Inventory planning, clearly defined.
Clear definitions of the most important terms in demand forecasting, inventory management, purchasing, supply chain, and working capital.
InventoryABC analysisABC analysis prioritizes items by economic contribution and separates high-impact A items from B and C items.Read definitionOperationsBullwhip effectThe bullwhip effect describes how small demand changes become progressively larger order swings across the supply chain.Read definitionFinanceContribution marginContribution margin is revenue minus variable cost and shows how much a product contributes to fixed costs and profit.Read definitionForecastingDemand forecastingDemand forecasting predicts future demand using historical data, seasonality, trends, and known business events.Read definitionForecastingDemand planningDemand planning combines a statistical forecast with marketing, sales, and operations knowledge to create an aligned demand plan.Read definitionPurchasingEconomic order quantityEconomic order quantity is the theoretical order size that minimizes combined ordering and inventory holding cost.Read definitionOperationsFill rateFill rate measures what share of demand can be fulfilled immediately from available inventory.Read definitionForecastingForecast accuracyForecast accuracy measures how close a forecast is to the demand that is later observed.Read definitionInventoryInventory coverageInventory coverage shows how long available stock will last at the expected demand rate.Read definitionInventoryInventory managementInventory management covers the planning, monitoring, and control of stock across locations, channels, and time periods.Read definitionInventoryInventory optimizationInventory optimization determines the economically best stock level per SKU to improve service level and cash flow at the same time.Read definitionFinanceInventory turnoverInventory turnover shows how often average inventory is sold and replaced during a period.Read definitionPurchasingLead timeLead time is the time between placing an order and the inventory becoming available for sale.Read definitionFinanceLost salesLost sales are purchases that do not happen because the required product is unavailable.Read definitionPurchasingMOQMOQ stands for minimum order quantity, the smallest quantity a supplier accepts per order or variant.Read definitionFinanceOpen-to-buyOpen-to-buy is the purchasing budget still available for a planning period after inventory and open orders are considered.Read definitionInventoryOut of stockOut of stock describes a product that is unavailable at a relevant point of sale.Read definitionInventoryOverstockOverstock is inventory that materially exceeds the economically expected demand.Read definitionPurchasingProcurement planningProcurement planning determines which products must be ordered, in what quantity, and at what time.Read definitionPurchasingPurchase orderA purchase order is the formal order sent to a supplier with items, quantities, prices, and delivery dates.Read definitionPurchasingReorder pointThe reorder point is the inventory level at which a replenishment order should be triggered.Read definitionPurchasingReplenishmentReplenishment is the demand-driven restocking of inventory through new orders or transfers.Read definitionOperationsReturn rateReturn rate shows what share of sold or shipped items is returned.Read definitionOperationsS&OPS&OP is a recurring alignment process that brings demand, supply, inventory, and financial targets into one plan.Read definitionInventorySafety stockSafety stock is additional inventory held to absorb uncertainty in demand and lead time.Read definitionForecastingSales forecastA sales forecast estimates how many units of a product will sell during a future period.Read definitionForecastingSeasonal demandSeasonal demand consists of recurring sales patterns linked to the calendar, weather, holidays, or consumption cycles.Read definitionOperationsService levelService level describes the target probability of meeting demand without a stockout.Read definitionOperationsSKUA SKU is the smallest uniquely managed inventory unit, usually a specific product, size, color, or pack configuration.Read definitionInventoryStockoutA stockout occurs when available inventory for a SKU reaches zero while demand still exists.Read definitionOperationsSupply chainThe supply chain covers all processes and partners from raw material or supplier through delivery to the customer.Read definitionFinanceWorking capitalWorking capital is the net short-term capital tied up in operations; inventory is often the largest controllable component for e-commerce brands.Read definitionForecastingXYZ analysisXYZ analysis classifies items by how regular and therefore predictable their demand is.Read definition