A Guide to Inventory Management Acronyms

The world of supply chain is laden with its own unique jargon and terms as well as a large array of inventory management acronyms.

Those working in inventory management need to understand these abbreviations.

Inventory professionals can bookmark this article to use as a reference guide when encountering a term that seems unfamiliar.

A Collection of Important Supply Chain Industry Acronyms

3PL (or TPL) This stands for third-party logistics, which come into play when a small business or organization outsources some or all of its supply chain functionality to a company that specializes in offering these services. Small- to medium-sized businesses (SMBs) looking to focus more on running their core business functions instead of a complex inventory management system would do well to look at using a 3PL service provider.

ABC Stratification: While not an acronym per se, ABC Stratification is an important term in inventory management. It categorizes inventory into three categories—A, B, C—based on the control level and record keeping involved with the inventory. Inventory in the “A” category features the tightest control, while “C” items sport a looser control.

ADC (or AIDC): Automatic data collection leverages computerized systems to track inventory in a storage facility or throughout the supply chain. Radio frequency identification (RFID) and bar code scanners are common technologies used to automate the inventory data collection process.

ASN: Advanced shipment notifications are used by logistics companies to notify their business customers when a shipment arrives. A detailed bill of lading used in the ASN process usually includes information such as the following: purchase order number, stock keeping unit (SKU) number, quantity delivered, lot number, container number, and more. ASNs are usually paper-based, but more businesses are moving to electronic formats for this data.

COGS: Cost of goods sold is an important accounting acronym used in inventory management that helps track inventory cost when it is sold to a customer. Unsold inventory is considered an asset on any business’s accounting ledger, and as such it can only be counted as an expense after it is sold.

DSD: Direct store delivery is used by retail businesses where the supplier directly ships inventory to a brick and mortar store, bypassing the wholesale element. DSD is a major component of a vendor-managed inventory process.

EPC: Electronic product codes are becoming more widely used as the inventory management process continues to leverage advanced technology. It is essentially a RFID version of a UPC code.

ERP: Enterprise resource planning is an advanced management system used by larger businesses to control the various processes of the company, including inventory management. It involves module-based software application to support each business function. SAP is a notable example of ERP software.

FIFO: First-in-first-out describes an inventory rotation system that attempts to first use the oldest inventory in storage.

JIT: Just-in-time is an inventory management process that involves acquiring inventory right as it is used in manufacturing or customer shipment. It is a complex technique focused on the optimization of many interrelated processes in a business.

MPS: Master production schedules are extensively used in a JIT scenario where a business is trying maximize manufacturing capacity to better handle periods where demand exceeds supply.

TMS: Transportation management systems is software that plays an important role in higher-end inventory management processes, helping to control the wide array of components involved in loading and shipping inventory.

Hopefully, this collection of inventory management acronyms provides a measure of insight to the supply chain process and inspires further researching of some of the concepts they describe.