Industrial Supplies Industry Terminology

ABC Analysis

An inventory classification method that segments items into A, B, and C categories based on their value and impact (e.g., sales volume, margin, or criticality). It prioritizes management focus, cycle counting frequency, and service levels.

Run an ABC analysis before setting safety stock levels; Count A-class items weekly and C-class items quarterly; Shift C-class consumables to vendor-managed bins to free working capital.

Advanced Shipping Notice (ASN)

An electronic pre-shipment notification detailing contents, pack structure, carrier, and estimated arrival. It improves receiving accuracy, cross-docking, and invoice matching.

Receiving schedules dock appointments based on ASNs; Match the ASN to the PO to speed check-in; The ASN shows 10 pallets and 2 mixed cartons of fasteners.

ANSI (American National Standards Institute)

The U.S. body that coordinates voluntary consensus standards impacting product dimensions, safety, labeling, and testing. ANSI standards ensure compatibility and compliance across industrial products.

Verify the ladder meets ANSI Type IA; Bearings conform to ANSI dimensional standards; Update safety signs to ANSI Z535 format.

Available to Promise (ATP)

A real-time calculation of uncommitted inventory available for new orders, factoring current stock, allocations, open POs, production, and lead times. Used to provide reliable promise dates.

CSR checks ATP before quoting ship date; ATP dipped after a large blanket release; ERP shows ATP of 500 units for Friday.

Backorder

Order quantity that cannot be filled at shipment due to stockout and is delivered later. It is a key service-level and customer satisfaction indicator.

We partially shipped and backordered the rest; Backorders spiked on M8 bolts after a supplier delay; Raise safety stock to reduce backorders.

Batch Picking

A warehouse method where a picker collects items for multiple orders during a single tour. It increases efficiency for high-SKU, small-order profiles.

Use batch picking for small-tool orders to cut travel; The WMS released a batch wave for 40 orders; Batch picking reduced picker travel by 30%.

Bill of Materials (BOM)

A structured list of all components, subassemblies, and quantities required to produce an assembly, kit, or finished good. It drives purchasing, kitting, and MRP.

The hose kit BOM specifies stainless clamps; Update the BOM for the new filter revision; Explode the BOM to generate buy signals.

Blanket Order

A long-term purchase commitment for a total quantity over a period, with scheduled releases and agreed pricing. It stabilizes supply and simplifies administration.

Issue a 12-month blanket for PPE with quarterly releases; Release 200 units against the blanket; Blanket orders help lock in pricing and capacity.

Consignment Inventory

Stock stored at the customer’s location but owned by the supplier until consumed. It improves availability for the customer and reduces working capital burden.

Drill bits are stocked in consignment bins at the plant; Reconcile consigned inventory monthly; Use consignment to improve cash flow on slow movers.

Cost of Goods Sold (COGS)

The direct costs of items sold, including purchase price, inbound freight, duties, and manufacturing costs. It drives gross margin and pricing decisions.

COGS rose due to ocean freight and tariffs; Include inbound freight to calculate true COGS; Lower COGS through vendor negotiations and value engineering.

Cross-Docking

A logistics practice that moves goods directly from receiving to shipping with minimal storage. It accelerates flow and reduces handling and inventory.

Cross-dock gloves from inbound door 3 to route 12; Use ASNs to enable cross-docking; Cross-docking reduced days on hand.

Cycle Count

A periodic counting method of subsets of inventory rather than a full physical count. Often prioritized by ABC class to maintain high accuracy.

Schedule daily cycle counts for A-items; Investigate variances after cycle counting; Cycle counts keep WMS inventory accuracy high.

Dead Stock

Inventory with negligible or no demand for an extended period. It ties up capital and space and may require markdown, return, or disposal.

Write off obsolete safety signs from 2019; Create a promotion to move dead stock abrasives; Review min/max to prevent dead stock buildup.

Demand Forecasting

The process of predicting future demand using historical sales, seasonality, promotions, and customer intelligence. It informs purchasing, capacity, and inventory policies.

Use seasonality to forecast glove demand; MAPE improved after adding POS data; Collaborate with OEM customers for forecast inputs.

Drop Shipping

A fulfillment method where the supplier ships directly to the end customer on behalf of the distributor. It reduces handling, lead time, and carrying costs.

Drop ship the compressor from the OEM to the plant; Mark the order as drop ship in ERP; Use drop ship to avoid LTL handling and delay.

E-Procurement

Digitized purchasing processes and platforms for requisitioning, approvals, ordering, and payment. It increases control, compliance, and speed.

