Supply Chain Terminology

Demand

What customers actually buy.

Forecast

An estimate of future demand. “Best guess — not a guarantee.”

Forecast Accuracy

How close your forecast was to actual demand.

Forecast Error

The gap between forecast and actual.

Demand Variability

How much demand changes (stable vs unpredictable).

Seasonality

Patterns that repeat (summer, holidays, events).

Promotion Impact

Temporary spikes caused by sales or marketing activity.

Baseline Demand

Normal demand without promotions or unusual events.

Demand Signal

Any input used to estimate demand (e.g., sales data, trends, customer input)

Inventory

PRoudct waiting for its next move.

On-Hand Inventory

What is physically available right now.

On-Order Inventory

Product already ordered but not yet received.

Days of Supply (DOS)

How lonmg inventory will last.

Lead Time

Time fomr placing an order to receiving it.

Demand During Lead Time

What you expect to sell while waiting for supply.

Safety Stock

Extra inventory to protect against uncertainty.

Cycle Stock

Normal inventory for day-to-day operations.

Reorder Point (ROP)

Inventory level that triggers a new order.

Target Inventory

Ideal amount of inventory to support demand + risk.

Excess Inventory

More than needed — creates cost and space issues.

Out of Stock (OOS)

When inventory hits zero — customer can’t buy.

Purchase Order (PO)

Formal request to a supplier for product.

Order Quantity

How much product you decide to buy.

Minimum Order Quantity (MOQ)

Minimum amount a supplier requires you to buy.

Supplier

The company providing the product.

Supplier Lead Time

How long that specific supplier takes to deliver.

Allocation

Supplier limits the amount you receive (short supply).

Short Shipment

When supplier delivers less than ordered.

Backorder

Demand that couldn’t be fulfilled.

Landed Csot

Total cost of the product after delivery (product + freight + handling)

Expedite

Speed up an order due to urgency.

Order Cycle

Full Timeline (PO Created → Shipped → Received)

Service Level / Fill Rate

% of demand fulfilled.

Inventory Risk

Likelihood of stockout or excess.

Tradeoff

Balancing Service, Inventory, and Costs.

Constraint

Anything limiting your plan: Supplier capacity, Warehouse space, or Transportation capacity.

Exception-Based Planning

Focus on what’s out of range — not everything.

Demand vs Supply Gap

Difference between what is needed vs available.

Upsteam

Supplier, planning decisions.

Downstream

Warehouse, delivery, customers.