Glossary

A

Allocated Stock - Stock-on-hand that has been set aside and is not available for sale or issue.


Average Cost - The cost price of the item used to valuate the inventory.

 

B

Backorder - The quantity associated with a firm sales/customer order where the expected delivery date has passed today's date.


Bill of Material - The list of all raw material items along with their quantity needed to make a finished good item.

 

C

Central Warehouse - The structure where branches or locations are supplied by a centralised location instead of external vendors. The centralised location is however supplied by external vendors.


Classification - The categorization of item codes into volume and value based groupings (HML & ABC) depending on their contribution to total sales/forecasts.


Classification Matrix - The 3x3 square of blocks where the rows represent value based sales/forecast movement, and the columns represent volume based sales/forecast movement. Each block represents a number of stocked product codes that indicate their importance to the business based on their sales/forecast movement.


C.O.S. (Cost of Sales) - The average monthly value of sales, at cost price, over the last 12 months.


Cover Forward - The period of time defined as Lead Time + Safety Stock + Replenishment Cycle. Also defined as the Order-up-to quantity.

 

D

Days Cover - The number of days that the current level of inventory will last based on forecasted demand assuming no further purchase orders arrive.


Day(s) Offset - The number of days by which the safety stock has been adjusted to its current level.

 

E

Excess Stock - An item whose net stock position exceeds the calculated Order-up-to or maximum level. The value of excess is defined as the amount of stock only exceeding the Order-up-to level.

 

F

Fill Rate - Actual - The percentage stock availability measured over a historic rolling 30 day period.


Fill Rate - Target - The targeted stock availability percentage.


Forecasting Performance - The level of historic over- and under-forecasting when compared with actual sales.


Forecast Risk - The percentage risk calculated due to historic forecasted demand exceeding or lagging actual sales.


Forecast Shots - The historic 12 month horizon forecasting attempts, by month, for the past 12 months.

 

G

H

I

J

K

 

L

Last Import Date - The date on which the last set of data was extracted from the host database and processed.


Lead time - The period of time from deciding to place a purchase order with a supplier, to when it is available for sale to the customer. In the case of production lead time, it is the time from when the raw stock is requested to when it is available to production.


Lead Time Performance - The measurement of supplier lead time based on early or late deliveries.


Lost Sales - The value of forecasted sales to be lost due to being out of stock.

 

M

Margin - The difference between the selling price and the Average cost price.


Minimum Order Quantity - A purchasing constraint imposed by a vendor where a minimum initial amount of stock may be ordered per order.


Model Stock - The average level of stock over the current replenishment cycle period that is regarded as ideal for the currently associated risk factors for the item. The Model stock level is defined as Safety Stock + 1/2 Replenishment Cycle.

 

N

Net Stock - The level of inventory defined as stock-on-hand minus backorders minus allocated stock plus open purchase orders.


Non-Stock item - An item not held in inventory but still on the price list for ordering should demand require it. An item that has not sold for a long time, typically a 12 month period.

 

O

Obsolete item - An item that has not had any sales for an extended period of time, typically 24 months, and therefore no inventory is planned to be held at this time.


On Order - The quantity of open and outstanding purchase orders.


Order Multiple - A purchasing constraint imposed by a vendor where the order amount greater than the Minimum Order Quantity must be ordered in multiples rather than in single units.


Order-up-to Level - The maximum level of stock required for inventory optimization. Defined as the Lead Time + Safety Stock + Replenishment Cycle.


Overdue Purchase Order - The quantity associated with an open and outstanding supply order where the Expected Arrival Date has passed today's date.


Over-Forecasting - Where historical forecasts have exceeded actual sales. Over-forecasting leads to excess stock.

 

P

Potential Stock-Out - An item whose net stock position is potentially going to drop to zero before the next purchase order arrives. Action over and above placing an order based on the normal lead time is required to prevent a stock-out from happening. The Potential stock-out value is defined as the value of sales that will be lost inside the lead time when the net stock position falls to zero or less until sufficient stock arrives to raise the net stock position above zero.


Products Supplied - The number of product codes currently associated with the vendor.


PTD - Period to Date. Defined as the period of time from the beginning of the current period to the Last Import date, typically being today.


Purchase Order - The quantity associated with an open and outstanding supply order where the Expected Arrival Date is either today or in the future.

 

Q

 

R

Recommended Order - The unit quantity to be purchased that will result in optimal inventory levels.


Re-Order Level - The minimum level of stock required for inventory optimization. Defined as Lead Time + Safety Stock.


Replenishment Cycle - The amount of stock, in time, to be purchased when a recommended order is triggered. The unit quantity is calculated by looking forward, at the end of the lead time period from today, the replenishment cycle period over future demand (Forecasts + BOM demand + Central Warehouse demand)

 

S

Safety Stock - A quantity of planned stock that provides safety against stocking-out due to unforeseen demand or risk. Otherwise known as planned dead stock. There are 5 inputs to calculating the level of safety stock, 2 are referred to as the sources of risk and they are Supply risk and Forecast risk, and the remaining 3 are referred to as risk multipliers, and they are Target Fill Rate, Replenishment Cycle and Leadtime


Selling Price - The price to be used to determine the average value of sales at selling price and to determine the level of margin made on an item. Selling price and Margin can be used in the classification settings.


Stock Item - An item held in inventory for the purpose of meeting immediate sales demand.


Stock-Out - An item where its net stock position is currently zero or less. Action over and above ordering based on the lead time is required to prevent further lost sales. The Stock-out value is defined as the value of sales that will be lost from now until sufficient stock arrives to raise the net stock position above zero.


Surplus Orders - An item where the arrival of the open and outstanding purchase orders will result in the net stock position being greater than the order-up-to or maximum stock level. The value of Surplus orders will be the portion of the order resulting in the net stock position exceeding the order-up-to level.


Supply Performance - The measurement of supply based on whether the vendor over or under delivered in terms of quantity.


Supply Risk - The percentage risk calculated due to a supplier delivering early or late based on historic deliveries.

 

T

Target - A manually set level/number to be reached.


Turns - The number of times in a 12 month period, that the current level of inventory is expected to be rotated.

 

U

Under-Forecasting - Where sales have exceeded historical forecasts. Under-forecasting leads to stock-outs.

 

V

Velocity - The rate of units sold.

 

W

X

Y

Z