Chapter 2 - Definitions

Question 1

The inventory held at the start of an accounting period.

Answer 1

Opening stock

Question 2

An audit check of the stock physically held; this may be by amount or value, or both.

Answer 2

StockTake

Question 3

Products ready for sale and /or use

Answer 3

Finished goods

Question 4

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.

Answer 4

Work in progress (WIP)

Question 5

The inventory held at the end of an accounting period; becomes the opening stock for the next period.

Answer 5

Closing stock

Question 6

A cyclical process of counting inventory to check system to actual balances.

Answer 6

Cycle counting

Question 7

Excess stock over what is required by the organisation

Answer 7

Surplus stock

Question 8

Stock which will never be used by the organisation.

Answer 8

Dead Stock

Question 9

The state of being no longer needed or surplus to requirements.

Answer 9

Redundancy

Question 10

The process of becoming outdated or obselete

Answer 10

Obsolescence

Question 11

Stock held as a contingency or insurance against disruption or unexpected demand.

Answer 11

Safety or buffer stock

Question 12

Having no or insufficient materials to continue production or the finished goods to meet an order.

Answer 12

Stockout

Question 13

Capital of a business that is used in its dat-to-day trading operations, calculated as the current assets minus the current liabilities.

Answer 13

Working Capital

Question 14

In relation to costs: accepting that they cannot be recouped.

Answer 14

Written off

Question 15

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.

Answer 15

Book Value

Question 16

Supplies that are integrated into the finished product.

Answer 16

Direct Supplies

Question 17

Supplies not incorporated in the finished product but which keep the business and factory operating.

Answer 17

Indirect supplies

Question 18

The overall approach to how stock is managed, including order points, quantities and values, physical placement of stock etc.

Answer 18

Inventory Strategy

Question 19

Items such as cleaning equipment or office supplies

Answer 19

Maintenance, Repair and Operations Inventory (MRO)

Question 20

How many times stock or inventory is being used/sold and purchased/replenished over a given time period.

Answer 20

Stock Turn/turn over

Question 21

The theory that 80% of outcomes result from 20% of inputs.

Answer 21

Pareto Principle

Question 22

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.

Answer 22

Tail Spend

Question 23

The description of stock items in terms of value, rate of turnover, storage characteristics etc.

Answer 23

Stock Profile

Question 24

Costs associated with the storage and handling of physical stock.

Answer 24

Holding / Carrying Costs

Question 25

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.

Answer 25

Vendor managed Inventory

Question 26

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.

Answer 26

Delphi Method

Question 27

Distorted demand increasing up the supply chain - also known as the Forrester effect

Answer 27

Bullwhip Effect

Question 28

The point either in time or in a process when the next order should be placed.

Answer 28

Reorder point

Question 29

The requirement for a stock item which is directly related to and therefore dependant upon the rate of production.

Answer 29

Dependent demand

Question 30

The requirement for a stock item which is not directly related to the rate of production.

Answer 30

Independent Demand

Question 31

A comprehensive list of components, items, materials and parts to create a product.

Answer 31

Bill of Materials (BOM)

Question 32

MRP

Answer 32

Material requirements planning

Question 33

MRP II

Answer 33

Manufacturing resource planning

Question 34

ERP

Answer 34

Enterprise resource planning

Question 35

DRP

Answer 35

Distribution resource planning

Question 36

MPS

Answer 36

Master production schedule

Question 37

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.

Answer 37

Single piece flow

Question 38

A scheduling system that supports ‘Lean’ and ‘JIT’ manufacturing processes, used to signal when inventory is low, and trigger reordering of materials.

Answer 38

Kanban

Question 39

A contract that is renewed automatically from year to year until cancelled by either party.

Answer 39

Evergreen Contract

Question 40

In relation to materials, this is where material is called up to replace material already used.

Answer 40

Pull

Question 41

In relation to materials, this is where materials are pushed forward to production areas in readiness for use.

Answer 41

Push