| A-B-C approach | Classifying inventory according to some measure of importance, and allocating control efforts accordingly.
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| cycle counting | A physical count of items in inventory.
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| cycle stock | The amount of inventory needed to meet expected demand.
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| economic order quantity (EOQ) | The order size that minimizes total annual cost.
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| excess cost | Difference between purchase cost and salvage value of items left over at the end of a period.
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| fill rate | The percentage of demand filled by the stock on hand.
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| fixed-order-interval (FOI) model | Orders are placed at fixed time intervals.
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| holding (carrying) cost | Cost to carry an item in inventory for a length of time, usually a year.
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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 | Time interval between ordering and receiving the order.
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| Little's Law | The average amount of inventory in a system is equal to the product of the average demand rate and the average time a unit is in the system.
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| ordering costs | Costs of ordering and receiving inventory.
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| periodic system | Physical count of items in inventory made at periodic intervals (weekly, monthly).
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| perpetual inventory system | System that keeps track of removals from inventory continuously, thus monitoring current levels of each item.
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| point-of-sale (POS) system | Record items at time of sale.
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| purchase cost | The amount paid to buy the inventory.
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| quantity discounts | Price reductions for larger orders.
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| reorder point (ROP) | When the quantity on hand of an item drops to this amount, the item is reordered.
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| safety stock | Extra inventory carried to reduce the probability of a stockout due to demand and/ or lead time variability.
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| service level | Probability that demand will not exceed supply during lead time.
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| setup costs | The costs involved in preparing equipment for a job.
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| shortage costs | Costs resulting when demand exceeds the supply of inventory; often unrealized profit per unit.
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| single-period model | Model for ordering of perishables and other items with limited useful lives.
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| two-bin system | Two containers of inventory; reorder when the first is empty.
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| universal product code (UPC) | Bar code printed on a label that has information about the item to which it is attached.
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