third-party organizations or freelancer to complete external activities
Pipeline Stock – items that are currently in transit from being moved from one place to another
Price – the amount the seller is charging for a product
Replenishment – restocking of units in replacing goods that have been shipped out
Replenishment Rate – the rate material is being added to stock
Seasonal Stock – stocks that stay in operation for a season at a time
Shortage – happens when the demands of the consumer cannot be met because short of stock
Unit – the standard size of an item/good
Unitization – combining different goods into a singular load to ease the shipment
Warehouse – a large location where items/products/goods are held/stored
Work in Process – the goods currently being worked on