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Glossary

ABC Classification - A method used to categorise inventory into groups based upon certain activity characteristics such as Sales $.   ABC categories are used to develop inventory planning policies, set count frequencies for cycle counting, and other inventory management activities.

 

Accounting Basis - Refers to the way your Company accounts are run.  The options in Ostendo are:

- Invoice: Sales Revenue and Tax Amount are posted at time Invoice was raised

- Cash Deferred Sales: Sales Revenue and Tax Amount are posted at time of payment. 

- Cash Immediate Sales: Sale Revenue is posted at time Invoice was raised.  Tax Amount is posted at time of Payment

 

Activity Alerts - Software functionality that triggers specific actions based upon the occurrence of a specific event or combination of events.    For example: If inventory drops below a predetermined level (reorder point) a message is triggered to a planner.

 

Actual cost - An Inventory costing method used in manufacturing and jobbing environments that uses the actual materials, machine, and labour costs recorded against a specific order to calculate the cost of the finished product or service.

 

‘Add-On’ Sale - An Add-On sale is a Sales technique whereby you offer a complementary product at a special price whenever the main product is being sold.  For example, If the Item you are selling is a tin of Paint then you may wish to suggest the purchase of Paint Brushes, Brush Cleaner, etc.  These ‘Add-On’ Sales Items may have their own Sell Price specifically used when sold along with the originating Sales Line.

 

Administrator: An Administrator is a person charged with maintaining the correct functioning of your computer installation and Ostendo Software. Sometimes called a systems administrator, an Administrator monitors the software, maintains users, and performs other important technical and operational tasks.

 

Allocations - Allocations refer to the linking of actual demand for an Item in a Sales, Assembly or Job orders to the Inventory Item.    It provides an indication as to when, and in what quantities, the Item is required.

 

Assembly Order - An Assembly Order is an Order that is placed within the organisation to manufacture an end product.  This normally uses a Bill Of Material and a Routing.  Upon completion the Product is moved into Stock

 

Available (or Free) Stock - Refers to the status of inventory as it relates to its ability to be sold or consumed. Availability calculations to determine this status basically subtract any current allocations of demands on inventory from the current on-hand balance. An example of an availability calculation would be: [Available] = [Quantity allocated to Assembly Orders] - [ Quantity allocated to Job Orders] - [Quantity allocated To Sales Orders].

 

Average cost - An Inventory costing method that recalculates an item’s cost at each receipt by averaging the actual cost of the receipt with the cost of the current inventory.

 

Backflushing: Automatic issue of Components and Descriptors to an order.  Upon receipt of the goods from an Assembly order the components required to make the product are automatically issued (I.e. Backflushed)

 

Backorder: Refers to unshipped Line Items on a shipped Sales Order. For example, if a Customer orders four Lines, but only two of the Lines are shipped (or partially shipped), the remaining Lines would be on backorder.

 

Barcode: An alternating series of vertical bars and white spaces of varying widths used to encode information that can be read by electronic scanners.   Typically these are used to identify an Item or a specific SKU

 

Bill of Material - A Bill of Material lists materials (components or ingredients) required to produce the end product.   Multilevel BOMs show subassemblies and their components.  Other information such as scrap factors may also be included in the BOM.

 

BOM - see Bill of Material

 

ByProduct - An Item that is sometimes (but not always) produced at the same time as the main product in an Assembly Order.  These usually do not absorb some of the Costs associated with the production of the main product.

 

Capacity Planning - A process for determining the amount of Asset (machine) and Labour resources required to meet the demand.

 

COGS - See Cost of Goods Sold

 

Component - An Item or Descriptor that is required for the production of another Item. Components are the Items and Descriptors listed on a Bill of Materials.

 

Consignment Stock - Inventory that is in the possession of the customer, but is still owned by the supplier. Consignment inventory is used as a marketing tool to make it easier for a customer to stock a specific supplier’s inventory.

 

Consolidate Invoice - A consolidated Invoice is a single Invoice that contains a collection of individual billing lines over a defined period.  Two options are available in Ostendo

- Consolidate by Order - During Invoice generation all lines due to be Invoiced from a single Order will be included in the Invoice.

- Consolidate by Customer - During Invoice generation all lines across all Orders due to be Invoiced will be included in a single consolidated Invoice.

 

Contract Invoice - (Also known as a ‘Recurring’ Invoice) A Contract Invoice is a billing schedule agreed with the Customer.  This can be either a schedule of planned Invoices each with a value, or a single planned invoice charged on a regular frequency

 

CoProduct - An Item that is always produced at the same time as the main product in an Assembly Order.  Co-Products will absorb some of the Costs associated with the production of the main product.

