Terminology - SI

The following definitions are BusinessPlus interpretations and are provided for reference only.

ABC Inventory Classification: The Stores Inventory system uses the ABC inventory classification system that establishes three groupings for material items:

• A group for approximately 10% of the items that comprise 70% of the annual dollar issues.
• B group for approximately 20% of the items that comprise 20% of the annual dollar issues.
• C group for approximately 70% of the items that comprise 10% of the annual dollar issues.

These percentages can vary and be modified to suit the individual organization.
Class A: High-dollar issue material items. These include items that have a long lead time, are SIB critical to the organization's ability to provide essential services, depreciate or deteriorate quickly, or have a high obsolescence risk. These items require constant review and adjustment.
Class B: Moderate-dollar items.
Class C: Low-dollar items. This classification will include all remaining material items not classified as either A or B. These are easily obtained off-the-shelf items.
Average Cost: Average cost is an accepted inventory valuation method. Average cost inventory calculations reflect the actual expense of inventory through a mathematical process. The system will compute the Stock Unit Cost for each order and maintain the stock unit cost for all subsequent orders. The system will add all stock unit costs and divide by the number of stock units to derive an average inventory amount.
FIFO: FIFO is an acronym for First In, First Out, and is an accepted method of inventory valuation. Inventory products utilizing FIFO will be valued, as a whole, at the price paid for the inventory that is still on hand. FIFO amounts are updated when invoices are entered into stock (POUPRC and SIBTDS) and can be viewed in SIUPIN. FIFO amounts are expressed in terms of Stock Units.
LIFO: LIFO is an acronym for Last In, First Out and is an accepted method of inventory valuation. Inventory products utilizing LIFO will be valued, as a whole, at the price paid for the last unit of the product added to inventory. LIFO reflects replacement values of inventory because it reflects the last price paid and indicates the price to replace the items in inventory. LIFO-valued inventories overstate inventory dollar amounts when the price paid for a product rises. LIFO-valued inventories understate inventory dollar amounts when the price paid for a product decreases. During periods of stable product prices, LIFO reflects the actual amount expensed for those products. LIFO amounts are updated when invoices are entered into stock (POUPRC  and SIBTDS) and can be viewed in SIUPIN. LIFO amounts are expressed in terms of Stock Units.
Safety Stock: A user-defined quantity to be kept on hand to eliminate, or at least limit, stock outage situations. Stock outages occur during increased usage or delayed delivery time. Safety Stock is generally the difference between the Maximum Quantity allowed and the Average Usage (Maximum Quantity - Average Usage). However, a reasonable balance between the costs of carrying the stock and the protection obtained against inventory exhaustion must be made.