Inventory Terminology Glossary
Inventory management has its own words, and people often use them without explaining. Here's a plain-language guide to the terms you'll hear most often.
Some of these terms sound harder than they really are. Others get used loosely, and can mean slightly different things depending on who's talking. This glossary sticks to simple, practical definitions you can use every day.
Core Terms
SKU (Stock Keeping Unit) — a unique code for one product type, used to track it apart from similar items.
Stock level — how much of a specific item you have on hand right now.
Reorder point — the stock level that tells you to reorder, so you don't run out before the next shipment arrives.
Safety stock — extra stock kept on hand as a buffer against sudden demand spikes or supply delays.
Lead time — the time between placing an order and receiving it.
Counting and Accuracy Terms
Cycle counting — counting a small part of your stock on a regular, rotating basis, instead of counting it all at once.
Physical inventory count — a full count of every item on hand, often done on a set schedule.
Shrinkage — stock that's lost, damaged, or stolen and no longer there to sell.
Dead stock — stock that hasn't sold in a long time and probably won't sell going forward.
Cost and Accounting Terms
Carrying cost — the total cost of holding stock, like storage, insurance, and the cash tied up in unsold items.
FIFO (First In, First Out) — an accounting method that assumes you sell your oldest stock first.
LIFO (Last In, First Out) — an accounting method that assumes you sell your newest stock first.
Inventory turnover — how many times your stock is sold and replaced in a given period.
Movement Terms
Cycle stock — the regular stock used to meet everyday, expected demand.
Backorder — an order for an item that's out of stock right now, to be filled once new stock arrives.
Stockout — a point where an item is completely out of stock and can't be sold.
Key Takeaways
Inventory terms aren't hard once you break them down. Most describe a quantity, a timing rule, or a cost. Sharing these terms makes it easier for a team to talk about stock levels, ordering, and accuracy without mix-ups.
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