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Glossary

Definitions, formulas, and worked examples for PAR levels, safety stock, reorder points, EOQ, decay rate, and other inventory and procurement concepts.
Buyer InsightsEssaysGuidesIndustryComparisons
34 articles
Glossary8 min read·Published

Purchase Price Variance (PPV): Formula, Causes, and Why Procurement Decides It

Purchase price variance (PPV) is the difference between the standard price on the purchase order and the actual price on the supplier invoice, multiplied by the quantity received. Formula: PPV = (Standard Price − Actual Price) × Actual Quantity. How PPV accumulates silently in open-loop procurement, why it flows directly into COGS and GMROI, and how a closed-loop system surfaces it in real time.
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Glossary9 min read·Published

Cycle Count: Inventory Record Accuracy, Count Frequency by ABC Tier, and the IRA Formula

Cycle counting is the practice of physically counting a rotating subset of SKUs to maintain Inventory Record Accuracy (IRA) without halting operations. Formula: IRA = (1 − |Σ variance| / Σ counted units) × 100. Count frequency by ABC tier, acceptable IRA thresholds by class, and why structured receiving is a continuous cycle count for high-velocity ordered items.
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Glossary7 min read·Updated

Days of Inventory on Hand (DOH): Formula, the Lead-Time Threshold, and When to Act

Days of inventory on hand is on-hand quantity ÷ daily consumption rate — the number of days before an item runs out. The critical threshold: DOH < lead time means the stockout window is open. With accounting vs. real-time DOH, the safety buffer formula, decay adjustment for perishables, vertical benchmarks, and how a closed-loop procurement platform acts on DOH.
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