Inventory Supply Chain

Inventory and supply chain terms you should have down

Inventory and supply chain management gets complicated quickly, and keeping these areas well-managed is crucial to customer satisfaction. But do you speak the language of inventory and supply chains?

Maybe you’re an inventory pro, or maybe you’re just taking your first steps into supply chain management. Either way, you’ll find this glossary of commonly used inventory and supply chain terms helpful, whether you’re learning for yourself or trying to explain your business to employees and customers.

(For more information, take a look at these other helpful resources that define basic ERP terms and order processing and purchasing terms.)

Must-Know Inventory Terms:


An assembly is an end item composed of parts or subassemblies meant to serve a particular function. Assemblies can be “disassembled” without necessarily being rendered unusable or destroyed.


Barcoding is the most common form of automatic identification used in automatic data-capture technologies. This means that by using barcodes, computer systems are able to capture data about items and products without human involvement. Barcodes track virtually everything—from retail goods to medical records, and machinery to human beings.

Bill of Materials (BOM)

A bill of materials, or BOM, is a list of everything needed to manufacture an end product. Think of a BOM as a recipe: it includes the raw materials, components, and processes needed to complete the end product, as well as partially completed parts that will later be integrated into the whole of the end product.

Cycle Counting

Cycle counting is a way to audit inventory by counting a small batch of inventory, rather than the entire inventory.

Demand Planning

Demand planning lives up to its name—it’s a supply chain management process used to predict changing levels of demand for a product. This practice allows you to better align your inventory with demand, therefore increasing profits.

Equipment Tracking

Equipment tracking refers to the method of tracking 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 

Inventory adjustments must be made when there are increases or decreases in inventory because of theft, loss, damage, or errors in the amount of items received.


Kitting is when individual items are packaged or made available as a group or “kit” to customers. It is typically done at the time of sale, unlike assemblies.

Order Fulfillment 

Order fulfillment is everything a company does between receiving an order from a customer (the point of sale) and placing the product in the customer’s hands.


LIFO, or “Last-in, First-out,” is an accounting method of valuing inventory that assumes that the last items purchased are the first sold. 


Manufacturing, simply put, is turning raw materials or parts into a finished product to be sold. This process typically uses a combination of man and machine efforts on a large scale to produce goods.


Receiving is an administrative function that involves checking the quality, quantity, and condition of the incoming goods, followed by their proper storage.

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

Serial or lot tracking is the process of tracking numbers assigned to products from receiving to final sale. Lot, or batch, numbers can be assigned to groups of products. For example, all the apples picked on a certain day at an orchard will go into the same bucket or lot. All the apples will be labeled with the lot number from their respective buckets. On the other hand, serial numbers are more unique — no two products will have the same serial number. Serial numbers can be used to track warranties or other services that involve individual items or products.

It’s All Connected

Whether you’re dealing with inventory management, order processing, or the basic ERP buzzwords, it doesn’t take long to realize it’s all connected — it’s all part of the world of distribution and manufacturing functionality. Understanding the important terms in these businesses is just the beginning of successfully managing inventory and orders.

Are there important terms in your distribution and manufacturing world that you didn’t see covered here? Let us know!


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