Glossary
Inventory and operations glossary
Direct answer
APICS and CSCMP-anchored definitions of every term used on this site[1]. Cross-referenced to concept and variant pages for full context.
- ABC analysis
- Pareto classification of SKUs by annual dollar volume into A, B, C classes for differentiated review policy.
- Andler formula
- German name for the EOQ formula, after Kurt Andler's 1929 derivation.
- Backorder
- An order that cannot be filled from on-hand and is held to be filled at next replenishment.
- C-class item
- Low annual-dollar-volume SKU. Typically managed by periodic review, not EOQ.
- Carrying cost (i) (i)
- Annual cost of holding inventory expressed as a percent of unit cost.
- Cycle stock
- Average on-hand inventory across an order cycle, equal to Q/2 under instantaneous resupply.
- Cycle time (T*) (T*)
- Time between orders at optimum, T* = Q*/D.
- Demand (D) (D)
- Annual demand in units.
- Economic order quantity (EOQ) (Q*)
- Wilson Q* = sqrt(2DS/H), the order size that minimises holding + ordering cost.
- Economic production quantity (EPQ) (Q*)
- Production lot size that minimises setup + holding cost with finite production rate p.
- Fill rate
- Fraction of demand satisfied immediately from stock (vs backordered).
- Holding cost (H) (H)
- Annual holding cost per unit, dollars/unit/year.
- JIT (Just-In-Time)
- Pull-based replenishment system that drives Q toward 1 by attacking setup cost.
- Kanban
- Card or container signaling replenishment authorisation; the physical token of JIT.
- Lead time (L) (L)
- Time between placing an order and receiving it.
- Lot-for-lot (L4L)
- MRP lot-sizing rule: order exactly net requirement each period.
- Minimum order quantity (MOQ)
- Supplier-imposed floor on order size.
- MPS (master production schedule)
- Time-phased plan of finished-goods production driving MRP explosion.
- MRP (material requirements planning)
- Bill-of-material explosion of MPS to derive time-phased net requirements.
- Newsvendor
- Single-period stochastic-demand optimisation; replaces EOQ for fashion/perishables with finite selling window.
- On-hand inventory
- Physical units in stock at a point in time.
- Ordering cost (S) (S)
- Fixed cost per order, dollars/order.
- Pipeline inventory
- Inventory in transit between supplier and warehouse.
- (Q, r) policy
- Continuous-review policy: when on-hand falls to r, order Q.
- Reorder point (ROP) (r)
- On-hand level that triggers a new order, ROP = d*L + safety stock.
- (s, S) policy
- Periodic-review policy: at fixed intervals, if on-hand <= s, order up to S.
- Safety stock (SS) (SS)
- Buffer above mean lead-time demand to absorb variance at target service level.
- Service level
- Probability of not stocking out during lead time.
- Setup cost
- Manufacturing equivalent of order cost: changeover labour, scrap, first-article inspection.
- SMED
- Single-Minute Exchange of Die. Toyota method for cutting setup cost toward zero.
- Shrinkage
- Inventory loss from theft, damage, or miscount; a component of carrying cost.
- Stock-keeping unit (SKU)
- A uniquely-identified inventory item.
- Stockout
- Demand event with no available on-hand to satisfy.
- Total cost (TC) (TC)
- Sum of holding cost + ordering cost (+ purchase cost if relevant).
- Turn (inventory turnover)
- Annual COGS / average inventory value. Higher = leaner inventory.
- Unit cost (C) (C)
- Cost per unit of the inventory item.
- Wagner-Whitin
- Dynamic-programming lot-sizing algorithm for time-phased deterministic demand.
- Wilson EOQ
- Common name for the EOQ formula, after R.H. Wilson's 1934 popularising article.