Inbound Logistics, INCOTERMS, Inventory Carrying Cost, Inventory Control


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Detailed terminology list , in pdf form, will soon be available


INCOTERMS are international rules for the interpretation of terms used in foreign trade contracts, recognised worldwide

Indefinite Delivery Contracts
Broadly ,there are three types of indefinite delivery or term type contracts viz. Indefinite quantity indefinite delivery contracts, indefinite quantity definite delivery contracts and requirements contracts

This clause , also known as "hold harmless", "defend" or "indemnify" is used to protect a purchaser or supplier from loss or damage. The words "hold harmless" and "indemnify" refer to getting reimbursed for penalties or liabilities incurred by one party because of another's action and pertain to monetary or financial loss.
The word "defend" imposes an obligation on one contracting party to defend the other in a legal action and to incur the cost of such action. These clauses are used in Purchase Orders

Independent Demand
Demand not directly related to the demand for other items or end items produced by the organisation

It refers to checking the quality of products and services to determine whether they meet the specifications. Usually, purchaser has the right to do inspection before accepting the materials

In-transit Inventory
Material moving between two or more locations, usually separated geographically; for example, finished goods being shipped from a plant to a distribution center. In-transit inventory is an easily overlooked component of total supply chain availability

Pallets and containers used in air transportation; the igloo shape is designed to fit the internal wall contours of a narrow body airplane.

Movement of products from one country into another. The import of automobiles from Germany to the U.S. is an example.

Inbound Logistics
The movement of materials from suppliers and vendors into production processes or storage facilities.

Integrated Logistics
A comprehensive, system-wide view of the entire supply chain as a single process, from raw materials supply through finished goods distribution. All functions that make up the supply chain are managed as a single entity, rather than managing individual functions separately.

Inter-coastal carriers
Water carriers that transport freight between East and West Coast ports, usually by way of the Panama Canal.

Inter-corporate hauling
A private carrier hauling the goods of a subsidiary and charging the subsidiary a fee: this is legal if the subsidiary is wholly owned (100%) or if the private carrier has common carrier authority.

Intermediately Positioned Warehouse
A warehouse located between customers and manufacturing plants to provide increased customer service and reduced distribution cost.

Intermodal Transportation
Transporting freight by using two or more transportation modes such as by truck and rail or truck and oceangoing vessel.

In-transit Inventory
Material moving between two or more locations, usually separated geographically; for example, finished goods being shipped from a plant to a distribution center. In-transit inventory is an easily overlooked component of total supply chain availability.

Intrinsic Forecast Method
In forecasting, a forecast based on internal factors, such as an average of past sales.

Inventory Carrying Cost
One of the elements comprising a company's total supply-chain management costs. These costs consist of the following:

Opportunity Cost: The opportunity cost of holding inventory. This should be based on your company's own cost of capital standards using the following formula. Calculation: Cost of Capital x Average Net Value of Inventory
Shrinkage: The costs associated with breakage, pilferage, and deterioration of inventories. Usually pertains to the loss of material through handling damage, theft, or neglect.
Insurance and Taxes: The cost of insuring inventories and taxes associated with the holding of inventory.
Total Obsolescence for Raw Material, WIP, and Finished Goods Inventory: Inventory reserves taken due to obsolescence and scrap and includes products exceeding the shelf life, i.e. spoils and is no good for use in its original purpose (do not include reserves taken for Field Service Parts).
Channel Obsolescence: Aging allowances paid to channel partners, provisions for buy-back agreements, etc. Includes all material that goes obsolete while in a distribution channel. Usually, a distributor will demand a refund on material that goes bad (shelf life) or is no longer needed because of changing needs.
Field Service Parts Obsolescence: Reserves taken due to obsolescence and scrap. Field Service Parts are those inventory kept at locations outside the four walls of the manufacturing plant i.e., distribution center or warehouse.

Inventory Control
The management of inventories, addressing primarily the questions such as how much quantity to hold, when to order and how much to order for an item

Inventory Management
The process of ensuring the availability of products through inventory administration.

Inventory Planning Systems
The systems that help in strategically balancing the inventory policy and customer service levels throughout the supply chain.
These systems calculate time-phased order quantities and safety stock, using selected inventory strategies.
Some inventory planning systems conduct what-if analysis and that compares the current inventory policy with simulated inventory scenarios and improves the inventory ROI.


Incoterms (International Commercial Terms) are the 3-letter acronyms used in international importing/exporting.

For example, the incoterm CFR stands for Cost and Freight, meaning the supplier covers the costs to clear the goods for export, and to freight the goods to the named port of destination.

If the incoterm was CIF, meaning Cost, Insurance and Freight, the supplier would additionally have to take out insurance to cover the risk of damage to the goods.

Some other commonly used incoterms are:

  • EXW (Ex-Works)
  • CIP (Carriage & Insurance Paid to)
  • FOB (Free on Board)
  • FCA (Free Carrier)
  • indemnity clause

    What is an indemnity? If a party indemnifies another it means it will cover any losses that the indemnified party incurs. Indemnity clauses are common in contractual agreements.

    Indirect Procurement

    Direct Procurement is the procurement of goods/services that are directly related to the 'product' being manufactured/resold.

    For example, with an engineering firm designs and builds hydraulic pumps, the direct procurement spend would include the machined parts, check valves, pulse timers, casings etc, that go into the pumps.

    On the other hand, Indirect Procurement is the procurement of goods/services that are not directly related to the 'product'.

    Using the previous example, the indirect procurement spend would include consumables (rags, gloves, earplugs), lubricants, testing equipment etc

    innominate terms

    A contract term that is not clearly defined as a condition or warranty is classified as a Innominate Term. If there is a breach of an innominate term, a court has to evaluate the degree of 'injury' the breach has caused, and make a decision as to whether it is a condition or warranty.

    If the court classifies the breach as a condition, the injured party may retract their obligations under the contract, or claim damages.

    inventory management

     Inventory Management is the process of keeping the right levels of stock to suit requirements, analyzing and monitoring the movement of stock throughout the ERP system and stores, and reducing dead stock.



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