| carrying cost | see holding cost.
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| cycle counting | physically counting items in inventory.
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| decoupling (internal operations) | strategic placement of inventories so that one section of the plant is not adversely affected by bottlenecks in other sections.
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| demand | the rate at which stock is used.
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| Economic order quantity (EOQ) | the lot size that balances holding costs against ordering or setup costs, so as to minimize the net cost of stocking inventory.
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| economic production quantity (EPQ) | an economic order quantity, when stock replenishment occurs through production rather than by purchase.
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| excess cost | the unrecovered cost per unit of items that are left in inventory at the end of the period.
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| fixed-order-interval model | a model for inventory control that assumes orders will be place at fixed intervals of time.
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| hedge | holding inventory as a protection against future possible shortages or price increase.
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| holding cost | the cost per unit of holding an item for a stated period of time, usually one year.
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| independent demand | demand estimates for an item of inventory that are not governed controlled by demand estimates for any other item.
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| inventory | a stock or store of goods.
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| inventory turnover | ratio of average cost of goods sold to average inventory investment.
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| lead time | the length of time between the placing of an order and receiving it.
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| lead-time variability | in those cases where the lead time is not known with certainty, lead time variability is measured by the standard deviation of the number of days in lead time.
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| ordering cost | the cost of ordering and receiving inventory, excluding the cost of the goods themselves.
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| periodic inventory system | physical counts of items in inventory made at periodic intervals (weekly, monthly, etc.)
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| perpetual inventory system | system that keeps track of removals from inventory continuously , thus monitoring the current stock of each item.
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| point of sale system (POS) | method for electronically tracking sales and inventory.
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| pricebreak | where quantity discounting is practiced, a price break is a quantity at which a lower price is offered.
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| quantity discount | a reduction in price per unit, as an incentive for making purchases in larger quantities.
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| reorder point (ROP) | a level of stock at which a replenishment is ordered.
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| safety stock | stock that is held in excess of expected demand due to variable demand or variable lead time.
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| salvage value | the recoverable cost of an item that remains in inventory at the end of the period. This may be negative; there may be an additional cost to dispose of an item.
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| service level | defined as the probability of being able to satisfy any order during the normal order cycle from stock on hand.
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| setup cost | the cost of preparing the equipment or machines to produce the job, such as cleaning, adjusting, etc., excluding the cost of the product itself.
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| shortage cost | the loss per unit incurred when demand exceeds supply of an item during a period.
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| single-period model | inventory model used for ordering perishables and other items with limited useful lives.
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| standard normal distribution | the distribution of the standard normal statistic z, with a mean of zero and a variance of one.
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| stockout | running out of stock, before the next replenishment is received.
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| two-bin system | two containers of inventory; reorder when the first one is empty.
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| universal product code | a bar code printed on an item tag or on packaging.
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| vendor-managed inventory system | the supplier has the responsibility for inventory replenishment.
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