Inventory management glossary: 30 terms in plain English

Inventory has its own dialect. Newcomers hear 'lead time,' 'on hand' and 'cycle count' in the same sentence and quietly nod. This glossary is for the nodding. It is short, it is in plain English, and it is arranged by what you are doing, not by the alphabet.

What you have

• Item: any distinct thing you stock. Two sizes of the same product are two items.
• SKU: stock keeping unit. Your own short code for an item.
• Barcode: a scannable pattern that stands for a number, often printed by the manufacturer.
• Unit of measure: how you count an item, such as each, box, gallon or meter.
• Category: a group of similar items, used for sorting and reports.
• Lot or batch: a group of units made or received together, usually carrying one expiry date.

How much you have

These three are the ones people mix up, and the mix-up causes real stockouts.

• On hand: what is physically there.
• Reserved: on the shelf, but promised to an order.
• Blocked: on the shelf, but not for sale, perhaps damaged or waiting for inspection.
• Available: on hand minus reserved minus blocked. This is what you can actually sell.
• On order: bought from a supplier and not yet received.

When and how much to buy

• Lead time: the days between placing an order and receiving it.
• Reorder point: the stock level at which you place an order.
• Reorder quantity: how much you order each time.
• Safety stock: a cushion held against late deliveries or sudden demand.
• Minimum order quantity: the smallest amount a supplier will sell you.
• Stockout: running out of an item someone wants.
• Overstock: holding more than you are likely to sell in a sensible time.

Buying and receiving

• Purchase order (PO): your written order to a supplier, listing items, quantities and agreed prices.
• Receipt: the record that goods arrived, and how many.
• Partial receipt: receiving part of an order now, with the rest still due.
• Backorder: the part of an order the supplier has not yet shipped.
• Over-receipt: receiving more than you ordered.
• Put-away: moving received goods to their shelf.

Selling and picking

• Pick: taking items from the shelf to fill an order.
• Customer order: a request from a customer, which the pick fills.
• FIFO: first in, first out. Oldest stock goes first.
• FEFO: first expired, first out. Soonest expiry goes first.

Counting and checking

• Physical inventory: counting everything, or a defined area, and comparing it with the system.
• Cycle count: counting a few items regularly, so that everything is covered over the year.
• Adjustment: a recorded correction when a count disagrees with the system.
• Shrinkage: stock lost to damage, error, waste or theft.
• ABC classes: items grouped by value, with A the vital few and C the long tail.
• Inventory accuracy: the share of items where the system matches the shelf.
• Turnover: how many times a year you sell through your stock.

The software words

• IMS: inventory management system, software that tracks stock, orders and counts.
• ERP: enterprise resource planning, a larger suite that also covers finance, production and more.
• WMS: warehouse management system, built for big warehouses with many locations.
• Master data: the item list, suppliers and locations the rest depends on.