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1. Opportunity Cost: The opportunity cost of holding inventory. This should be based on your company's own cost of capital standards using the following formula.
Calculation: Cost of Capital x Average Net Value of Inventory
2. Shrinkage: The costs associated with breakage, pilferage, and deterioration of inventories. Usually pertains to the loss of material through handling damage, theft, or neglect.
3. Insurance and Taxes: The cost of insuring inventories and taxes associated with the holding of inventory.
4. Total Obsolescence for Raw Material, WIP, and Finished Goods Inventory: Inventory reserves taken due to obsolescence and scrap and includes products exceeding the shelf life, i.e., spoils and is no good for use in its original purpose (do not include reserves taken for Field Service Parts).
5. Channel Obsolescence: Aging allowances paid to channel partners, provisions for buy-back agreements, etc. Includes all material that becomes obsolete while in a distribution channel. Usually, a distributor will demand a refund on material that goes bad (shelf life) or is no longer needed because of changing needs.
6. Field Service Parts Obsolescence: Reserves taken due to obsolescence and scrap. field service parts are those inventories kept at locations outside the four walls of the manufacturing plant i.e., distribution center or warehouse.
Inventory Cost: The cost of holding goods, usually expressed as a percentage of the inventory value; includes the cost of capital, warehousing, taxes, insurance, depreciation, and obsolescence.
Inventory, Days of: The number of days of inventory on-hand at any given time.
Inventory In Transit: Inventory in a carrier's possession, being transported to the buyer.
Inventory Management: The process of ensuring the availability of products through inventory administration.
Inventory Planning Systems: The systems that help to strategically balance the inventory policy and customer service levels throughout the supply chain. These systems usually calculate time-phased order quantities and safety stock using selected inventory strategies. Some inventory planning systems conduct what-if analysis and compare the current inventory policy with simulated inventory scenarios to improve the inventory ROI.
Inventory Turns: The cost of goods sold divided by the average level of inventory on hand. This ratio measures how many times a company's inventory has been sold during a period of time. Operationally, inventory turns are measured as total throughput divided by average level of inventory for a given period. How many times a year the average inventory for a firm changes over or is sold.
Inventory Turnover: See Inventory Turns.
Inventory Velocity: The speed at which inventory moves through a defined cycle (i.e., from receiving to shipping).
Invoice: A detailed statement showing goods sold or shipped and amounts for each. The invoice is prepared by the seller and acts as the document that the buyer will use to make payment.
Irregular Route Carrier: A motor carrier that may provide service utilizing any route.
ISO: See International Standards Organization (ISO).
ISO 9000: A series of quality assurance standards compiled by the Geneva, Switzerland-based International Standards Organization. In the United States, ISO is represented by the American National Standards Institute based in Washington, DC.
ISO 14000 Series Standards: A series of generic environmental management standards under development by the International Organization of Standardization which provide structure and systems for managing environmental compliance with legislative and regulatory requirements and affect every aspect of a company's environmental operations.
Issuing Carrier: The carrier whose name is printed on the bill of lading and with whom the contract of carriage exists.
ITE: See Independent Trading Exchange (ITE).
Item: Any unique manufactured or purchased part, material, intermediate, sub-assembly, or product.
J
Jidoka: The concept of adding an element of human judgment to automated equipment. In doing this, the equipment becomes capable of discriminating against unacceptable quality, and the automated process becomes more reliable.
JIT II: *See Just In Time II (JIT II)
JIT: *See Just in Time (JIT)
Joint Cost: A common cost in cases where a company produces products in fixed proportions and the cost the company incurs to produce one product entails producing another; the backhaul is an example.
Joint Rate: A rate over a route that requires two or more carriers to transport the shipment.
Joint Supplier Agreement (JSA): Indicative of Stage 3 Sourcing Practices, the JSA includes terms and conditions, objective, process flows, performance targets, flexibility, balancing, and incentives.
JSA: See Joint Supplier Agreement (JSA).
Just In Time (JIT): An inventory control system that controls material flow into assembly and manufacturing plants by coordinating demand and supply to the point where desired materials arrive just in time for use. An inventory reduction strategy that feeds production lines with products delivered just in time. Developed by the auto industry, it refers to shipping goods in smaller, more frequent lots.
Just in Time II (JIT II): Vendor-managed operations taking place within a customer's facility. JIT II was popularized by the Bose Corporation. The supplier reps, called "inplants," place orders to their own companies, relieving the customer's buyers from this task. Many also become involved at a deeper level such as participating in new product development projects and manufacturing planning (concurrent planning).
Just-in-Time Logistics (or Quick Response): The process of minimizing the times required to source, handle, produce, transport, and deliver products in order to meet customer requirements.
K
Kaizen: A Japanese term for improvement - continuing improvement involving everyone - managers and workers. In manufacturing, kaizen relates to finding and eliminating waste in machinery, labor, or production methods. Also see: Continuous Process Improvement.
Kanban: Japanese word for visible record, loosely translated means card, billboard, or sign. Popularized by Toyota Corporation, it uses standard containers or lot sizes to deliver needed parts to the assembly line just in time for use.
Keiretsu: A form of cooperative relationship among companies in Japan where the companies largely remain legally and economically independent, even though they work closely in various ways, such as sole sourcing and financial backing. A member of a keiretsu generally owns a limited amount of stock in other member companies. A keiretsu generally forms around a bank and a trading company but distribution (supply chain) keiretsus exist, linking companies from raw material suppliers to retailers.
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