Plain definitions for the inventory planning terms that get used loosely. Each entry explains the term, the formula where there is one, and when it actually matters.
MOQ is the smallest quantity a supplier will produce or sell in one order. It is their constraint, not yours — so the real skill is deciding when to accept a buy larger than your forecast justifies, and pricing that decision in carrying cost rather than unit cost.
· 7 min read
A backorder is an order you have already accepted for stock you do not have. The useful question is not what it means but whether to keep taking it — which turns on your real lead time, what the customer does while waiting, and the channel you sold through.
· 6 min read
Inventory turnover measures how many times you sell and replace your inventory during a period—a key indicator of how efficiently your inventory investment generates sales.
· 4 min read
A purchase order records what you agreed to buy, from whom, in what quantity and by when. Eight steps to create one, only two of which are decisions — and the reason an open order belongs in your plan, not only in your accounting system.
· 8 min read
Fill rate is the share of ordered demand you ship from stock on the first attempt. It is calculated on units, cases, order lines or whole orders, and the version a retail scorecard uses is in-full delivery against the purchase order.
· 7 min read
Sales and Operations Planning (S&OP) is a business process that aligns sales forecasts with supply capabilities and financial goals into a single, agreed-upon plan.
· 4 min read
Lead time is the total duration between placing an order and having that inventory available to sell—not just shipping time, but every step from order to shelf.
· 5 min read
Demand forecasting is the estimate of how many units you will sell, by SKU and by channel, over a stated period. The four methods CPG brands actually use, what data each one needs, the conditions that break them, and how to tell whether yours is working.
· 10 min read
A reorder point (ROP) is the inventory level at which you need to place a new order with your supplier—the trigger that tells you it's time to reorder.
· 5 min read
Safety stock is the inventory you hold above the forecast to cover the weeks the forecast is wrong. How to size it from your own demand and lead-time variability, with a stated service level and a worked example.
· 10 min read