Inventory Management Terminology

cycle inventory

An inventory accuracy audit technique where inventories is counted on a cyclic schedule rather than once a year.

Capital Costs

Value of of capital tied up in inventory

Storage costs

Cost associated with warehouse space and material handling costs.

Hedge Inventory

Cost due to additional inventory acquisitions of products to take advantage of temporary low prices, the possibility of a strike, or other events.

Lean

A philosophy of production that emphasizes the minimization of the amount of resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-added activities in design, production, supply chain management, and dealing with customers.

Economic order quantity (EOQ)

A type of fixed order quantity model that determines the amount of an item to be purchased or manufactured at one time.

Unit costs

Acquisition cost of an item

Decoupling Inventory

Amount of inventory kept between entities in a mfg or distribution network to create independence between processes or entities; objective is to disconnect the rate of use from the rate of supply of the item

Process Outputs

Completion of tangible Goods, Information, Services

Risk Costs

Costs associated with the decision to stock inventory. Among the risk are product obsolescence, damage, shrinkage.

Cost of reordering

Costs incurred during reordering such as preparation, order creation, storage, put away, manufacturing, and scrap

Service Costs

Direct cash expenditures necessary to support inventories.

ABC Classification

Group of items in decreasing order of annual dollar volume or other criteria .

Anticipation Inventory

Inventory that is held in anticipation of customer demand (like seasonal demand).

Lot-Size Inventory

Inventory that results whenever qty price discounts, shipping costs, setup costs, or similar considerations make it more economical to purchase or produce in larger lots than are needed for immediate purposes

Aggregated Inventory

Level of inventory permitting manager to control and view inventories of finished goods in group form.

First-In, First-Out (FIFO)

Method to assign cost to inventory that assumes items are sold in the order acquired; earliest items purchased are the first sold.

Last-In, First-Out (LIFO)

Oldest inventory is first to be us

Buffer

Quantity of materials waiting further processing

Bulk breaking

Taking larger lots of an item and breaking them down into smaller quantity lots for their customers

Flexibility

The ability of the manufacturing system to respond quickly, in terms of range and time, to external or internal changes.

Globalization

The interdependence of economies globally resultinf from growing volume and variety of international transactions in goods, services, capital and also from the spread if new technology.

Backorder

a customer order that cannot be filled when promised or demanded but is filled later

Process Inputs

consists of materials components, energy, equipment and labor that are used during the product of service transformation.

Overhead

cost components composed of several possible costs that are indirectly consumed in manufacturing.

Standard cost

cost elements such as purchased materials cost, direct labor, setup time, receiving, stock put away, picking and packing, shipping, overhead total cost by absorbing these components costs

Carrying cost

cost of holding an item in inventory

Variable inventory costs

inventory costs that vary with the volume of output

MRO

maintenance, repair, and operating supplies

Demand flow

movement of demand stating with the customer order and flowing back through retailers, distributors, manufacturers and then suppliers until the requirements satisfied.

Fluctuation Inventory

provides a cushion against unexpected demand

safety stock inventory

surplus inventory that a company holds to protect against uncertainties in demand, lead time, and supply changes

Logistics

the art and science of obtaining, producing, and distributing material and product in the proper place and in the proper quantities

Process

the performance of any planned work or method associated with an individual machine, process, departments, or inspection.

Lead time

the time needed to respond to a customer order