Move MRO buys to the e-procurement portal; Use punchout catalogs for contract pricing; Automate approvals in the P2P workflow.

EDI (Electronic Data Interchange)

Standardized, computer-to-computer exchange of business documents (e.g., POs, ASNs, invoices). It reduces errors and speeds order-to-cash.

Customer requires EDI 850 POs; Our 856 ASN failed validation; Enable EDI invoicing to accelerate cash collection.

ERP (Enterprise Resource Planning)

An integrated software suite managing core business processes such as inventory, orders, purchasing, finance, and planning. It provides a single source of truth.

ERP shows real-time stock across branches; Implement MRP in ERP for A-class items; The ERP upgrade enables lot traceability.

Fill Rate

The percentage of demand fulfilled immediately from stock at the first shipment. It is a primary service-level KPI.

Line fill rate reached 96%; Improve fill rate by adjusting ROPs and safety stock; Backorders hurt our order fill rate.

Five S (5S)

A workplace organization method: Sort, Set in order, Shine, Standardize, Sustain. It improves safety, efficiency, and visual control.

5S the bin area before peak season; Label locations and shadow boards per 5S; Conduct weekly 5S audits in will-call.

FOB (Free On Board)

A trade term defining when ownership and risk transfer and who pays freight. In U.S. practice, often specified as FOB Origin or FOB Destination.

Quote FOB Origin—buyer pays freight; Clarify FOB terms on the PO; Price is FOB plant, freight collect.

GHS (Globally Harmonized System)

An international system for classifying and labeling chemicals, standardizing hazard statements, pictograms, and safety data sheets.

Update labels to GHS format; Train staff on GHS pictograms; Ensure SDS align with GHS classifications.

GTIN (Global Trade Item Number)

A GS1 standard identifier for trade items (e.g., UPC, EAN). It underpins barcoding, scanning, and product data synchronization.

Scan the GTIN on the carton; Map SKUs to GTINs in ERP; Supplier added GTIN-14 for case-level barcodes.

HAZMAT (Hazardous Materials)

Materials that pose risks during handling or transport and require special packaging, labeling, and documentation per regulations.

Ship HAZMAT via certified carriers; Apply HAZMAT surcharges appropriately; Verify HAZMAT training and documentation.

HS Code (Harmonized System Code)

The international tariff classification system used by customs to determine duties and trade statistics. Correct coding minimizes costs and delays.

Assign HS codes to all imports; Tariff increases affected HS 8205 fasteners; Broker needs HS codes on commercial invoices.

Incoterms

ICC-defined rules that clarify responsibilities for delivery, risk, and costs in international trade. They standardize buyer-seller obligations.

Quote DDP to better control delivery; Supplier ships under FCA per contract; Align Incoterms with insurance coverage.

Industrial Internet of Things (IIoT)

A network of connected industrial devices that capture and exchange data to improve visibility, maintenance, and supply chain automation.

IIoT bin sensors trigger auto-replenishment; Stream machine runtime data for predictive maintenance; Feed IIoT signals into ERP dashboards.

Inventory Turnover

A measure of how many times inventory is sold and replenished over a period. Higher turns generally indicate healthier inventory.

Increase turns on PPE from 4 to 6; Low turns flag potential dead stock; Turns improved after SKU rationalization.

ISO 9001

A globally recognized quality management standard emphasizing process control, documentation, and continuous improvement.

Our DC is ISO 9001 certified; Audit procedures per ISO 9001 requirements; Require ISO certification for critical suppliers.

JIT (Just-in-Time)

An inventory strategy to receive or produce items exactly when needed, reducing holding costs and waste. Requires stable supply and demand.

JIT delivery for OEM kits to reduce stock; JIT faltered when supplier lead times slipped; Pair JIT with reliable carriers and suppliers.

Job Safety Analysis (JSA)

A systematic review of job steps to identify hazards and define safe operating procedures. It reduces incidents and ensures compliance.

Conduct a JSA before cutting pipe; Update JSA for the new packing line; Train new hires on JSA procedures.

Kanban

A pull-based replenishment signaling system (cards, bins, digital) that triggers restocking based on consumption rather than forecasts.

Two-bin kanban for fasteners in assembly; Set kanban sizes using historical usage; Use e-kanban through scales or RFID.

Lead Time

The total elapsed time from order placement to receipt, including supplier, production, transit, and internal processing time.

Supplier lead time is 21 days door-to-door; Lead time variability drives safety stock; Expedite to recover promised dates.

