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Common Terms in Inventory Management 

Bin Card

Document updated by the store keeper that tracks the inventory kept of a single product in a particular bin.

Buffer Stock

Amount of stock equivalent to the consumption during the standard replenishment period.

Committed Inventory

Particular items in the inventory which are committed to a particular order or transfer.

Demand SignalAny form of request to remove stock from a warehouse or storage facility coming in any format.

Refers to any stored material, including both raw materials and finished goods. Also commonly referred as stock, though in the manufacturing sector, “stock” only comprises the finished products that are kept in the store.

Inventory Ledger

Accountancy document or computer record that tracks inventory transactions (receptions and dispatches) in terms of quantity and value.

Lead TimeThe time lapse between the moment when the order is placed and the moment of its reception.
Minimum Stock

The minimum quantity always available in stock to avoid shortage. It is established for products which are critical or difficult to supply and their shortage can jeopardize the project plan. Minimum Stock = Buffer Stock + Safety Stock

On Hand Inventory

Items in the stock that are available to be released.


Situation in which too much inventory is kept in the store.

Physical inventory

The process of physically counting and verifying the goods in stock in order to reconcile data in records and reality.

Re-Ordering Cycle

Period of time between two successive regular orders for a particular item in stock.

Safety Stock

Level of extra stock that is kept to mitigate risk of Stock-out caused by uncertainties in supply and demand.

Stock Card

Document updated by the store keeper that tracks the inventory kept of a single product in the storage facility.

Stock Keeping Unit (SKU)

A unique code or nomenclature that designates a single line item of a larger consignment. SKUs may be tied to a specific production run or expiration date, and may denote only a product of specific characteristics.


Situation in which the inventory can’t cope with the demand for a certain item.

Time bucket

The time frame used to measure consumption and demand: days, weeks, months, quarters or years are the most commonly used.

Vendor Managed Inventory (VMI)

Inventory management strategy in which suppliers take care of the inventory as part of their retailer’s inventory.


Inventory (or stock) management refers to the knowledge and the practices to keep the optimal amount of material in the storage facility. When holding a storage facility, inventory management becomes an integral part of the supply chain management. It is complementary to warehouse facility management and to the physical management of stored material.