 

Cost Centre - A specific function or service area for which a budget is prepared and costs identified within the Company’s Accounts.  Cost Centres are used by Ostendo to gather Costs  These Cost Centres are associated with the actual GL Account Code(s) in the associated Accounting Package.

 

Costing method - Refers to the calculations used to determine the value (cost) of inventory.

 

Cost of Goods Sold - An accounting term used to describe the total value (cost) of products sold.  Since inventory is an asset, it is not expensed when it is purchased or produced.  Instead it goes into an asset account (usually called Inventory).  When a product is sold, the value of the product (the cost, not the sell price) is moved from the asset account to an expense account called Cost of Goods Sold or COGS.  COGS appears on the profit-and-loss statement.

 

Credit Terms - Credit Terms are part of the general Terms and Conditions pertaining to your business.  They set out what you will do for your customers and what you expect your customers to do in return.

 

CRM – Customer Relations Management.    A means of managing the overall marketing, sales and service process.   Generally includes lead management from initial prospect to close of sale and beyond.

 

Current (or Last) Cost - An inventory costing method that applies the cost of the most recent receipt to a specific item.

 

Custom Product - A Custom Product is a product that is created to a Customer’s unique specification.  The Manufacturer normally makes an end ‘Model’ that has infinite variables.  The Customer defines the specific values of the variables from which a ‘Customer Specific’ product can be defined, quoted, and manufactured.

 

Cycle Count - Refers to process of regularly scheduled inventory counts that “cycles” through your inventory.  The User normally determines how often certain items/locations are counted.

 

Demand - The need (from a Sales, Assembly, or Job Order) for a specific product or service in a specified quantity. 

 

Dependent Demand - A demand generated from scheduled production of other items.  Within Ostendo this refers to Components used in an Assembly Order.

 

Descriptor - Any quantifiable product or Service that you can handle, buy, sell, consume, or track can be considered a Descriptor (or non-Stock Item). This covers everything from Travel, Accommodation Costs, to non-stocked supplies from Suppliers Catalogues.

 

Direct Invoicing - Direct Invoicing allows you to create a Customer Invoice that does not originate from a Sales or Job Order.

 

Direct Ship - Direct Shipping and Drop Shipping are two interchangeable terms.  They describe a process whereby three parties interact with the sales transaction (your Customer, You, and your Supplier).  The Customer orders a product from You who then arranges with the Supplier to ship the product directly to the Customer.    The Customer pays You and You pay the Supplier.

 

Discrete Manufacturing - This describes manufacturing of distinct items (items you can easily count, touch, see) such as a light bulb, telephone, bicycle, fuel pump, etc. 

 

Distribution Requirements Planning - Process for determining inventory requirements in a multiple Site/Warehouse environment.  DRP may be used for both Distribution and Manufacturing.   In manufacturing, DRP will integrate directly with MRP.  

 

Distributor - Describes the organisation that does not manufacture goods but purchases for distribution (Wholesaler).  This process covers storing, shipping, and transporting goods. 

 

Drop Ship - Drop Shipping and Direct Shipping are two interchangeable terms.  They describe a process whereby three parties interact with the sales transaction (your Customer, You, and your Supplier).  The Customer orders a product from You who then arranges with the Supplier to ship the product directly to the Customer.    The Customer pays You and You pay the Supplier.

 

Economic Order Quantity - The result of a calculation that determines the most cost effective quantity to Purchase or Assemble.  The formula basically finds the point at which the combination of order cost and carrying cost is the least.  The standard formula is EOQ = Square Root [2 * (Annual Usage) * (Order Cost) / (Annual Carrying Cost/unit)]. 

 

EDI – Electronic Data Interchange

 

Event Management - Software functionality that triggers specific actions based upon the occurrence of a specific event or combination of events.    For example: If inventory drops below a predetermined level (reorder point) a message is triggered to a planner.  This is event management.

 

Fast Moving Consumer Goods (FMCG) - Description of common high volume products such as food, hygiene product, or cleaning supplies.  These would be products that the average consumer would frequently purchase such as cereals, toothpaste, or dish soap.

 

FIFO - First-in-first-out.  In Warehousing it describes the method of rotating inventory to use the oldest product first.  It also refers to an accounting term used to describe an inventory costing method.

