Inventory Planning Glossary

Essential terms and definitions for demand forecasting, inventory management, and supply chain planning.

Backorder: A customer order accepted for a product that is not currently in stock, held open against a future receipt date rather than shipped from inventory on hand.
Demand Forecasting: The process of predicting future customer demand for your products using historical sales data, market trends, and other factors.
Fill Rate: The percentage of customer demand fulfilled from stock on hand — a direct measure of how often you have what customers want when they want it.
Inventory Turnover: A measure of how many times you sell and replace your inventory during a period — a key indicator of how efficiently your inventory investment generates sales.
Lead Time: 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.
Minimum Order Quantity (MOQ): The smallest quantity a supplier will produce or sell in a single order — a constraint set by their production economics rather than by your demand.
Purchase Order: A formal document sent to a supplier requesting goods at a specified price and quantity, used to manage procurement and inventory replenishment.
Reorder Point: The inventory level at which a new purchase order should be placed to avoid a stockout, calculated from demand rate, lead time, and safety stock.
Safety Stock: The extra inventory kept on hand to protect against uncertainty — a buffer between expected demand and actual demand variability.
Sales and Operations Planning (S&OP): A business process that aligns sales forecasts with supply capabilities and financial goals into a single integrated plan.

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