Inventory and Supply Chain: Speaking the Language

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If your business relies on inventory and supply chain management, you know that these processes have a language all their own. Mastering that language, understanding its terms, is crucial to your success. It’s important for new hires as well as seasoned employees to know exactly what they’re talking about.

We came across an article posted on Sales Pad Insights that we found helpful. Here’s the glossary of inventory and supply chain management terms that should prove useful to your team too:

Assembly: this refers to an end item consisting of subassemblies or parts. Assemblies can often be disassembled back into their components.

Barcoding: We’ve all seen the barcoding on our packaged groceries. Computer systems can read nearly unlimited information that is contained in even a simple barcode and can decode it instantly. This saves time, money and resources as well as guarding against human error in the inventory and supply chain operation. Barcodes can contain information about anything you like – from retail goods to medical records and are now a widely used form of automatic data capture.

Bill of Materials (BOM): The bill of materials is basically a summary of all things needed for the manufacture of an end product. It should include materials, components and processes and any sub parts necessary to complete a process or product.

Cycle Counts: A common way to audit inventory is to count the items in a representative cycle or batch and extrapolate the whole from that sample.

Demand Planning: This stands for Demand and Planning and you will readily appreciate that being able to accurately predict the demand for your product will enable you to plan your inventory for maximizing profits.

Equipment Tracking: This process refers to the tracking of physical assets (such as inventory and products), either by scanning barcode labels attached to the assets or by using tags with GPS, BLE, or RFID which broadcast their location.

Inventory Adjustments: When your inventory increases or decreases due to theft, loss, damage or error, adjustments must be made to account for the difference.

Kitting; When individual items are packaged or made available as a group or “kit” to customers, it is referred to as Kitting. Unlike assemblies, kits are generally made at the time of sale.

Order Fulfillment: Order fulfillment refers to all steps your team takes between receiving an order and dispatching the finished item.

LIFO: ‘Last-in-first-out’ is an inventory valuation method which assumes that the last items placed in inventory are the first sold during an accounting year.

Manufacturing: The manufacturing process is the steps through which raw materials are transformed into a final product. The manufacturing process begins with the product design, and materials specification from which the product is made.

Receiving: This is an administrative function that involves checking the quality, quantity, and condition of incoming goods and assuring that they are properly distributed or stored.

Route Planning and Dispatch: Route planning involves the planning of routes and schedules for transporting goods. Dispatch is the actual assigning of drivers to routes, and managing the drivers and vehicles to ensure that orders are met and goods are delivered.

Serial/Lot Tracking: Items may have both serial and lot numbers. The ability to track these is an important part of the supply chain process and getting products from manufacturers to consumers safely and accurately and with accountability.

Whether you’re dealing with inventory management, order processing, or the basic ERP buzzwords, it doesn’t take long to realize it’s a language unto itself and it’s a crucial part of the world of distribution and manufacturing functionality. Understanding the important terms is a first step in successfully managing inventory and orders.

SalesPad functionality is designed to enhance your manufacturing and distribution business. Contact us to discuss how to streamline your business for greater results.

If you are a distribution company evaluating new software, or if you currently use Microsoft Dynamics GP, SalesPad or Acumatica, contact CAL Business Solutions [email protected] or 860-485-0910 x4.

By CAL Business Solutions, Microsoft Dynamics GP & Acumatica partner,


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