 

Finite Capacity Planning - Finite Capacity Planning is an approach to determine which Assembly Orders can be produced in a fixed time period whilst taking the limitations on different resources into consideration. The goal of Finite Capacity Planning is to ensure that work proceeds at an even and efficient pace throughout the plant without overloading workcentres

 

Fixed Overheads - Stable costs that occur regardless of whether or not goods are being produced (i.e. rent of factory). These are allocated according to the number of production hours worked.

 

Forecast - A Forecast is an estimation of future demand and is used to replenish Inventory Levels.  Most forecasts are based on historical demand.  Adjustments for seasonality and trend are often necessary.

 

Forecast Consumption - Describes the method Ostendo uses to reduce forecasted demand by the actual demand that occurs during the forecast period.

 

Free Stock – See ‘Available Stock’

 

Independent Demand - A demand generated from Forecasts, Inventory Minimum Stock, Sales, Assembly or Job Orders.

 

Infinite Capacity Planning - Infinite Capacity Planning is where the loading requirements are based on the planned or scheduled dates and do not rearrange them if capacity is not available.  This produces a view that compares the current actual Load to the availability of the Resource to make it.  The resultant View and provides information regarding over or under conditions based on this calculated Load -v- Capacity.  From this the manager can take steps to even out this loading by, for example, authorise Overtime, or Subcontract the work so that the Order is not delayed.

 

Inventory - Any quantifiable item that you, buy, sell, and store in a Warehouse can be considered inventory.  This covers everything from office and maintenance supplies, to raw material, semi-finished products and finished goods.

 

Inventory Management - The direction and control of activities with the purpose of getting the right inventory in the right place at the right time in the right quantity in the right form at the right cost.

 

Inventory Turn - The number of times inventory is consumed or sold during a one year period.  Generally calculated by dividing the average inventory level (or current inventory level) into the annual inventory usage (annual Cost of Goods Sold).

 

Item - refers to a specific item identity.  The Item could have varying Units of Measure and other ‘Item Characteristics’ such as Colour, Lot Number, Grade, Expiry Date, etc

 

Item Characteristics - Data that describes ‘Sub-Level’ characteristics of an item so that it can be uniquely identified in Inventory.  These characteristics may include Colour, Size, Grade, Expiry Date, Batch, Lot, or Serial Number.

 

Job Order - Covers carrying out a Service activity or a series of Tasks.  This style of Order is used for Service and Maintenance activities in addition to Construction and Contracting.  It can involve large ‘Projects’ that have multi-Invoice stages based on actual achievement rather than a known value of the Sales Order

 

Jobbing Shop - Jobbing (or Job) shops are typically small manufacturing operations that handle specialised manufacturing processes such as small customer orders or small batch jobs.  Job shops typically move on to different jobs (possibly with different customers) when each job is completed.

 

Kitset - In Ostendo a Kitset is defined as a collection of Items and Descriptors that can be called up and added to a Sales Orders line.  Any Invoice generated from the sale of a Kitset will use the sell price of that Kitset.  However the individual lines within the Kitset will be issued to the Sales Order. 

 

Landed Cost - An Inventory costing method that includes the purchased cost plus transportation costs, import fees, duties, taxes, and other costs incurred in obtaining the Item.

 

Last (or Current) Cost - An Inventory costing method that applies the cost of the most recent receipt to all inventory of a specific item.

 

Lead Time - The amount of time required for an item or Descriptor to be available for use from the time it is ordered.   Lead time generally includes purchase order processing time, vendor processing time, in transit time, receiving, inspection, and any prepack times.

 

LIFO - Last-in-first-out - In Warehousing it describes the method for using the newest inventory first.  It is also used in accounting to describe an inventory costing method.

 

Lot Number: A unique identifier assigned to a batch of Items produced at the same time and also share the same specifications.

 

MRP / MRPII - Manufacturing Resource Planning - Process for determining Material, Labour and Machine requirements specifically in a manufacturing environment.   MRP was originally designed for materials planning only.   When Labour and Machine (Resources) planning was incorporated it became known as MRPII.  Today the definition of MRPII is generally associated with MRP systems.

 

Negative Inventory - An inventory condition whereby the on-hand inventory balance is listed as a quantity less than zero.  This can occur (for example) when an Item is placed in Inventory and formally issued.  However its receipt from Purchasing has not yet been recorded.

 

Obsolete Inventory - Inventory that has had no sales or usage activity for a specific period of time.  The period of time varies by company and industry and may even vary by product line within a specific company

 

Order Cost - Also known as Purchase Cost.  Order Cost is the sum of the fixed costs that are incurred each time an item is ordered.  These costs are not associated with the quantity ordered but primarily with physical activities required to process the order.   For purchased items, these would include the cost to enter the purchase order and/or requisition, any approval steps, the cost to process the receipt, incoming inspection, invoice processing and vendor payment, and in some cases a portion of the inbound freight may also be included in order cost.

