{"id":11717,"date":"2021-01-28T12:59:01","date_gmt":"2021-01-28T20:59:01","guid":{"rendered":"https:\/\/michaeljbrumm.com\/dclcorp-phase2\/?p=11717"},"modified":"2021-01-28T13:02:35","modified_gmt":"2021-01-28T21:02:35","slug":"guide-inventory-management-terms","status":"publish","type":"post","link":"https:\/\/michaeljbrumm.com\/dclcorp-phase2\/blog\/inventory\/guide-inventory-management-terms\/","title":{"rendered":"Complete Guide to Inventory Management Terms"},"content":{"rendered":"

At its base level, inventory management refers to tracking the goods a company has in stock. It includes such activities as ordering, restocking, storing and inventory forecasting.<\/span><\/p>\n

Strategically managing inventory gets more challenging in accordance with growth of units sold. In today\u2019s hyper-competitive marketplace, good <\/span>inventory management<\/span><\/a> is an often overlooked but critical aspect for any ecommerce business. It is vital that the inventory management process is efficient, cost effective, and accurate. If you do not have all of those components in place you may run considerable risk of failing to meet customer demand and losing money with your <\/span>ecommerce fulfillment<\/span><\/a> efforts.<\/span><\/p>\n

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12 Inventory Management Terms you Should Know<\/span><\/p>\n

There can be a steep learning curve for understanding inventory management, even if you own a product-based company that deals with physical inventory. We are going to start with the key basic terminology and acronyms and define them to help build your knowledge of inventory management.<\/span><\/p>\n

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Days Inventory Outstanding<\/span><\/p>\n

Days inventory outstanding (DIO) represents the number of days the current inventory will last. A lower DIO indicates a shorter time required to clear out inventory. DIO is also referred to as days sales of inventory (DSI), days in inventory (DII), or simply days inventory.<\/span><\/p>\n

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EOQ<\/span><\/p>\n

Economic order quantity (EOQ) is a term for the ideal quantity a company should purchase to minimize its inventory costs, like shortage or carrying costs. The overall goal of economic order quantity is to decrease spending; its formula is used to identify the greatest number of units needed (per order) to reduce buying. One of the primary gains of the EOQ model is customized recommendations for your particular company. At times, EOQ may suggest investing in a larger order to take advantage of discount bulk buying and to cut down on total costs associated with multiple shipments.<\/span><\/p>\n

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Finished Goods Inventory<\/span><\/p>\n

Finished goods inventory includes all products that have been completed by the manufacturing or production process \u2014 or that have been purchased in completed form \u2014 and that are available for sale. This term typically applies to manufacturers, since their goods can be in multiple forms, such as raw or in production. Retailers usually only maintain ready-to-sell items, meaning all their goods are finished.<\/span><\/p>\n

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Inventory Cycle Count<\/span><\/p>\n

An inventory cycle count is part of a company\u2019s inventory auditing procedure. In an inventory cycle count, a subset of inventory is counted on a certain day to help maintain accurate inventory levels. Unlike a full inventory count, an inventory cycle count is less disruptive to operations \u2014 though it doesn\u2019t offer as much accuracy across the board.<\/span><\/p>\n

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Inventory Shrinkage<\/span><\/p>\n

Inventory shrinkage is the difference between inventory counts recorded in accounting documents and what\u2019s physically present in the warehouse or other storage location. For clarity, consider this hypothetical statement by an inventory manager: \u201cAccording to our records, we should have 150 widgets in the warehouse, but we only have 100.\u201d That\u2019s shrinkage, though it\u2019s typically measured monetarily.<\/span><\/p>\n

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Reorder Point<\/span><\/p>\n

A reorder point is the quantity at which you reorder an item to replenish its supply. The reorder point will differ greatly from product to product and business to business. For example, a product that sells quickly and in large amounts would generally have a higher reorder point than a slower moving product.<\/span><\/p>\n

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Safety Stock<\/span><\/p>\n

Safety stock refers to the extra amount of a product that you keep to mitigate the risk of stockouts. Supply and demand can shift unpredictably, and having safety stock helps ensure you\u2019re able to fulfill orders. The benefit is that sales are uninterrupted; however, purchasing and storing extra products ties up more money in inventory.<\/span><\/p>\n

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SKU<\/span><\/p>\n

SKU stands for stock keeping unit, which is used in conjunction with a barcode system to represent a distinct item. SKUs are typically printed on products as scannable labels and hold item-specific data such as price, manufacturer, and other product details. Businesses use SKUs to identify products and keep track of inventory levels.<\/span><\/p>\n

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Stockout<\/span><\/p>\n

As the name implies, a stockout means you\u2019ve run out of a product. Stockouts may occur for any number of reasons: an unexpected surge in customer demand, not ordering enough of a product, an erroneous delivery from a supplier, inaccurate stock counts in the warehouse, theft, or a combination of these.<\/span><\/p>\n

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Write-Downs<\/span><\/p>\n

The reason some companies in your industry are successful is because they have efficient inventory management. Implementing an inventory management system (IMS) can help you identify the root cause of slow-moving inventory and find ways to reduce excess and obsolete stock. Inventory management also helps you sell off excess and obsolete stock more effectively through the process of write-downs. By reducing the price of an item, you can still make a profit. But failing to find a way to utilize obsolete stock will lead to a write-off where the product is considered a loss to your company.<\/span><\/p>\n

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Supply Chain<\/span><\/p>\n

A supply chain is the network of organizations, resources, activities, and technology that works together to create, sell, and distribute products to customers. A supply chain can have many complex touchpoints, depending on things like the number or amount of raw materials involved in manufacturing a product, the type of product, and who and where the end customer is.<\/span><\/p>\n

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Distributed Inventory<\/span><\/p>\n

Having <\/span>warehouses in multiple locations<\/span><\/a> can help you provide more affordable and faster shipping to customers, and helps you make region-popular items more accessible. If you have warehouses located strategically around the country, you will have an easier time reaching customers in their <\/span>shipping zone<\/span><\/a>, saving you money and delivering in a more timely fashion.<\/span><\/p>\n

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Bottom Line<\/span><\/p>\n

If you establish the best practices for inventory management it can be an incredible help in efficiently running your business. It is important to make the right choices that can scale and grow with your business. Great inventory management will save money, time, and improve customer service. Remember that with an effective inventory management system in place you can keep your business profitable, analyze sales patterns and predict future sales, and prepare for the unexpected. With a proper inventory management, a business has a better chance to survive and thrive.<\/span><\/p>\n

Help with inventory management is one of the many benefits to working with a 3PL. If you are seeking logistics support we\u2019d love to hear from you. You can read <\/span>DCL\u2019s list of services<\/span><\/a> to learn more, or check out <\/span>the many companies we work with<\/span><\/a> to ensure great logistics support. <\/span>Send us a note<\/span><\/a> to connect about how we can help your company grow.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

At its base level, inventory management refers to tracking the goods a company has in stock. It includes such activities as ordering, restocking, storing and inventory forecasting. Strategically managing inventory gets more challenging in accordance with growth of units sold. In today\u2019s hyper-competitive marketplace, good inventory management is an often overlooked but critical aspect for […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[107],"tags":[],"class_list":["post-11717","post","type-post","status-publish","format-standard","hentry","category-inventory"],"acf":[],"yoast_head":"\nComplete Guide to Inventory Management Terms - DCL Logistics<\/title>\n<meta name=\"description\" content=\"Learn the key terminology and acronyms involved in inventory management to help build your knowledge and improve your stragegy\" \/>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Complete Guide to Inventory Management Terms - 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