ABC policy Prioritizing the management of inventory according to the significance of each item’s annual dollar volume to the organization. cycle stock or ABC policy or Pareto analysis? Click here for Hint

algorithm A procedure described by a series of steps. Click here for Hint algorithm or SKU or standard normal distribution?

average inventory The average of the beginning and the ending inventory of a particular time period. Click here for Hint lead time or SKU or average inventory?

backorder To delay order fulfillment due to inadequate supply. Click here for Hint back order or order cycle or service level?

cost of capital The cost of funding for an organization, such as the interest rate on borrowed funds. Click here for Hint holding cost or fixed cost or cost of capital?

cycle stock Inventory held to gain economies of scale. Click here for Hint pipeline stock or cycle stock or inventory?

deterministic Fixed and known in advance, representing a high level of certainty when planning. Click here for Hint deterministic or probabilistic or fixed cost?

economies of scale Decreasing average unit cost by increasing volume. Click here for Hint stockpiling or price break or economies of scale?

finished goods Inventory awaiting sale to consumers. Click here for Hint cycle stock or inventory or finished goods?

fixed cost Cost incurred regardless of the volume of associated activity. In inventory planning, this is understood to be costs incurred regardless of the size of the order. Click here for Hint fixed cost or variable cost or holding cost?

fixed order interval policy An inventory system in which the amount of replenishment is determined by the rate of previous demand and its timing is predetermined at an economical interval. Click here for Hint SKU or fixed order quality policy or fixed order interval policy?

fixed order quantity policy An inventory system in which the amount of replenishment is predetermined at some economical value and its timing is then determined by the rate of previous demand. Click here for Hint SKU or fixed order quality policy or fixed order interval policy?

holding cost Variable costs associated with having inventory. Click here for Hint holding cost or variable cost or fixed cost?

inventory Tangible items awaiting sale or use. Click here for Hint inventory or finished goods or cycle stock?

inventory turnover The number of annual inventory cycles, sometimes referred to as turns. Click here for Hint order cycle or inventory turnover or stockpiling?

lead time Any delay between requesting a product and receiving it. Click here for Hint holding cost or service level or lead time?

opportunity cost Cost of an alternative foregone. In inventory planning, this is often the cost of capital. Click here for Hint opportunity cost or tangibility or cost of capital?

optimization Identification of the best alternative. Click here for Hint optimization or probabilistic or deterministic?

order cycle The time required for average demand to consume an order, triggering another order for replenishment. Click here for Hint run size or order cycle or WIP?

Pareto analysis The use of statistics to identify which factors are the most influential in a particular outcome of interest. Click here for Hint ABC policy or Pareto analysis or algorithm?

periodic review system An inventory system operated according to a fixed order interval policy. Click here for Hint SKU or periodic review system or fixed order interval policy?

pipeline stock Inventory currently in transit between locations. Click here for Hint pipeline stock or cycle stock or safety stock?

price break A discount for orders of a certain minimum size. Click here for Hint price break or price break quantity or shrinkage?

price break quantity The minimum order size that qualifies for a quantity discount. Click here for Hint price break or price break quantity or order cycle?

probabilistic Variable or not well known in advance; subject to randomness. This represents some uncertainty in planning. Click here for Hint deterministic or probabilistic or algorithm?

raw materials Inventory brought in from outside the system. Click here for Hint cycle stock or safety stock or raw materials?

reorder point An inventory level that triggers replenishment of an item. Click here for Hint safety stock or reorder point or run size?

run size A batch or order, size associated with the production of an item. Click here for Hint run size or run time or order cycle?

run time The time required to produce a batch of some item. Click here for Hint run size or run time or order cycle?

safety stock Inventory held to protect against uncertain supply or demand. Click here for Hint pipeline stock or cycle stock or safety stock?

sawtooth diagram A graph of inventory levels over time. Click here for Hint sawtooth diagram or algorithm or Pareto analysis?

service level The probability that demand for an item will be met during the lead time on replenishment of that same item. Click here for Hint reorder point or probabilistic or service level?

shrinkage Physical loss of inventory before sale or use. Click here for Hint shrinkage or opportunity cost or tangibility?

SKU (stock keeping unit) A particular item of inventory. Click here for Hint backorder or SKU or optimization?

spoilage Unintended transformation of inventory before sale or use, rendering it inappropriate for its original purpose. Click here for Hint ABC policy or WIP or spoilage?

standard normal distribution A normal distribution with a mean of zero and a variance of 1. Any other normal distribution can be converted to this standard, allowing the use of standard normal tables to analyze the original distributions. Click here for Hint Pareto analysis or algorithm or standard normal distribution?

stock out To fail to meet customer demand due to inadequate supply. Click here for Hint stock out or shrinkage or opportunity cost?

stockpiling Producing or securing goods in advance of demand, building up substantial inventory. Click here for Hint backorder or stockpiling or safety stock?

tangibility The degree of perceivable, physical essence of a product. Click here for Hint tangibility or optimization or inventory?

variable cost Cost that varies with volume of associated activity or, in inventory planning, the size of the order. Click here for Hint fixed cost or variable cost or holding cost?

WIP (work in process) Inventory resulting from transformation of raw materials, but not yet ready for sale to consumers. Click here for Hint WIP or average inventory or order cycle?