The supply chain glossary for scaling brands
Plain-English definitions of inventory, demand planning and supply chain terms.
Demand planning & forecasting
Predicting demand, measuring forecast accuracy, and planning safety stock.
ABC analysis
A method of classifying SKUs by their relative importance — usually revenue or margin — into A (vital few), B (middle), and C (long tail) buckets, so each gets the right level of planning attention.
Bottom-up forecast
A demand forecast built from the bottom up — at SKU, channel, and location level from actual sales history — then aggregated upward. Unconstrained: it estimates what demand would be, before stock, budget, or supply constraints are applied.
Demand variability
How much demand bounces around its average — the input that determines how much safety stock you need to hit a target service level.
Forecast accuracy
How close forecasts are to actual demand — usually expressed as 100% minus MAPE, with the meaningful action being the trend, not the headline number.
Forecast bias
The systematic tendency of a forecast to over- or under-shoot reality — measured by whether errors net out to zero or pile up in one direction.
Lead time variability
How much your supplier lead time bounces around its average — a critical input to safety stock alongside demand variability.
MAE— Mean Absolute Error
The average size of your forecast errors, in actual units — how far off the forecast was on average, regardless of direction.
MAPE— Mean Absolute Percentage Error
The standard accuracy metric for forecasts — average error expressed as a percentage of actual demand.
Planning horizon
How far into the future a plan looks — set by the longest lead time you have to commit to a decision today.
Reorder point— Reorder Point (ROP)
The stock level at which you trigger the next purchase order, calculated to land replenishment before you run out.
Safety stock
Extra stock held above expected demand to absorb forecast error and lead-time variability without stocking out — expressed either as units or as time (days/weeks of cover). Same buffer, two units.
Seasonality
Predictable, recurring patterns in demand that follow a calendar — weekly, monthly, or annual cycles separate from the underlying trend.
Top-line plan— Top-Down Forecast
The top-down view of demand — a revenue, category, or channel-level target set from the plan or budget, broken down to guide what the business needs to sell.
XYZ analysis
A method of classifying SKUs by how predictable their demand is — X (stable), Y (moderately variable), Z (erratic) — so planning effort and stock policy match each product's predictability.
Merchandising & range planning
Seasonal planning, range building, and trading performance for fashion and CPG brands.
Drop— Drop (product release)
A planned release of product within a season — the unit of intake, launch, and trading rhythm for drop-led brands.
Intake margin— Intake margin (initial markup)
The margin baked into a product at the point of buying — selling price versus landed cost — before any markdown or promotion erodes it.
Markdown
A reduction in a product's selling price to clear stock — planned at end of season or reactive in-season — and the single biggest controllable drain on realised margin.
Open to buy— Open to Buy (OTB)
The budget left to commit to new stock within a season's plan — what's planned to buy, minus what's already bought and on order. The discipline that stops over-buying.
Option count
How many distinct styles or options a range carries — the breadth dial. More options spread the buy thinner; fewer concentrate the risk.
Range plan
The planned line-up for a season — which products and options, at what depth, for which channels — built before any buying starts.
Rate of sale— Rate of sale (ROS)
Units sold per week per option or SKU — the merchandiser's velocity measure, and the number that drives cover and replenishment decisions.
WSSI— Weekly Sales, Stock and Intake
The merchandiser's weekly control document — sales, stock, and intake plotted by week, plan versus actual, across a whole season — used to steer trading decisions every week.
Stock metrics
The numbers that tell you whether your inventory is healthy.
Days of cover
How many days of forward demand the current stock-on-hand will satisfy at the current sell-through rate — the operator-friendly view of inventory health.
Fill rate
The percentage of customer demand actually fulfilled from available stock — measured by units, lines, or orders depending on the question being asked.
GMROI— Gross Margin Return on Inventory Investment
The gross profit a SKU generates per pound (or dollar) of inventory investment — the metric that ranks SKUs by how hard their inventory is working.
In-stock rate
The percentage of SKUs currently available to sell — the snapshot view of catalogue availability that retail platforms rank brands by.
Inventory turnover— Inventory Turnover Ratio
How many times you sold through your average inventory over a period — usually a year.
Lost sales
The revenue you didn't make because the stock wasn't there — demand that went unmet during a stockout, usually invisibly.
Sell-through rate
The percentage of an inventory batch sold within a defined window — the standard measure of whether a buy worked.
Stockout rate
The percentage of SKUs (or SKU-days) that are out of stock — a direct measure of how often you're disappointing demand.
Weeks of supply
How many weeks of forward demand the current stock-on-hand will satisfy — the weekly-cadence equivalent of days of cover, used in retail and wholesale.
Stock states
What the stock is doing right now — backordered, dead, in transit.
Allocated stock
Stock that's physically on hand but already promised to specific orders — present in the warehouse, but not available to sell to anyone else.
Available to promise— Available to Promise (ATP)
The quantity of stock that can be promised to new orders right now — what's on hand, minus what's already allocated, plus what's confirmed inbound within the promise window.
Backorder
An order a customer places for an item that's currently out of stock — to be fulfilled when stock arrives.
Consignment stock
Stock physically held by a customer or retailer but still owned by the supplier — title transfers only when the customer sells or uses it.
Dead stock
Inventory that is unlikely to sell within a useful timeframe — tying up cash and warehouse space.
In-transit inventory
Inventory you own but isn't at your location yet — moving between supplier and warehouse, or between two warehouses you control.
