Glossary
The inventory glossary.
Every term here is one your team actually says on the floor. We define it in plain English and show it with a real example.
45 terms
45 terms, defined the way they come up in the work. If two people argue about what one means, it's probably in here.
ABC analysis
ABC analysis ranks inventory into A, B, and C classes by value or usage so teams can focus counting and purchasing effort on the items that matter most.
Read
Backorder
A backorder is a customer order accepted for an item that is currently out of stock, to be fulfilled when inventory arrives.
Read
Barcode vs QR code vs RFID
Barcodes, QR codes, and RFID are three identification technologies for inventory: barcodes encode an ID in lines scanned one at a time, QR codes hold more data and scan from any angle with a phone camera, and RFID tags transmit by radio so many items can be read at once without line of sight.
Read
Batch tracking
Batch tracking records which production or receiving batch each unit of inventory belongs to, so a specific batch can be traced, recalled, or investigated.
Read
Bin location
A bin location is a specific shelf, rack, room, truck, or zone where inventory can be stored and counted.
Read
BOM (bill of materials)
A bill of materials (BOM) is the structured list of components and quantities required to build one unit of a product or kit.
Read
Carrying cost
Carrying cost is the total annual cost of holding inventory, including capital, storage, insurance, shrinkage, and obsolescence, usually expressed as a percentage of inventory value.
Read
COGS (cost of goods sold)
Cost of goods sold (COGS) is the direct cost of the inventory a business sold during a period, calculated from beginning inventory plus purchases minus ending inventory.
Read
Consignment inventory
Consignment inventory is stock held at one party's location while another party still owns it, with payment due only when the stock is used or sold.
Read
Cross-docking
Cross-docking moves incoming goods directly from receiving to outbound shipping with little or no storage in between.
Read
Cycle count
A cycle count is a recurring partial inventory count run during normal operations to keep records accurate without halting the business.
Read
Dead stock
Dead stock is inventory that has stopped selling or being used and is unlikely to move without intervention.
Read
Demand forecasting
Demand forecasting is the practice of estimating future usage or sales of each item so purchasing can order ahead of need rather than react to stockouts.
Read
Drop shipping
Drop shipping is a fulfillment model where the seller takes the customer's order but the supplier ships the product directly, so the seller never holds the inventory.
Read
EOQ (economic order quantity)
Economic order quantity (EOQ) is the order size that minimizes the combined cost of ordering and holding inventory for a given item.
Read
FEFO (first expired, first out)
FEFO (first expired, first out) is a rotation method where the stock closest to its expiration date is used or sold first, regardless of when it arrived.
Read
FIFO
FIFO (first in, first out) is a rotation method where older inventory is used or sold before newer stock.
Read
Inventory accuracy
Inventory accuracy is the percentage of inventory records that match the physical count, measured at the SKU and location level.
Read
Inventory audit
An inventory audit verifies that recorded inventory matches physical stock and that the processes producing the records are sound, whether run internally or by an external auditor.
Read
Inventory turnover
Inventory turnover measures how many times a business sells and replaces its inventory over a period, usually a year.
Read
Inventory variance
Inventory variance is the difference between the recorded quantity of an item and the quantity actually counted.
Read
Just-in-time (JIT) inventory
Just-in-time (JIT) inventory is a strategy of holding minimal stock and receiving goods only as they are needed, trading buffer inventory for dependence on reliable supply.
Read
Kitting
Kitting is the practice of grouping individual SKUs into a single sellable or issuable kit, assembled either ahead of time or at the moment of fulfillment.
Read
Landed cost
Landed cost is the total cost to get a unit of inventory onto your shelf: purchase price plus freight, duties, insurance, and handling fees.
Read
Lead time
Lead time is the elapsed time between placing an order with a supplier and having the stock available for use or sale.
Read
LIFO
LIFO (last in, first out) is a method where newer inventory is used or sold before older stock.
Read
Lot tracking
Lot tracking groups inventory by production batch so teams can manage expiration, recall, or production history.
Read
Packing slip
A packing slip is the document accompanying a shipment that lists what the shipment contains, used to verify the delivery against the order.
Read
Par level
A par level is the standard quantity of an item a location should hold, with replenishment topping stock back up to par on a regular schedule.
Read
Periodic inventory
Periodic inventory is a method where stock levels are only determined by physical counts at intervals, with no continuous record of movements in between.
Read
Perpetual inventory
Perpetual inventory is a method where stock records update continuously with every receipt, sale, transfer, and adjustment, so the system always shows a current count.
Read
Pick list
A pick list is the document or screen that tells a worker which items, in which quantities, to retrieve from which locations to fulfill orders.
Read
Purchase order (PO)
A purchase order (PO) is a buyer's formal document committing to purchase specified items, quantities, and prices from a supplier.
Read
Putaway
Putaway is the process of moving received goods from the dock to their storage location and recording where they went.
Read
Reorder point
A reorder point is the inventory level that triggers a replenishment order before stock runs out.
Read
Reorder quantity
Reorder quantity is the number of units to order when stock hits the reorder point, sized to cover demand until well past the next delivery.
Read
Safety stock
Safety stock is extra inventory held above expected demand to absorb usage spikes and supplier delays.
Read
Serialized inventory
Serialized inventory tracks unique units individually by serial number rather than as a quantity.
Read
Shrinkage
Shrinkage is the loss of inventory between purchase and sale from theft, damage, spoilage, miscounts, and administrative error.
Read
SKU
A stock keeping unit (SKU) is a unique identifier a business assigns to a sellable, usable, or trackable item.
Read
Stock keeping vs item master
The item master is the catalog of definitions describing each item, while stock keeping records are the live quantities of those items at specific locations.
Read
Stockout
A stockout occurs when an item's available inventory reaches zero while demand for it still exists.
Read
Three-way matching
Three-way matching verifies a supplier invoice against the purchase order and the receiving record before payment is approved.
Read
Wave picking
Wave picking groups orders into scheduled batches (waves) that are released to the floor together, timed around carrier cutoffs, labor shifts, or zones.
Read
WMS (warehouse management system)
A warehouse management system (WMS) is software that directs the physical work inside a warehouse: receiving, putaway, picking, packing, and shipping.
Read
Stop looking these up. Run them.
In Order3, these stop being glossary entries and become the daily work. A reorder point fires, a draft PO gets written up, and it waits for your approval. Start free.