Chapter 2 - Definitions Flashcards
The inventory held at the start of an accounting period.
Opening stock
An audit check of the stock physically held; this may be by amount or value, or both.
StockTake
Products ready for sale and /or use
Finished goods
in inventory management the expression relates to stock that is in the process of being manufactured but is not finished yet. In the services sectors the term is also used for anything between order and delivery.
Work in progress (WIP)
The inventory held at the end of an accounting period; becomes the opening stock for the next period.
Closing stock
A cyclical process of counting inventory to check system to actual balances.
Cycle counting
Excess stock over what is required by the organisation
Surplus stock
Stock which will never be used by the organisation.
Dead Stock
The state of being no longer needed or surplus to requirements.
Redundancy
The process of becoming outdated or obselete
Obsolescence
Stock held as a contingency or insurance against disruption or unexpected demand.
Safety or buffer stock
Having no or insufficient materials to continue production or the finished goods to meet an order.
Stockout
Capital of a business that is used in its dat-to-day trading operations, calculated as the current assets minus the current liabilities.
Working Capital
In relation to costs: accepting that they cannot be recouped.
Written off
The notional value of stock as set down in a company’s accounts; it is an estimate of value which may or may not be achieved or may indeed be exceeded.
Book Value
Supplies that are integrated into the finished product.
Direct Supplies
Supplies not incorporated in the finished product but which keep the business and factory operating.
Indirect supplies
The overall approach to how stock is managed, including order points, quantities and values, physical placement of stock etc.
Inventory Strategy
Items such as cleaning equipment or office supplies
Maintenance, Repair and Operations Inventory (MRO)
How many times stock or inventory is being used/sold and purchased/replenished over a given time period.
Stock Turn/turn over
The theory that 80% of outcomes result from 20% of inputs.
Pareto Principle
The bottom 20% of an organisations spend, which usually accounts for 80% of the suppliers. These can be made up of low-value, one-off purchases.
Tail Spend
The description of stock items in terms of value, rate of turnover, storage characteristics etc.
Stock Profile
Costs associated with the storage and handling of physical stock.
Holding / Carrying Costs
Inventory owned by the buying organisation that is monitored and managed by the supplier to ensure that adequate supply provision is made in line with usage and forward demand.
Vendor managed Inventory
A structured forecasting technique using a panel of experts and a number of rounds of questioning. Responses are shared after each round and the experts encouraged to reconsider their own responses. It is intended to achieve a consensus view.
Delphi Method
Distorted demand increasing up the supply chain - also known as the Forrester effect
Bullwhip Effect
The point either in time or in a process when the next order should be placed.
Reorder point
The requirement for a stock item which is directly related to and therefore dependant upon the rate of production.
Dependent demand
The requirement for a stock item which is not directly related to the rate of production.
Independent Demand
A comprehensive list of components, items, materials and parts to create a product.
Bill of Materials (BOM)
MRP
Material requirements planning
MRP II
Manufacturing resource planning
ERP
Enterprise resource planning
DRP
Distribution resource planning
MPS
Master production schedule
Situation in which products proceed, one complete product at a time, through various operations in design, order taking and production without interruptions, backflow or scrap.
Single piece flow
A scheduling system that supports ‘Lean’ and ‘JIT’ manufacturing processes, used to signal when inventory is low, and trigger reordering of materials.
Kanban
A contract that is renewed automatically from year to year until cancelled by either party.
Evergreen Contract
In relation to materials, this is where material is called up to replace material already used.
Pull
In relation to materials, this is where materials are pushed forward to production areas in readiness for use.
Push
