Inventory Terms & Definitions

ABC analysis is an inventory categorization technique that divides stock into three classes — A (high value), B (moderate), and C (low value) — based on sales contribution.

A barcode is a machine-readable data representation, and UPC (Universal Product Code) is a 12-digit barcode standard used to identify individual retail products globally.

The practice of assigning and tracking unique batch or lot numbers to groups of products manufactured or received together, enabling traceability from supplier to customer.

Extra inventory held beyond forecasted demand to absorb supply chain variability and protect against unexpected spikes in orders or supplier delays.

Inventory owned by the supplier but stored at the retailer’s location, where the retailer only pays for goods once they are sold to end customers.

A cycle count is a perpetual inventory auditing method where a small subset of stock is counted on a rotating schedule rather than doing a full physical inventory.

Dead stock refers to inventory that has not sold over an extended period and is unlikely to sell in the future without significant intervention like markdowns.

A formula that calculates the optimal order quantity to minimize the total cost of ordering and holding inventory, balancing purchase costs against carrying costs.

An inventory rotation method that prioritizes shipping products with the earliest expiration dates first, minimizing waste from expired or near-expired goods.

An inventory valuation and rotation method where the oldest stock is sold or used first, ensuring products move through the supply chain in the order they were received.

Products that have completed the manufacturing or assembly process and are ready for sale to customers.

The process of assigning available inventory to specific sales channels, warehouses, or customer orders to ensure stock is distributed where it’s needed most.

A metric measuring how many days your current inventory will last based on average daily sales or usage rate.

The practice of maintaining the right amount of stock at the right locations to maximize service levels while minimizing carrying costs and capital investment.

The process of determining what products to stock, in what quantities, and at which locations to meet anticipated demand while controlling costs.

The loss of inventory due to theft, damage, administrative errors, or supplier fraud, resulting in fewer physical units than what the system records show.

The real-time synchronization of stock levels across all sales channels, warehouses, and fulfillment locations, ensuring that inventory counts are accurate everywhere products are sold.

A ratio that measures how many times a business sells and replaces its inventory over a specific period, indicating how efficiently stock is being managed.

The ability to see accurate, real-time stock levels across all locations, warehouses, and sales channels from a single view, enabling better decision-making and preventing overselling.

An inventory strategy where materials and products are ordered and received only as they are needed for production or sale, minimizing stock on hand and reducing carrying costs.

The process of assembling multiple individual components or products into a single ready-to-ship kit or package before an order is placed, streamlining fulfillment.

The practice of assigning unique identifiers to groups of products manufactured or received together, enabling traceability from supplier through to end customer for quality control and recall management.

The situation where a business accepts more orders for a product than it has available inventory to fulfill, resulting in cancellations, backorders, or customer dissatisfaction.

An inventory tracking method that continuously updates stock quantities in real time as purchases, sales, returns, and adjustments occur.

Inventory that appears available in the system but does not physically exist in the warehouse, leading to overselling, fulfillment failures, and inaccurate stock records.

A sales strategy where multiple products are offered together as a single combined package at a price that is typically lower than purchasing each item individually.

A reorder point is the inventory level at which a new purchase order should be placed to replenish stock before it runs out.

Safety stock is extra inventory held as a buffer against demand variability and supply chain disruptions to prevent stockouts.

The percentage of inventory received that is sold within a specific time period, measuring how quickly products move from the warehouse to the customer.

The practice of assigning and recording unique identifiers to individual units for precise tracking through the supply chain from receipt to delivery.

A unique alphanumeric code assigned to each product or variant in your inventory, used to track stock levels, sales, and fulfillment across all channels.

The process of analyzing a product catalog to identify underperforming SKUs and deciding which to keep, discontinue, or consolidate to improve profitability and operational efficiency.

A stockout occurs when a product is completely unavailable for sale because inventory has been depleted, resulting in lost sales and potential brand damage.

A supply chain arrangement where the supplier monitors the buyer’s inventory levels and takes responsibility for replenishment decisions, reducing stockouts and ordering overhead for the buyer.