Cash to cash cycle time looks at the amount of time, usually days, of working capital a business has tied up in managing its inventory or supply chain.  Like many metrics, the more efficient the cash-to-cash cycle time is, the fewer days an organization's cash is unavailable for use.

​  Days sales outstanding or DSO as it is often called, is a ratio that measures the average number of days a company takes to collect its accounts receivable. When a company's DSO is short, it tells us that the company is faster at collecting payments from customers.  ​This also means you are able to use the cash from sales sooner.

​  Days payable outstanding ratio is used in accounting and finance departments that measures how many days, usually on average, it takes a company to provide payment to its suppliers.  The higher a company’s DPO, the longer it takes to pay its bills.

  Days inventory outstanding, or, DIO, as it is often referred to, is a ratio that measures the average number of days that a company holds inventory before they transform that inventory into sales.  The lower the figure, the better.

  Visual control refers to methods, devices, activities and or systems which are designed to assist in the management or control of our activities, processes, parts and or machines through visual and or other sensory means.

  Formally defined, a fill rate is the percentage of customer orders that a company can ship or, “fill”, immediately from the inventory you have on hand without placing backorders, running out of stock or missing sales.

  Inventory waste is any unnecessary storage of materials, products or information.

  PDCA or plan-do-check-act is a four step method used in lean, quality improvements and other continuous improvement strategies.  

  A Defect is any output from a service or a product that does not meet the customer required specifications, standards or requirements. 

  Inventory Turnover is the number of times your inventory cycles or turns over in a year or other defined period.  Inventory turnover can help an organization understand how efficiently their inventory is supporting sales.  The inventory turnover number implies how often inventory was bought and sold throughout the year or other defined period.  Put another way, inventory turnover is an indicator of how well a business is using their inventory.  For example, how many dollars of sales from a cost perspective are being supported by each dollar of inventory.

​  Though not a valuation method, transfer pricing is a technique that organizations use to assist in aggregate inventory management, especially when looking at, and adjusting margins.  Formally defined transfer pricing is a practice used in accounting to transfer the cost of goods or services from one area of a business to another.

  The 8 forms of waste are also referred to as the 8 forms of muda.  A Lean strategy attempts to remove any and all forms of waste from business processes.

  A problem is a deviation or gap between what is actually happening and what should be happening.  A problem can also be defined as any customer need that is not met on-time in the right amount and in acceptable quality (according to the customer).

​  Standard costs are actually estimates of the actual costs in a company’s production process.  These estimates are used because knowing the exact costs would be impossible until the process is performed.  Another way to think of standard costs is as the target or budgeted costs involved in a businesses processes.  Standard costs usually include: material costs, labor costs and overhead costs.

  The specific identification inventory valuation method is used to track each and every item in your inventory individually.  This includes the time it enters the inventory until the time it leaves it.  Let’s not get confused here, specific identification is different from LIFO and FIFO.  LIFO and FIFO  groups pieces of inventory together based on when they were purchased and how much they cost, while specific identification identifies and tracks every piece of inventory individually.  The specific inventory method tags or marks each item with its purchase cost and any additional costs that are incurred in the transformation process until it is sold. 

​  LIFO is a method used for cost flow assumption purposes in the cost of goods sold calculation.  ​The LIFO method of inventory valuation assumes the most recent products or, "last in" products of a company’s inventory have been used first.

 First in First out is a method used in inventory valuation for accounting purposes.  The method advocates the practice of using the oldest inventory item first, hence the name "first in" "first out." The principle is also applicable in maintaining precise sequence during and through the production of items because it ensures that the first part into a process or inventory location is also the first part to be used.  The FIFO lane is one method of controlling and regulating a pull system that is between two disconnected (decoupled) processes.  

  The average cost method is an inventory valuation method used in accounting to calculate the value of inventory.  Put very simply it is the cost of all inventory items summed and averaged.

​  Inventory valuation can make or break a company.  It is absolutely essential that the valuation method you choose aligns with the needs of your specific business and the industry it serves.  In this post we will introduce one valuation type known as actual cost valuation.

Managing inventory would be impossible without a means to track how much inventory is on hand and if it is an appropriate amount of inventory.  With that being said, the days of supply metric is a useful metric that can show an organization how many days their existing inventory will last before it reaches zero or drops into their safety stocks.

Hedge inventory finds its roots in the term ‘hedging’.  Hedging which means reducing or controlling risk is a common practice in many industries and a not so common one in others.  Hedge inventory is actually very similar to anticipation inventory, except there is more risk and quite a bit less certainty in increased demand and decreased supply.

  Have you ever wondered, what does the word anticipation mean?  In this lecture, we will answer the question, what is anticipation inventory? 

  Have you ever heard the question, what lot size should we order?  Or, what’s the lot size of the inventory?  In this lecture we will demystify this question and provide some clarity on what a Lot Size is.

  Imagine a smooth flowing process.  The work is easy, employees are happy and inventory seems to flow like a stream of water.  Now, think what would happen if just one operation in the process couldn’t keep up with the others.  Or, a machine breaks down.  Now your flow is halted and a lot of waiting occurs.  Many traditional manufacturers in these cases rely on inventory buffers to prevent a complete line stop and keep lines running.  So, what is an inventory buffer?