Unlocking the Secrets of Inventory Terminology: A Beginner’s Guide

Stock level: the amount of inventory on hand at a given time
Reorder point: the inventory level at which an order should be placed
Lead time: the time it takes to receive inventory after an order is placed
Stockout: the state of being out of stock of a particular item
Safety stock: extra inventory kept on hand to avoid stockouts
Cycle counting: a method of regularly counting a portion of inventory to ensure accuracy
Bill of materials (BOM): a list of materials and components needed to make a product
Kanban: a system for managing inventory and production using cards or other visual cues
ABC analysis: a method of classifying inventory items by importance or value
FIFO: first in, first out method for valuing and selling inventory.
LIFO: last in, first out method for valuing and selling inventory
FEFO: first expired, first out the method for managing inventory of perishable goods
Stock turnover: the rate at which a company sells and replaces its inventory
Gross margin: the difference between the cost of goods sold and the revenue generated from selling those goods
Carrying cost: the cost associated with holding and storing inventory, including insurance, taxes, and storage fees.
Stock Adjustment: A process of recording the increase or decrease in stock due to breakage, theft or any other reasons
Stock Valuation: The process of determining the value of a company’s inventory
Stock Audit: An independent examination of a company’s inventory to ensure accuracy and compliance with regulations.
Excess Inventory: The inventory which is not needed at the moment and cannot be sold in the near future.
Obsolete inventory: The inventory that is no longer needed or in demand by customers.
Minimum stock level: The lowest level of inventory that a company needs to maintain to meet customer demand and avoid stockouts.
Maximum stock level: The highest level of inventory that a company can afford to hold without incurring high carrying costs.
Stock replenishment: The process of restocking inventory to meet customer demand.
Drop shipping: A type of inventory management where a company does not keep goods in stock but transfers customer orders and shipment details to a supplier or manufacturer.
Stockless production: A method of inventory management where a company only produces what is needed, when it is needed, to meet customer demand.
Barcode scanning: A method of inventory management where barcodes are used to track the movement of inventory in and out of a warehouse or store.
Inventory turnover ratio: a ratio that measures how frequently a company sells and replaces its inventory over some time.
Gross margin return on investment (GMROI): A measure of how effectively a company uses its inventory to generate profit.
Inventory to sales ratio: A ratio that compares a company’s inventory levels to its sales over some time.
RFID: Radio Frequency Identification, a method of inventory management where RFID tags are used to track the movement of inventory in and out of a warehouse or store.
Stockless Production: A method of inventory management where a company only produces what is needed, when it is needed, to meet customer demand.
Pull System: A method of inventory management where production is based on actual customer demand.
Push System: A method of inventory management where production is based on forecasted demand.
Make-to-Order: A method of inventory management where goods are produced only after a customer places an order
Make-to-Stock: A inventory management method where goods are produced in advance and held in inventory for customer demand.
Stockless Manufacturing: A method of inventory management where a company only produces what is needed, when it is needed, to meet customer demand.
Capacity Planning: A method of inventory management where production capacity is matched to forecasted demand
Backordering: A method of inventory management where customers are notified that a product is out of stock and will be shipped later.
Stockless Procurement: A method of inventory management where a company only purchases what is needed, when it is needed, to meet customer demand.
Lean Inventory: A method of inventory management where a company strives to keep inventory levels as low as possible while still meeting customer demand.
Stockless Distribution: A method of inventory management where a company only ships what is needed, when it is needed, to meet customer demand.
Stockless Supply Chain: A method of inventory management where a company only keeps the minimum amount of inventory necessary throughout the supply chain.
JIT: Just-in-Time, a method of inventory management where goods are produced and delivered just in time to meet customer demand.
VMI: Vendor Managed Inventory, a method of inventory management where a supplier manages the inventory levels of the products they provide to a company.
EOQ: Economic Order Quantity, a method of inventory management that calculates the optimal order quantity for inventory to minimize costs and maximize efficiency.
Stockless Planning: A method of inventory management where production, procurement, and distribution are based on actual customer demand.
Stockless Management: A method of inventory management where a company only keeps the minimum amount of inventory necessary to meet customer demand.
Stockless Logistics: A method of inventory management where a company only keeps the minimum amount of inventory necessary in the logistics process.
Stockless Warehousing: A method of inventory management where a company only keeps the minimum amount of inventory necessary in the warehouse.
Stockless Retail: A method of inventory management where a retail store only keeps the minimum amount of inventory necessary to meet customer demand.