Inventory Planning Glossary
The vocabulary of inventory planning, defined for Shopify fashion brands. Every definition here is written to stand on its own.
Variant-level forecasting
Forecasting demand separately for every individual variant of a product — each size, colour, and length — rather than for the product as a whole.
A style that looks healthy in aggregate is routinely sold out in the two sizes that matter. A fashion brand selling one t-shirt in 6 sizes and 5 colours has 30 independent demand curves, not one. Forecasting at style level averages those curves together and hides the stockouts inside them.
Dead stock
Inventory that is not selling at a rate that will clear it before it loses commercial value, tying up cash that could fund what is selling.
Dead stock is a capital problem before it is a storage problem. The relevant number is not how many units are sitting there, but how much money is trapped in them and what that money would have earned in a faster-moving SKU.
Size curve
The distribution of demand across sizes for a given style — the proportion of units that should be bought in each size.
Size curves are brand-specific and style-specific. Buying a standard bell curve when your actual customers skew two sizes larger produces guaranteed stockouts at the top of the range and guaranteed markdowns at the bottom, in the same purchase order.
Stockout
The state of having zero sellable units of a variant that customers are actively trying to buy.
The cost of a stockout is not only the lost sale. It includes the customer who does not return, the paid traffic already spent driving them to an unavailable product, and the ranking that a sold-out listing loses.
Sell-through rate
The percentage of received inventory sold over a given period — units sold divided by units received, for the same window.
Sell-through is the clearest single indicator of whether a buy was correctly sized. Read at variant level rather than style level, it tells you which specific sizes and colours to buy deeper next time and which to cut.
Reorder point
The inventory level at which a new purchase order must be placed to avoid running out before the replenishment arrives.
A reorder point is a function of sales velocity and supplier lead time. Long or variable lead times — common for brands producing overseas or with artisan partners — push the reorder point much higher than intuition suggests.
Lead time
The elapsed time between placing a purchase order with a supplier and having sellable units available to customers.
Lead time includes production, shipping, customs, and receiving — not just manufacturing. Brands routinely underestimate it by omitting the last two, which converts a well-timed reorder into a stockout.
Sales velocity
The rate at which a variant sells, usually expressed as units per day or per week.
Velocity is the input every other calculation depends on. It is also non-stationary in fashion: a style's velocity changes with season, price, and promotion, which is why straight-line extrapolation of recent velocity breaks down on seasonal products.
Weeks of cover
How many weeks current stock will last at the current sales velocity.
Weeks of cover is the most useful single at-a-glance metric for a buyer, because it converts an abstract unit count into a deadline. Four weeks of cover on a variant with a ten-week lead time is already a stockout, whatever the stock count says.
Open to buy
The budget available for new inventory purchases in a given period, after accounting for existing commitments and planned sales.
Open to buy is where inventory planning meets cash flow. Capital trapped in dead stock reduces open to buy directly, which is why the two are best read side by side rather than in separate reports.
SKU
Stock Keeping Unit — the unique identifier for one specific, individually sellable variant of a product.
In fashion, SKU count grows multiplicatively: styles times colours times sizes. A modest catalogue of 40 styles can easily be well over 1,000 SKUs, which is the point at which manual spreadsheet planning stops being reliable.
Overstock
Holding materially more units of a variant than forecast demand supports over the relevant selling window.
Overstock and dead stock are related but distinct: overstock is a quantity judgement made at buying time, while dead stock is the eventual outcome when overstock does not clear. Overstock is still recoverable through promotion; dead stock generally is not, at full margin.
Safety Stock
A buffer quantity of inventory held to protect against unexpected demand surges or supplier lead time delays.
Safety stock acts as an insurance policy. In fashion, safety stock must be dynamically calculated per size variant rather than applied blanketly across a style, preventing cash lockup while mitigating stockouts on hero sizes.
Inventory Turnover
A ratio showing how many times a brand sells and replaces its inventory over a given period (COGS divided by average inventory).
A high inventory turnover indicates strong demand velocity and cash efficiency, while low turnover highlights capital trapped in dead stock and slow-moving variants.
Demand Forecasting
The process of estimating future customer demand using historical sales trends, seasonal patterns, and sales velocity data.
Effective demand forecasting in e-commerce evaluates variant-level sales velocity and lead time buffers so purchase orders are issued before stock depletion.
Inventory Carrying Cost
The total cost of holding inventory, including warehouse space, insurance, capital interest, shrinkage, and depreciation.
Carrying cost usually accounts for 20-30% of total inventory value annually. Unsold dead stock actively drains capital every month it remains on the shelf.
ABC Analysis
An inventory categorization technique that divides SKUs into three categories (A: high value, B: moderate, C: low value) based on revenue contribution.
In D2C fashion, 'Class A' hero variants drive the majority of gross margin. Stockout prevention efforts should be heavily focused on Class A SKUs to safeguard revenue.