Obsolete inventory
Stock that can no longer be sold at full price — usually because it's been discontinued, replaced, expired, or aged beyond its commercial window.
On-hand inventory
The total physical units in your warehouses right now — the starting point for every other inventory state, but never the sellable answer on its own.
Supplier ops
Working with suppliers — POs, MOQs, lead times, and supplier performance.
Bill of materials— Bill of Materials (BOM)
The recipe of a finished product — the components and materials, and the quantity of each, that go into making one unit.
Blanket Purchase Order— BPO
An umbrella PO covering a defined volume and price over a period — with deliveries called off in batches as needed.
Drop ship
A fulfilment model where the seller takes the customer order but the supplier ships directly to the customer — the seller never holds the inventory.
Lead time
The total time between placing an order with a supplier and having the goods available to sell.
MOQ— Minimum Order Quantity
The smallest quantity a supplier will accept on a single purchase order.
Purchase order— Purchase Order (PO)
A formal document that a buyer issues to a supplier specifying what to ship, in what quantity, at what price, and when.
RFQ— Request for Quotation
A formal request to suppliers for a specific quote — covering price, lead time, MOQ, and terms — usually for a defined product specification.
Supplier scorecard
A structured measurement of supplier performance across delivery, quality, cost, and responsiveness — used to drive supplier reviews and sourcing decisions.
Freight & landed costs
The true cost of getting stock to your warehouse — freight, duty, and the documents that move it.
ASN— Advanced Shipping Notice
A supplier's notification of what has actually been shipped and when it will arrive — the message that tells you the contents and timing of an inbound shipment before it lands.
Bill of lading— Bill of Lading (B/L)
The shipping document that acts as receipt for the goods, evidence of the carriage contract, and — crucially — the document of title that controls who can collect the cargo at destination.
Customs clearance
The process of getting imported goods released by customs after the vessel arrives — declarations, duty payment, and any inspections — which sits between port arrival and the goods actually being available to sell.
Duties & tariffs
Import taxes charged on goods crossing a border — the rate set by what the product is (its HS code) and where it's from, applied to the goods' customs value.
FCL / LCL— Full Container Load / Less than Container Load
Two ways to ship by sea: FCL books a whole container for your goods alone; LCL shares container space with other shippers. The choice is a trade-off between cost, speed, and risk.
Freight forwarder
A logistics intermediary who arranges shipping, customs, and documentation between a supplier and a buyer — without owning the freight infrastructure themselves.
HS code— Harmonised System code
The standardised numeric code that classifies a product for customs — it determines the duty rate the product attracts and how it clears the border.
Incoterms— International Commercial Terms
The standardised three-letter codes that define who pays for shipping, who carries the risk, and where title transfers between buyer and seller in international trade.
Landed cost
The true per-unit cost of getting a product into your warehouse — unit price plus freight, duty, and handling — rather than the invoice price your supplier quotes.
Packing list
The document itemising what's physically in each carton and pallet of a shipment — the reference your warehouse checks goods in against, and the partner document to the commercial invoice.
Inventory accounting
How you cost and value the stock you hold.
Closing stock— Closing Stock (Ending Inventory)
The value of inventory still on hand at the end of an accounting period — and the figure that becomes next period's opening stock.
FEFO— First Expired, First Out
An inventory rotation method that ships the unit closest to expiry first, regardless of when it arrived.
FIFO— First In, First Out
An inventory accounting method that assumes the oldest stock you bought is the first stock you sell.
Finished goods— Finished Goods Inventory
Inventory that's complete and ready to sell — past the production line, past QC, sitting in the warehouse waiting on demand.
LCNRV— Lower of Cost or Net Realisable Value
An accounting rule that values inventory at whichever is lower — what you paid for it, or what you can realistically sell it for.
Opening stock— Opening Stock (Beginning Inventory)
The value of inventory you have on hand at the start of an accounting period — equal to the previous period's closing stock.
Raw materials— Raw Materials Inventory
The inputs you've bought but haven't yet started turning into finished product — the first stage in the inventory cycle.
Weighted average cost— Weighted Average Cost (WAC)
An inventory accounting method that values every unit at the running average cost of all stock currently on hand.
Work in progress— Work in Progress (WIP) Inventory
Inventory that's been started but not yet finished — partially-built goods sitting between raw materials and finished stock.
Identification & coding
How items are uniquely identified across systems and supply chains.
ASIN— Amazon Standard Identification Number
Amazon's 10-character unique identifier for every product in its catalogue — the equivalent of a Google index entry for an Amazon listing.
EAN— European Article Number
A 13-digit barcode standard used for product identification across Europe and most of the world outside North America.
GTIN— Global Trade Item Number
A globally unique identifier issued by GS1 for a product or product variant — the umbrella standard that includes UPC and EAN.
Lot number
An identifier shared by a group of units produced or received together — used for traceability, expiry management, and recall.
Serial number
A unique identifier assigned to an individual unit — used for warranty, anti-counterfeit, theft tracking, and high-value item traceability.
SKU— Stock Keeping Unit
A unique internal code your business uses to identify and track every distinct product variant.
UPC— Universal Product Code
A 12-digit barcode standard used for product identification, primarily in North American retail.
Stop calculating these in spreadsheets
Lumina turns the metrics in this glossary into live planning workflows — connected to your sales, stock, and supplier data.
Book a demo