Inventory terms, in plain English
The vocabulary that runs every stockroom — defined properly, with the formula where there is one, a worked example, and an honest note on where the textbook version falls short. New terms added regularly.
SKU
SKU stands for Stock Keeping Unit — the unique code a business assigns to each distinct product (and variant) it stocks, so it can be tracked through purchasing, warehousing and sales. A red T-shirt in medium and the same shirt in large are two different SKUs.
Read the full definition →MOQ
MOQ stands for Minimum Order Quantity — the smallest quantity of a product a supplier is willing to sell in one order. If the MOQ is 500 units, you buy 500 or you don’t buy at all, even if you only need 120.
Read the full definition →Safety stock
Safety stock is the buffer inventory you hold on top of expected demand, so a demand spike or a late delivery doesn’t immediately become a stockout. It’s insurance measured in units: too little and you lose sales; too much and you tie up cash.
Read the full definition →Dead stock
Dead stock (or obsolete stock) is inventory that has stopped selling — items with no sales over a sustained period and no realistic prospect of selling at full price. It sits in the warehouse consuming cash, space and attention.
Read the full definition →Lead time
Lead time is the time between placing an order and having the goods on the shelf, ready to sell. If you order from a supplier on the 1st and can pick the stock on the 22nd, the lead time is 21 days. It is the single biggest driver of how much stock you have to hold.
Read the full definition →Reorder point
A reorder point (ROP) is the stock level that triggers a new purchase order. When stock on hand (plus stock already on order) falls to this level, it’s time to buy. It equals the demand you expect during the supplier’s lead time, plus safety stock for the unexpected.
Read the full definition →EOQ
EOQ — economic order quantity — is the order size that minimises your total cost of ordering and holding stock. Order too little too often and admin/delivery costs pile up; order too much and cash sits in the warehouse. EOQ is the textbook balance point between the two.
Read the full definition →Obsolete stock
Obsolete stock is inventory with no realistic future demand — products superseded by newer versions, expired, out of spec, or made for customers who no longer exist. Obsolescence is the process of stock sliding from "slow" to "dead" to "worthless", and it shows up on the balance sheet long after it started in the warehouse.
Read the full definition →Replenishment
Replenishment is the process of reordering stock so you can keep selling without over-buying — deciding what to order, how much, from which supplier, and when. It sounds like admin; done across thousands of products with MOQs and a finite budget, it’s the hardest maths problem in the building.
Read the full definition →Purchase order
A purchase order (PO) is the document a buyer sends a supplier to order goods, what you want, how many, at what price, delivered where and when. Once the supplier accepts it, it is a binding order. An invoice comes later; the purchase order comes first.
Read the full definition →Definitions are free. Decisions are the product.
Optimal Chain turns these concepts into per-product numbers from a simple spreadsheet export: forecasts, buffer stock, budget-fitted purchase orders. Send us an export and see your own catalogue analysed.
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