Sources, terminology and the questions worth asking
Where the authoritative definitions and data actually live, not a paraphrase of them.
- Institute for Supply Management (ISM) — Professional association publishing supply management research, standards and monthly reports.
- Association for Supply Chain Management (ASCM/APICS) — The body behind CSCP and CPIM certifications, and the source for standard supply chain terminology.
- U.S. Census Bureau — Manufacturing & Trade Inventories — Government data on manufacturing, wholesale and retail inventory levels and sales.
- Federal Reserve Economic Data (FRED) — Public economic data series useful for benchmarking inventory-to-sales trends over time.
Operators, rules, costs and providers described here are those of the United States.
The reviews that should happen whether or not something's broken
Supply chain numbers go stale quietly. These are the review points worth putting on a calendar rather than waiting for a problem to force them.
| When | What happens |
|---|---|
| Quarterly | Recalculate reorder points and safety stock on stable-demand items using recent, not stale, demand figures. |
| Annually | Revisit your carrying-cost capital rate with finance, and reset KPI targets against actual historical performance. |
| Annually | Review scored suppliers against actual delivered performance to keep scorecards accurate. |
| Before contract renewal | Review software usage, contract terms and any auto-renewal clauses well ahead of the renewal date. |
| Periodically | Place a small trial order with a qualified backup supplier to keep the relationship and their readiness current. |
| After any major demand shift | Recheck reorder points immediately — a new customer or lost customer can invalidate a historical peak-demand assumption. |
Always confirm current dates with the official source — they move.
Checklists you can work through
Before finalizing a reorder point
- Demand figures reflect the last relevant period, not a stale annual average
- Lead time figures include the worst case you've actually experienced, not just the average
- Seasonality has been accounted for if this item has a seasonal demand pattern
- The item has been segmented appropriately (value and criticality) rather than using a blanket assumption
- The reorder point has a scheduled review date, not an indefinite 'set and forget' status
- Minimum order quantities, if any, have been factored into the practical reorder policy
Before finalizing a supplier decision
- Weights were set before seeing supplier scores
- Scores are based on evidence (quotes, historical data), not impressions
- Total cost of ownership, not just unit price, was compared
- Concentration and disruption risk were considered explicitly
- The person who manages the day-to-day relationship had input
- The recommendation and its weights are documented for future reference
The mistakes that cost the most
Using a stale demand average
Recalculate reorder points on your last relevant period of sales, not a year-old spreadsheet figure.
Setting scorecard weights after seeing the scores
Write down weights before scoring any supplier — otherwise the scorecard just justifies a decision you'd already made.
Comparing software on price alone
Get a full cost breakdown — implementation, migration, training — from every vendor before comparing subscription price.
Tracking too many KPIs to actually review
Cut to three to five metrics reviewed weekly by someone who can act on them.
Treating a bulk discount as automatically worth it
Compare the discount against the carrying cost of holding the extra inventory for the additional time to sell through it.
Assuming two suppliers means real diversification
Check whether both suppliers share an upstream source or region before counting them as genuinely independent.
Glossary
The words that get used as if everyone already knows them.
Reorder point
The inventory level that triggers placing a new order, equal to demand during lead time plus safety stock.
Safety stock
The buffer inventory held to cover demand or lead time coming in worse than average.
Carrying cost
The annual cost of holding inventory, typically 20-30% of its value, covering capital, storage and risk.
Lead time
The time between placing an order with a supplier and receiving it.
Fill rate
The percentage of demand met directly from stock on hand, without a backorder or stockout.
On-time-in-full (OTIF)
The percentage of orders delivered complete and on the promised date.
Inventory turns
How many times a year you sell through your average inventory value.
Perfect order rate
The percentage of orders that are complete, on time, undamaged and correctly invoiced, all at once.
Cash-to-cash cycle time
The time cash is tied up between paying suppliers and collecting from customers.
Dual sourcing
Qualifying and using two suppliers for the same input to reduce concentration risk.
Nearshoring
Sourcing from geographically closer countries (such as Mexico, for US buyers) to reduce lead time and disruption risk.
Supplier scorecard
A weighted evaluation of suppliers across criteria such as price, lead time, quality and risk.