Supply Chain Glossary

Supply Chain & Inventory Terms Explained

A practical reference for e-commerce merchants. Every term you need to know about demand forecasting, fulfillment, returns, and sourcing.

64
Terms Defined
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A
ABC Analysis
An inventory categorization method that ranks products by sales volume or revenue contribution — A items are top sellers…
Allocated Inventory
Stock that has been reserved for open customer orders or purchase commitments and is no longer available for new orders.
Available to Promise (ATP)
The uncommitted portion of a company inventory that can be promised to new customer orders based on current stock minus …
Average Selling Price (ASP)
The average revenue earned per unit sold of a product over a specific time period, used to track pricing trends and info…
B
Backorder
An order placed by a customer for a product that is currently out of stock and will be fulfilled once new inventory arri…
Barcode Scanning
The use of optical barcode readers to track inventory movements in a warehouse, improving accuracy and speed of stock co…
Batch Tracking
An inventory control method that assigns a batch or lot number to a group of products sharing the same production run or…
Bullwhip Effect
A supply chain phenomenon where small fluctuations in end-consumer demand cause increasingly large swings in orders upst…
C
Carrying Cost
The total cost of holding inventory in storage, including warehousing fees, insurance, depreciation, and the opportunity…
Consignment Inventory
An arrangement where a supplier places goods with a retailer but retains ownership until the items are sold, after which…
Cross-Docking
A logistics practice where inbound goods are transferred directly from receiving to outbound shipping with little or no …
Customs Clearance
The process of submitting documentation and paying duties to import goods into a country, required before shipment is re…
Cycle Stock
The portion of inventory that is regularly consumed and replenished as part of normal ordering cycles, excluding safety …
D
DDP (Delivered Duty Paid)
A shipping term where the seller is responsible for all costs and risks including import duties and taxes until the good…
Days of Inventory Outstanding (DIO)
A metric that measures how many days on average a company holds inventory before selling it.
Days of Supply
Days of Supply: a key concept in supply chain and ecommerce fulfillment for Shopify brands.
Dead Stock
Inventory that has not sold for a prolonged period and is unlikely to sell in the future, tying up capital and warehouse…
Demand Forecasting
Demand Forecasting: a key concept in supply chain and ecommerce fulfillment for Shopify brands.
Demand Sensing
A short-range forecasting technique that uses real-time sales signals, POS data, and market inputs to refine near-term d…
Demand Variability
The degree to which customer demand fluctuates over time, which directly impacts the level of safety stock and forecast …
Dropshipping
A fulfillment model where the retailer does not hold physical inventory; instead, orders are shipped directly from the s…
E
Economic Order Quantity (EOQ)
A formula-based inventory model that calculates the optimal order quantity that minimizes total holding and ordering cos…
F
FOB (Free on Board)
A shipping term indicating that the seller is responsible for goods until they are loaded onto the buyer's vessel, after…
Fill Rate
The percentage of customer orders fulfilled completely from available stock without any backorders or lost sales.
First In, First Out (FIFO)
An inventory management method where the oldest stock is sold or used first, reducing the risk of spoilage or obsolescen…
Fulfillment Center
Fulfillment Center: a key concept in supply chain and ecommerce fulfillment for Shopify brands.
Fulfillment SLA
A service level agreement that defines the committed time frame within which a merchant or 3PL must pick, pack, and ship…
G
Gross Margin Return on Inventory (GMROI)
A profitability metric that measures the gross profit earned for every dollar invested in inventory.
I
Incoterms
Internationally standardized trade terms published by the ICC that define the responsibilities of buyers and sellers for…
Inventory Shrinkage
The loss of inventory due to theft, damage, administrative errors, or supplier fraud, measured as the difference between…
Inventory Turnover
A ratio that measures how many times a company sells and replaces its entire inventory within a given period, indicating…
J