 

Phantom Bill of Material - A fictitious Bill of Material created for common subassemblies that you do not normally produce as separate items.  For example, if you have a number of products that all use the same common components you can create a phantom bill for the common components and then just put the phantom item on the bills for all products that use it.

 

Physical inventory - Refers to the process of counting all inventory in a warehouse or plant.  A ‘Physical’ Inventory is commonly carried out once per year.

 

POS - Point of sale or point of service (POS or PoS) can mean a retail shop, a checkout counter in a shop, or the location where a chargeable transaction occurs such as Vehicle Servicing, Spare Parts sales, Whiteware sales. Jobbing Shop, Etc.

 

Price Breaks - These are price reductions given for the Customer purchasing larger quantities. The rationale behind Price Breaks is to obtain economies of scale and pass some (or all) of these savings on to the customer.

 

Process Manufacturing - A type of manufacturing where a product is produced or transformed through mixing, chemical reactions, etc.  Examples of process manufacturing would be extracting copper from ore, combining materials to make paint, mixing ingredients and making biscuits.

 

Purchase Order - A document used to approve, track, and process purchased items.   A purchase order is used to communicate a purchase to a supplier. It is also used as an authorisation to purchase. A purchase order should state quantities, costs, and delivery dates. The purchase order is also used to process and track receipts and supplier invoices/payments associated with the purchase.

 

Quantity Allocated - Also known as committed quantity and denotes the quantity required by, and allocated to, current open Sales, Assembly or Job orders.

 

Quantity Available - Refers to the status of inventory as it relates to its ability to be sold or consumed.  Availability calculations are used to determine this status. Availability calculations basically subtract any current allocations of demands on inventory from the current on-hand balance. An example of an availability calculation would be: [Available] = [Quantity allocated to Assembly Orders] - [ Quantity allocated to Job Orders] - [Quantity allocated To Sales Orders].

 

Quantity In Transit - In multi-branch environments, quantity in transit reflects the quantity that has been shipped from one branch/facility to another branch/facility, but has not yet been received by that branch/facility.

 

Quantity On-Hand - Quantity on hand describes the actual physical inventory in the possession of the business.  When inventory is received or produced it is added to the quantity on hand.  When inventory is sold or consumed it is removed from quantity on hand.

 

Quantity On-Order - Includes quantity on open Purchase or Assembly orders.

 

Queue Time - The amount of time a job waits at one Step, Stage or Operation prior to it being worked upon in that step.  This usually forms part of the manufacturing lead time.

 

Recurring Invoice - (Also known as a ‘Contact’ Invoice) A recurring Invoice is a billing schedule agreed with the Customer.  This can be either a schedule of planned Invoices each with a value, or a single planned invoice charged on a regular frequency

 

Reorder Point - A number held against an Inventory Item that triggers a Suggested Order whenever the Quantity Available falls below this level.

 

Reorder Quantity - A number held against an Inventory Item that represents the minimum quantity to be ordered whenever a Suggested Order is triggered.  The resultant Suggested Order quantity is the greater of either this Reorder Quantity or the quantity required to bring the Quantity Available up to the Reorder Level

 

Replenishment Order: A Planned Order issued by the Replenishment Run to re-supply an Item whose available quantity has fallen below its Reorder Point.

 

Revision Control - Revision control is the management of multiple revisions of the same unit.  It is most commonly used in engineering to manage ongoing development versions of the same product.  Changes are identified by incrementing an associated Revision Number (or Letter) code, termed the "revision number".

 

Routing - used in conjunction with the bill of material in Assembly operations.  While the BOM contains the material requirements, the routing will contain the specific steps required to produce the finished items.  Each step generally consists of a description of what is to be done and also contains machine and labour requirements.

 

Sales and Distribution - Describes the organisation that does not manufacture goods but purchase for sale.  Part of this process covers storing, shipping, and transporting goods.  Also describes the facilities (distribution operations, distribution centres) that conduct these activities. 

 

Sales Order - A Sales Order represents a Customer demand for your products.  This can range from Point of Sale (Supermarkets, etc), Counter Sale (Car Parts Retailer), or Distributor/Manufacturer (Pick/Despatch/Invoice)

 

Schedule of Quantities - Is a detailed listing of the quantities of materials, labour and any other items required to carry out a task (Example: Fitting a Bathroom, or laying a length of drainage).   It is often used in the Building and Construction industry to quickly formulate quotations.  When making a quotation the SOQ is selected and a quantity applied.  The contents of a Schedule of Quantities is expanded to provide details, costs and timescale.

