Inventory Planning
The terms behind deciding how much stock to buy, where to hold it, and how to keep inventory records accurate across channels.
ABC AnalysisSorting SKUs into classes by their share of sales: A items are the few that drive most revenue, C items are the many that drive little.Allocated InventoryUnits that are still physically in the warehouse but have been reserved for specific open orders, so they can no longer be sold to new customers.Available to PromiseATPThe quantity of a SKU that can still be committed to new customer orders by a given date, calculated from on-hand stock and scheduled receipts minus existing commitments.BackorderAn order accepted for an item that is out of stock, to be shipped when new inventory arrives.Bill of MaterialsBOMA list of the component SKUs and quantities that make up a finished product or kit.Consignment InventoryStock held at a retailer's or brand's location while the supplier keeps legal ownership, with the holder paying only for units after they sell.Cycle CountCounting a small portion of inventory on a rotating schedule instead of shutting down for a full physical count.Dead StockInventory that has not sold for a long period and is unlikely to sell at full price.Demand ForecastingThe practice of estimating future unit sales by SKU, channel, and time period, using sales history, seasonality, promotions, and known events such as launches.Economic Order QuantityEOQThe order size that minimizes the combined cost of placing orders and holding inventory.First Expired, First OutFEFOA rotation rule where the units with the earliest expiration date ship first, regardless of when they were received.First In, First OutFIFOA rotation rule where the oldest inventory is shipped first.Global Trade Item NumberGTINThe GS1 family of product identifiers (GTIN-8, -12, -13, -14) used worldwide to identify items and cases.In-Transit InventoryGoods that have left a supplier or another warehouse but have not yet been received at their destination, whether on the ocean, in a truck, or moving between fulfillment centers.Inventory ReconciliationThe process of comparing inventory quantities across systems such as the WMS, ecommerce platform, marketplaces, and accounting ledger, and against physical counts, then investigating and correcting variances.Inventory Write-OffAn accounting entry that removes the value of inventory from the books because it can no longer be sold, such as expired, damaged, lost, or obsolete units.Lead TimeThe total time from placing a purchase order to having inventory available to sell, including production, transit, customs, and receiving.Lot TrackingRecording the production lot or batch number of each unit received and shipped so it can be traced later.Min/Max InventoryA replenishment method in which each SKU has a minimum level that triggers an order and a maximum level that the order quantity brings inventory back up to.Minimum Order QuantityMOQThe smallest quantity a supplier will accept in a single purchase order.On-Hand InventoryThe total quantity of a SKU physically present in a warehouse or store, including units allocated to orders, on quality hold, or damaged.Open-to-BuyOTBA budget for how much new inventory can still be purchased in a period without exceeding the planned ending inventory, after accounting for planned sales, markdowns, and stock already on order.OverstockInventory held in excess of what forecast demand requires over the planning horizon, often measured as units beyond a target number of days or weeks of supply.Periodic Inventory SystemA method of tracking inventory in which quantities are determined by physical counts at set intervals, and cost of goods sold is calculated from those counts rather than recorded with each sale.Perpetual Inventory SystemA method of tracking inventory in which every receipt, sale, transfer, and adjustment updates quantities and values in real time, so records always show a current balance.PreorderAn order taken for a product before it is available, usually ahead of a launch.Purchase OrderPOA document a buyer issues to a supplier listing the SKUs, quantities, unit prices, delivery dates, and payment and shipping terms for an order of goods.Reorder PointROPThe inventory level at which a new purchase order should be placed so stock arrives before you run out.ReplenishmentThe process of restoring inventory to target levels, either by ordering from suppliers or by moving stock from reserve storage or another warehouse into the locations where it sells or is picked.Safety StockExtra inventory held to cover variation in demand and supplier lead time.Sales and Operations PlanningS&OPA recurring cross-functional process, usually monthly, in which sales, marketing, operations, and finance agree on one demand plan and the supply, inventory, and budget needed to meet it.SeasonalityA predictable pattern in which demand rises or falls at the same times each year, driven by holidays, weather, school calendars, or shopping events.SerializationThe practice of assigning a unique serial number to each individual unit of a product and recording it at receiving, shipment, and return.ShrinkageInventory lost to theft, damage, miscounts, or administrative errors, measured as the gap between recorded and actual stock.SKU RationalizationReviewing the product catalog and discontinuing SKUs that contribute little revenue or margin relative to their operating cost.Stock Keeping UnitSKUA brand's internal code for one distinct sellable item, with a separate SKU for each variant such as size or color.StockoutThe state of having zero sellable inventory for a SKU.Universal Product CodeUPCA 12-digit barcode standard, issued through GS1, used to identify retail products in North America. It is one format of the broader GTIN.Vendor-Managed InventoryVMIAn arrangement in which a supplier monitors a customer's inventory and sales data and decides when and how much to replenish, within agreed stock limits.Virtual BundleA sellable product made of two or more component SKUs that is not pre-assembled, with its available quantity calculated from component stock and its components picked separately at order time.