Inventory Management Key Terms

Manage your inventory better when you know some basic key terms

In simplest terms, inventory management is having enough merchandise available to meet the needs of your customers, without having too much excess. Systems are available to help track the location and quantity of merchandise, as well as tabulate losses.  Losing merchandise or stocking too much excess will have detrimental effects on your operating budget. If your business needs to improve the inventory management system, review these basic key term knowledge as a first step.

 

Barcoding

Barcoding for a merchant ensures that the inventory can be tracked beginning from when it arrived at the warehouse, prior to being stored or placed on a shelf and at the end of the cycle, which is when they are sold. Barcoding is an extremely simple method of inventory management.
Try: You can read more about industry standards for barcodes at Barcoding. While there, you can also view some industry standard barcode examples.

Inventory control software

Inventory control software will help your business keep track of how many products are in your warehouse and how many items have sold. Inventory control software will also help make product re-stocking and ordering more concise.
Try: There is a free article on inventory management software from the folks at Inphinet Interactive Communications.

Availability

It may seem simple to define availability in the terms of inventory management, but there is a calculation to determine it. Availability refers to the number of items available to sell after any holds or pre-sold items are subtracted.
Try: For the exact calculation and more information on availability, EPIQ can provide consulting.

Drop shipping

A popular inventory management method is drop shipping. When a merchant participates in drop shipping, they do not keep any inventory on site. When a customer orders from the merchant, the order will be shipped directly from the manufacturer. This is the case with many companies who operate with catalogs only or an Internet-only based store.
Try: Visit the site wiseGEEK for additional information about drop shipping and how it works with inventory management.

Lead time

When you hear the phrase lead time, what the person using it is referring to is the time period between when a product is ordered and when it is delivered. Lead time is very important when dealing with inventory, because you want your popular items to have a short lead time to meet customer demand.
Try: You can visit Management-Hum.com to find out more on how reorder levels and lead time fits into inventory management.

Carrying cost

The term carrying cost refers to the actual cost for having items in inventory. The price of acquiring the item and actually storing the item are what goes into the calculation.
Try: For more on the carrying cost, or holding cost, PMICP has a free calculator with definitions to help fill in the boxes.

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