Inventory terms glossary — every stock definition a Shopify operator needs

This glossary defines the inventory terms a Shopify operator actually meets — in apps, reports, spreadsheets, and supplier emails — in one or two plain sentences each, alphabetized for lookup. Definitions are operational, not academic: where a term changes a decision you make, the definition says so. Deep-dive links point to the guide that owns each topic.

A

ABC analysis — Ranking SKUs by importance, usually by revenue or profit contribution, so buying attention and count frequency concentrate on the few items that matter most. The spreadsheet method and class-by-class actions are in ABC inventory analysis.

Aged inventory — Stock that has been on hand longer than your category's normal sell-through window, valued at cost. Often surfaced in an inventory aging report with 0–30/31–60/61–90/90+ day buckets.

Available to sell — Units physically on hand, sellable now, and not spoken for by open orders or in-process transfers. Different from on-hand, which can include units already committed.

Average inventory — The mean inventory value over a period, used as the denominator in turnover and related ratios; two-point (start + end ÷ 2) is common, monthly averaging is more honest for seasonal catalogs.

B

Backorder — An order accepted for a product that isn't currently in stock, to be fulfilled when supply arrives. A strategy when deliberate; a sync failure when accidental.

Bill of materials (BOM) — The recipe of components that makes one finished unit — relevant only if you make, assemble, or kit what you sell.

Blanket PO — A standing purchase order covering multiple deliveries over time, released in installments rather than as one shipment.

C

Carrying cost — The annual cost of holding stock: storage, insurance, capital, and obsolescence, usually framed as a percentage of inventory value. The component breakdown is in inventory carrying cost.

COGS (cost of goods sold) — The cost of the units actually sold in a period; the number every margin calculation sits on, driven in Shopify by the cost-per-item field.

Committed inventory — Units allocated to open, unfulfilled orders — deducted from available, not yet from on-hand.

Consignment inventory — Stock held at a selling location but owned by the supplier until sold. Both directions matter: placing your goods in boutiques, or holding a supplier's goods.

Cycle count — Counting a rotating subset of SKUs on a schedule instead of counting everything at once; the cadence design is in inventory counts on Shopify.

D

Days of cover (days of supply) — How many days your current stock will last at its recent sales rate: on-hand ÷ daily velocity. The calculation and its in-transit caveat are in days of cover.

Dead stock — Inventory with no realistic prospect of selling at original price — typically zero velocity for months — still consuming storage and capital.

Demand forecasting — Estimating future unit sales per SKU to drive buying decisions; in practice, a per-SKU rate plus seasonality judgment, not a black box.

Demand variance — How much a SKU's sales fluctuate around its average; the input that sizes safety stock and drives XYZ classification.

E

EOQ (economic order quantity) — A formula for the order size that minimizes combined ordering and carrying costs; useful as a sanity check, rarely followed literally by small catalogs because its assumptions rarely hold.

Expiry date tracking — Managing stock rotation by dated goods so the soonest-expiring units sell first (FEFO).

F

FEFO (first expired, first out) — Rotation rule for dated goods: sell the earliest expiry first regardless of arrival order. The food-and-perishable version of FIFO.

FIFO (first in, first out) — Assuming the oldest stock sells first — both a physical rotation habit and a common accounting cost-flow method.

Fill rate — The share of demand you actually fulfilled from stock (line fill rate = order lines shipped complete ÷ lines ordered). A service metric that pairs with velocity.

Finished goods — Sellable, completed inventory, as opposed to raw materials or work in progress.

G

GMROI (gross margin return on inventory investment) — Gross profit ÷ average inventory cost; the "how many dollars back per dollar on the shelf" ratio, and the capital-efficiency check behind smarter buying.

I

In-transit inventory — Units purchased, paid, and shipped but not yet received or sellable. Often invisible to on-hand counts, which is why it distorts cover math.

Inventory adjustment — A manual correction to a recorded quantity, ideally with a reason code; the pattern of adjustments is itself diagnostic data.

Inventory discrepancy — Any gap between counted and recorded stock, valued in units and dollars; the investigation workflow has its own guide.

Inventory turnover — COGS (or units sold) ÷ average inventory; how many times stock cycles per period, interpreted against your category's norms.

Inventory shrinkage — The gap between recorded and physical inventory from any cause — theft, damage, receiving errors, paperwork. Prevention is layered controls; every store should baseline its own rate.

K

Kitting — Assembling multiple SKUs into one sellable kit or bundle at fulfillment time, which converts component stock into finished-goods stock.

