SUPCH 4

Inventory

The raw materials, component parts, work-in-process, or finished products that are held at a location in the supply chain.

Carrying Costs

Costs associated with holding inventory, including warehousing, opportunity costs, and risks of inventory loss.

Ordering Costs

Expenses incurred to create and process an order to a supplier, including relationship maintenance and order preparation.

Stock-out Costs

Lost income and expenses due to a shortage of inventory, including the cost of no sales and internal process-related costs.

Economic Order Quantity (EOQ)

The amount to order that minimizes both the total costs of holding inventory and (purchase) ordering costs.

Re-Order Point (ROP)

The level of inventory which triggers an action to replenish that particular inventory stock.

Safety Stock (SS)

Extra stock that is maintained to mitigate the risk of stock-outs caused by uncertainties in supply and demand.

Lead Time

The time between placing an order and receiving the inventory.

Forecasting

The process of predicting future demand based on historical data and other information.

Periodic Review System (PRS)

A system that checks inventory at fixed intervals and orders quantities to bring inventory up to a target level.