 

Serial Number: A unique number used to identify a single Item.

 

Setup time: The amount of time required to prepare an Assembly Order (or Step) before the process of assembling the parent Item can begin.  Setup time is charged only once per Order, regardless of the quantity ordered.

 

Source on Demand - An ordering method reacting to a direct demand for an Item.  Whenever a Demand is created be a Sales, Assembly or Job Order then a matching supply Order (Assembly or Purchase) for the required quantity is created.

 

Standard Cost - Inventory costing method used in (mainly) manufacturing environments that uses the materials costs in the bill of materials combined with the labour and machine costs in the routing to calculate the cost of the finished or semi-finished item.

 

Step - A step is a definitive process phase within an Assembly Order that defines where the activity is being carried out, what will be done to complete that step, and how long the step will take.  A sequence of consecutive Steps can describe a complete Assembly process (Example: Cut, Machine, Assemble, Inspect)

 

SKU – Stock Keeping Unit is a unique identifier for each distinct product or product variation that can be stocked.   SKU usage is usually associated with data management and enables stock tracking in warehouses and retail outlets.

 

Suggested Order - Term used within Inventory Replenishment for a system-generated planned order quantity.  Suggested Orders only exist within the computer system and serve multiple functions.  One function is to notify the planner or buyer to produce or order materials, which is done by converting a Suggested Order into a Purchase or Assembly Order. 

 

Supplier Catalogue - A Supplier Catalogue is designed to present the Supplier’s products to you.  It contains information about the products and includes Item details along with Purchase Pricing, Quantity Discounts, recommended Sell Price, etc.

 

Supply From Stock - An ordering method whereby any demand created by a Sales, Assembly or Job Order immediately makes an allocation against current Stock.  Inventory Maintenance routines maintain the Stock Level by addressing the total demands

 

System Alerts - Are pre-defined exception conditions which generates a ‘pop-up’ messages that appear on your PC at a selected time after the alert condition has occurred.  (For Example: A Purchase Order has overdue Lines).

 

Task - A Task is used in the Job Order environment to define a ‘descriptive’ activity.  (Example: Fit out a Kitchen, or Lay 100 Mtrs of Cable).  It comprises of materials and activities that contribute to the complete activity.  A Task is also known a ‘Schedule of Quantities’

 

Task Bill - A Task Bill is a pre-defined list of materials, Descriptors and Labour activities.  This is often referred to as a ‘Schedule of Quantities’.  It is used as the basis for adding a known Task to a Job Line.   The Task Bill has Header Information plus details lines that make up the Schedule of Quantities

 

Job Template - A Job Template is a pre-defined Job Order list that can contain multiple Tasks, Task Lines and Resources.  A Template is - optionally - selected when creating a new Job; the copied contents can then be amended as required.

 

Timesheets - Timesheets are used to record the start and end time of tasks, or just the duration. It may contain a detailed breakdown of tasks accomplished throughout the Job or Project. This information may be used for payroll, client billing, and increasingly for project costing, estimation, tracking and management.

 

Unit of Measure - Describes how the quantity of an item is tracked throughout the system. The most common unit of measure is “each”, which simply means that each individual item is considered one unit.   An item that uses “case” as the unit of measure would be tracked by the number of cases rather than by the actual piece quantity.

 

Unit-of-Measure Conversions - Unit-of-Measure conversion is needed whenever you work with multiple units of measure in Purchasing, Sales or Inventory.   For example, An Item that has a base UOM of ‘Each’ may also sell, purchase or stock in ‘Pack’.  Therefore you would require a conversion to allow the system to calculate how many ‘Each’ are represented by a quantity of Packs.

 

Variable Overheads - Changeable overhead costs that vary according to the number of goods produced (i.e. water and lights). These are allocated according to the number of labour hours used to produce the finished product(s).

 

Warehouse Management - The flexibility to define a variety of warehouses and locations and then manage inventory across these locations.   Functions usually include a warehouse master record, item/warehouse cross-references and monitoring Inventory on hand, available and allocated stock in relation to Re-Order Point and Re-order levels

 

Work-in-Process (WIP) - Generally describes activity that is currently being processed in an Assembly Order.   WIP is actually an inventory account that represents the value of materials, labour, and overhead that has been issued to Assembly Orders but has not yet produced a stockable item.