Lean

A management philosophy focused on eliminating waste, improving flow, and delivering customer value with fewer resources.

Map the DC value stream per Lean principles; Kaizen event reduced picking waste; Lean cut dock-to-stock time by 40%.

Lockout/Tagout (LOTO)

A safety procedure ensuring equipment is isolated from energy sources and cannot be started during service or maintenance.

LOTO required before conveyor maintenance; Audit LOTO kits and procedures; Train staff annually on LOTO steps.

Maintenance, Repair, and Operations (MRO)

Supplies and services used to keep facilities and equipment running (e.g., tools, lubricants, PPE). A major spend category in industrial operations.

Consolidate MRO suppliers to reduce COGS; MRO spend analysis revealed duplicate SKUs; Stock MRO spares near the line.

Minimum Order Quantity (MOQ)

The smallest quantity a supplier will sell or that is economical to purchase. It affects cash, space, and service levels.

Vendor MOQ is 1,000 gloves; Negotiate lower MOQs to reduce inventory; MOQ triggered a bulk buy to meet demand.

On-Time Delivery (OTD)

The percentage of orders delivered by or before the promised date. A core customer service KPI for distributors and suppliers.

OTD improved to 94% after carrier changes; Missed OTD due to weather delays; Tie bonuses to OTD targets.

OSHA (Occupational Safety and Health Administration)

The U.S. agency that sets and enforces workplace safety and health standards. Compliance reduces risk and liability.

Prepare for an OSHA inspection; Ensure fall protection meets OSHA standards; Recordables on OSHA logs decreased.

PPE (Personal Protective Equipment)

Equipment worn to minimize exposure to hazards, such as gloves, respirators, goggles, and helmets. Often regulated by OSHA and other bodies.

Specify cut level A5 gloves for metalwork; Stock PPE sizes for all shifts; Train on proper PPE fit and care.

Procure-to-Pay (P2P)

An end-to-end process covering requisition, approval, purchasing, receiving, and payment. Digitization reduces cycle time and errors.

Automate P2P with three-way match; P2P cycle time fell by 40%; Embed catalogs into the P2P system for compliance.

Purchase Order (PO)

A formal buyer authorization to purchase goods or services, specifying quantities, prices, terms, and delivery requirements.

Issue a PO before shipment; PO lines matched the supplier invoice; Submit a PO change order to update due dates.

QA/QC (Quality Assurance/Quality Control)

QA prevents defects through process control and documentation; QC detects defects via inspection and testing. Together they ensure conformity.

QC incoming bearings to ANSI specs; QA updated calibration schedules; Supplier CAPA resolved a QC nonconformance.

Reorder Point (ROP)

The inventory level that triggers a replenishment order. Typically calculated from expected demand during lead time plus safety stock.

Set ROP equal to demand during lead time plus safety stock; Review ROPs for seasonal items; WMS auto-reorders at ROP.

Safety Stock

Extra inventory held to buffer against variability in demand or lead time. It reduces the risk of stockouts at a cost of higher inventory.

Raise safety stock ahead of outage season; Safety stock prevented a stockout during a delay; Calculate safety stock by target service level.

SKU (Stock Keeping Unit)

A unique identifier for a specific product and variant used for inventory control, pricing, and reporting.

One SKU per glove size and color; SKU proliferation hurt turns; Standardize SKU naming conventions in ERP.

Third-Party Logistics (3PL)

External providers that deliver logistics services such as warehousing, transportation, and fulfillment. They add capacity and expertise.

Outsource e-commerce fulfillment to a 3PL; Integrate the 3PL via EDI 940/945; 3PL billed storage by pallet position.

Total Cost of Ownership (TCO)

The comprehensive cost of acquiring and using a product over its lifecycle, including price, freight, duties, handling, storage, quality, and downtime costs.

TCO favored the local supplier despite higher unit price; Include tariffs and damage rates in TCO; Tool life changes the TCO of abrasives.

Vendor Managed Inventory (VMI)

A replenishment model where the supplier monitors and restocks the customer’s inventory based on agreed parameters and consumption data.

VMI for fasteners via bin scanning; Define min/max levels with the vendor; VMI cut stockouts at the plant.

Warehouse Management System (WMS)

Software that manages warehouse operations including receiving, putaway, picking, packing, shipping, and inventory control. It optimizes labor, space, and accuracy.

WMS directed putaway improved space utilization; Enable wave picking in the WMS; WMS integration provides real-time inventory across branches.