Inventory Terms

ABC Analysis – a method of classifying inventory items depending on use and value

Aggregate Plans – show the overall production planned for classes of products in a given period of time

Agile Strategy – aims at providing quality customer service by reacting quickly and in the right way to changing circumstances

Andon – a mechanism that shows when a process is operating normally, and when it develops problems

B2B – (business-to-business dealings) where a business buys goods from another business

B2C – (business-to-customer dealings) where a final consumer buys a good from a business

Backorder – a situation where the demand of a customer cannot be met from stock, but the customer waits for the good to come into stock

Batching Rule – a rule for minimizing the MRP costs by making larger batches form several small ones

Bill of Materials – a list of all materials that make up a certain product, and the order in which the materials are used

Break Bulk – the process in which an item is broken down into smaller amounts before delivery to customers

Business Strategy – the strategic ideas and decisions that affect a business as a whole

Capacity – a process’s maximum throughput in a given time

Causal Forecast – an approach that uses a known relationship to estimate the value of a variable from known values of another

Closed Loop MRP – an MRP version that includes feedback to ensure a proposed schedule does not cause problems with, e.g. capacity

Co-Managed Inventory – a situation where stocks are jointly managed by an organization and a third party

Consumables – sets of materials which are not part of the final product but are needed to support operations

Control System – a scheduling system segment that scrutinizes progress and ensures everything is going according to plan

Cross-Docking – links delivery and supply such that arriving goods are taken straight to loading area ready for delivery to customers

Customer – anyone that creates demand for goods

Demand – amount of goods wanted by customers

Destock – reduce amount of stock held

Economic Order Quantity – order size minimizing simple inventory system costs

Electronic Data Interchange – a way of transferring data directly among remote computers

Error – difference between forecast value and actual value

FIFO – first-in-first-out convention of valuing stock

Forecast – estimation of what could happen in the future

Forecast Value – difference between forecast value and actual value

Holding Cost – the cost of keeping the unit of an item in stock for specific time

Information System – the system responsible for the control of information flow throughout an organization

Inventory – list of goods in stock

Item – a single article held in stock

Item Coding – an arrangement for giving an identified tag to every package of items moved

Judgmental – a forecasting method that uses human knowledge and skill rather than more formal means

Lead Time – the difference between time of order and time of delivery

LIFO – last-in-first-out stock valuing convention

Lost Sales – when customer withdraws their demand because it cannot be met

Lot Sizing – making one large order form several small ones for MRP

Mass Customization – an operations approach that combines the flexibility of customized goods with the benefits of mass production

Master Schedule – a timetable for individual commodity production

Material – anything kept in stock

Material Requirements Planning (MRP) – demand method whereby the master schedule is exploded to find demand directly

Mean Error – a measure of bias in a forecast

Mission – statement showing aims and purpose of an organization

Noise – irregular time series variations

Order – a massage from an organization to a supplier asking for delivery of items

Outsourcing – use of third party organizations to perform non-core activities

Pareto Analysis – ABC analysis

Parts List – a list of materials that make up a product and the order in which the materials are used

Pipeline Stock – items that are being moved from one place to another

Price – amount charged by seller for an item

Projective Forecast – a forecast that puts historical events in the future

Quality Circles – a group of individuals who meet to try and improve uct quality

Quick Response – extension of JIT principles to other orgs in the supply chain

Replenishment – stocking materials as replacement for used up units

Replenishment Rate – the rate at which materials are added to stock

Rule of 80/20 – ABC analysis or Pareto analysis

Safety Stock – a set of materials that are kept to cover for unexpected circumstances

Scientific Inventory Control – finding optimal ordering policies and stock levels using mathematical models

Seasonal Stock – stock that maintains stable operations through seasonal demand variations

Shortage – occurs when customer demand cannot be met from stock

SKU – stock keeping unit

Stocktaking – periodic scrutiny to get the difference between actual and recorded stock levels

Supply Chain – the series of organizations and activities products go through between the initial supplier and the final consumer

Target Stock Level – determines size of order for a periodic review method

Time Series – observations made at regular time intervals

Two-Bin System – a method of determining when it’s time to place an order by keeping the reorder level in a bin and the remaining stock in another

Unit – the standard quantity or size of an item

Unitization – putting goods into standard packages for easy movement

Vendor-Managed Inventory – has suppliers that manage both their stocks and ones held further down the supply chain

Warehouse – a location where goods are held

Work in Process – the units being worked on currently

Work in Progress – work in process

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