L

Landed cost — The full cost of a unit at your door: product price plus freight, duty, insurance, and fees. Buying decisions made on invoice cost alone understate true unit cost — the build-up is in landed cost.

Lead time — Days from placing a PO to stock being sellable at your location — supplier production plus transit plus receiving. The single most underestimated input in buying math.

Lot tracking — Grouping units by production batch for traceability, recalls, and expiry rotation; essential for food, cosmetics, and supplements.

M

Min-max — A replenishment rule: reorder up to a "max" level whenever stock falls to a "min" trigger; simple, and cruder than velocity-based methods for skewed catalogs.

MOQ (minimum order quantity) — The smallest quantity a supplier will accept per order, per SKU, or per shipment — the constraint that forces rounding and overbuying; tactics are in MOQ meaning.

O

On-hand inventory — Units physically present at a location per your records — before subtracting commitments or damage nobody has written off.

Open-to-buy — The budgeted amount of new inventory you can purchase in a period after accounting for planned sales and current stock; a spending governor, not a reorder trigger.

Out-of-stock cost — The revenue lost while a SKU is unavailable — days dark × true daily demand × price. Days are facts; the dollar conversion is always an estimate.

P

Par level — The stock level to maintain for an item; ordering tops you back up to par. Common in food service and consumables.

Phantom inventory — Stock in your records that doesn't exist on the shelf — usually born in unverified receiving or unwritten-off damage.

Purchase order (PO) — The formal order document to a supplier listing SKUs, quantities, agreed prices, and terms; the anchor of the receiving and paper trail.

R

Reorder point (ROP) — The stock level that triggers a new PO: lead-time demand plus safety stock. The full formula with worked numbers is in the reorder point formula.

S

Safety stock — Buffer units held above expected demand to absorb supplier delays and demand spikes; sized from your own demand variance and lead-time reliability in safety stock.

Sell-through rate — Units sold ÷ units received, over a period; the speed-of-selling measure buyers use to judge a buy and time markdowns, covered in sell-through rate.

SKU (stock keeping unit) — Your unique code for one distinct sellable item and variant — the atomic unit of all inventory data.

Stockout — The state of a product being unavailable while demand exists. Note the operator vocabulary: most merchants say "went dark" or "ran out."

U

UOM (unit of measure) — The unit a SKU is counted, bought, or sold in (each, case, pound); best practice is one canonical unit per SKU, converted once at receiving.

V

Velocity (sales velocity) — Units sold per day for a SKU — the demand rate that drives every reorder calculation. Honest velocity counts only days the item was actually in stock.

Vendor managed inventory (VMI) — An arrangement where the supplier monitors your stock and ships replenishments itself; requires data sharing and trust you usually grant selectively.

W–Z

WIP (work in progress) — Partially finished goods in production — relevant to makers and assemblers, invisible to pure resale catalogs.

XYZ analysis — Classifying SKUs by demand stability (X steady, Y seasonal, Z lumpy) so each class gets the planning method it deserves; the XYZ matrix combines it with ABC.

Year-end count — The full physical count taken for accounting and tax records, with cutoff discipline for orders in flight; stricter and more complete than operational cycle counts.

How to use this page

Bookmark it as the reference when an app, report, or supplier uses a term you haven't met. The definitions here are deliberately short; the linked guides carry the formulas, worked examples, and decision tables. If you're newer to the whole discipline, the inventory management guide is the structured starting point that sequences these concepts into a weekly routine.

Common questions

What are the most important inventory terms to know first? Start with five: SKU (the unit of record), velocity (units sold per day), days of cover (how long stock lasts), reorder point (when to order), and safety stock (the buffer above expected demand). Every buying decision is a combination of those five.

What's the difference between on-hand and available inventory? On-hand is everything physically present per your records; available subtracts units already committed to open orders. Reorder math and storefront availability should both use available, not on-hand — otherwise committed units get sold twice.

What does UOM mean on a purchase order? UOM names the unit quantities are expressed in — eaches, cases, or weight units. Keep your inventory records in the sell unit (eaches) and write POs in supplier units with the case size noted, converting once at receiving.

Is shrinkage the same as stock loss from theft? No — shrinkage is the total recorded-versus-physical gap from all causes, including receiving errors, damage, and paperwork mistakes. Theft is usually the smallest single contributor in small stores, which is why process controls beat security hardware as a starting point.

Where can I learn these terms in more depth? Each linked guide in this glossary owns its topic — formulas, worked examples, and decision tables included. For a structured path through all of them, start with the inventory management guide and follow its sequence into the metric and method articles.