Just-in-Time (JIT) Inventory
An inventory strategy that aligns raw material and product orders precisely with production or sales schedules to minimi…
K
Kitting
The process of combining multiple individual SKUs into a single packaged bundle or kit that is sold as one product.
L
Landed Cost
The total cost of a product including purchase price, shipping, customs duties, insurance, and all other charges to deli…
Last In, First Out (LIFO)
An inventory accounting method where the most recently received inventory is recorded as sold first, affecting cost of g…
Last-Mile Delivery
Last-Mile Delivery: a key concept in supply chain and ecommerce fulfillment for Shopify brands.
Lead Time
The total time between placing a purchase order with a supplier and receiving the goods at your warehouse.
M
Minimum Order Quantity (MOQ)
The smallest quantity of a product a supplier is willing to sell in a single purchase order.
Multi-Location Inventory
The management of stock distributed across multiple warehouses, retail locations, or 3PL facilities, requiring consolida…
O
Omnichannel Fulfillment
A strategy that integrates inventory and order management across all sales channels — online, retail, and marketplace — …
On-Hand Quantity
The total physical count of a SKU currently in stock and available in a warehouse or storage location at any given momen…
Overstock
Excess inventory beyond what is needed to meet forecasted demand, resulting in higher holding costs and potential markdo…
P
Periodic Inventory
An inventory tracking method where stock counts and records are updated at set intervals — weekly, monthly, or quarterly…
Perpetual Inventory
An accounting method that continuously updates inventory records in real time as products are received, sold, or transfe…
Pick and Pack
Pick and Pack: a key concept in supply chain and ecommerce fulfillment for Shopify brands.
Pick, Pack, and Ship
The warehouse fulfillment process of selecting items from storage (pick), packaging them (pack), and handing them to a c…
Purchase Order (PO)
A formal document issued by a buyer to a supplier specifying the products, quantities, and agreed prices for a planned i…
Purchase Order Management
The end-to-end process of creating, tracking, approving, and reconciling purchase orders with suppliers to ensure timely…
R
Reorder Point
Reorder Point: a key concept in supply chain and ecommerce fulfillment for Shopify brands.
Replenishment Cycle
The recurring process of reviewing stock levels and placing orders to restore inventory to target levels before a stocko…
Returns Management
Returns Management: a key concept in supply chain and ecommerce fulfillment for Shopify brands.
Returns Merchandise Authorization (RMA)
A process that authorizes a customer to return a purchased product to the seller or manufacturer for a refund, replaceme…
Reverse Logistics
The supply chain processes involved in moving products from the customer back to the seller or manufacturer for returns,…
S
SKU Rationalization
The strategic process of reviewing your product catalog and discontinuing low-performing SKUs to reduce inventory comple…
Safety Lead Time
A buffer added to the standard supplier lead time to account for variability in delivery schedules and reduce the risk o…
Safety Stock
Safety Stock: a key concept in supply chain and ecommerce fulfillment for Shopify brands.
Sell-Through Rate
The percentage of available inventory sold over a given period, used to measure product performance and inform future pu…
Service Level
The probability that customer demand will be met without a stockout during a replenishment cycle, expressed as a percent…
Stock-Keeping Units (SKUs)
Stock-Keeping Units (SKUs): a key concept in supply chain and ecommerce fulfillment for Shopify brands.
Stockout
A situation in which a product is completely out of stock and unavailable to fulfill customer orders, resulting in lost …
T
Third-Party Logistics (3PL)
Third-Party Logistics (3PL): a key concept in supply chain and ecommerce fulfillment for Shopify brands.
V
Vendor-Managed Inventory (VMI)
An arrangement in which the supplier monitors the retailer's stock levels and takes responsibility for replenishing inve…
W
Warehouse Management System (WMS)
Software that manages and optimizes warehouse operations including receiving, storage, picking, packing, and shipping of…
Weeks of Supply
A metric that estimates how many weeks current inventory will last at the current rate of sales, helping buyers plan rep…

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