Operations Terms and Definitions
This is a listing of terms and definitions related to grocery and supermarket operations.
A physical inventory system involves the actual counting of merchandise. A retailer using the cost method of inventory valuation and relying on a physical inventory system can derive gross profit only as often as it conducts a full physical inventory.
Perpetual inventory is a real-time records of the number of units handled by a retailer adjusting for sales, returns, transfers to other departments or stores, receipt of supplier shipments, and related transactions. Usually executed with point-of-sale and order, inventory & warehouse management systems.
Order lead time is the period from the date an order is placed by a retailer to the date merchandise is ready for sale (received, price-marked, and put on the retail selling floor).
Operational equipment efficiency (OEE) is a metric of overall system operational performance. A solid OEE formula is:
multiply the three OEE factors: Availability (Run time / Planned time), Performance ([Total Count / Run Time] / Ideal Run Rate), and Quality (‘Good’ Count / Total Count). A high OEE is good.
The electronic exchange of business information using standardized formats. Companies conducting business electronically are typically called trading partners. EDI allows retailers and suppliers to regularly exchange information on inventory levels, delivery times, unit sales, and so on,
Each picking is an order picking process of picking an individual item from a master carton. It may also known as split-case picking or piece picking.
Warehouse slotting is manual or software-based inventory deployment driven by SKU activity profiles; e.g., placing the fastest moving inventory in most accessible locations.
Basic stock method is an inventory-level planning tool wherein a retailer calculates a baseline level of inventory that is the same for all months; inventory should not drop below the base level.
A basic stock list specifies the inventory level, color, brand, style category, size, package, and so on for every staple item carried by the retailer.
An automatic reordering system orders merchandise when stock-on-hand reaches a pre-determined reorder point. An automatic reorder can be generated by a computer on the basis of a perpetual inventory system and reorder point calculations.