Inventory-flow control, term by term
The vocabulary behind Horizon and behind every serious replenishment conversation — defined in plain language. Taken from the fundamentals we teach in client training.
Adequate Inventory
Ordering logic in which target stock levels respond to how adequate current inventory actually is — nudged up when stock runs low, down when it lingers high — instead of being computed from demand forecasts. Developed by Gutsaga Technologies as the core of the Horizon platform; it goes beyond classic TOC buffer management.
Why it matters: Because it reacts to reality instead of predicting it, it cannot be poisoned by out-of-stock history and works even for slow movers where forecasts fail.
Stock zones (Zones & Decisions)
A classification of every SKU at every location into bands around the target: unwanted / tolerated / allowed overstock above; the OK “Horizon” zone in the middle; low-inventory, urgent, ground (zero stock) and safety-stock below. Each zone carries a defined action.
Why it matters: Zones turn thousands of stock numbers into a short list of decisions: leave alone, order, expedite, transfer, promote, or clear out.
Target level (replenishment level)
The stock level the system maintains per SKU-location: enough to cover maximum regular consumption during the replenishment time, excluding one-off spikes. Orders simply fill the gap: target minus stock on hand and in transit, rounded to packs.
Why it matters: Managing targets instead of individual orders is the philosophical shift that makes ordering automatic and controllable at the same time.
Replenishment time
The full cycle from deciding to order until goods are sellable: order frequency + production time (if any) + delivery and shelving time. The stock a system needs equals maximum consumption during this window.
Why it matters: Every day cut from replenishment time cuts required inventory — often the cheapest stock reduction available.
Reorder point
A trigger line, usually set as a share of the target level: when stock on hand plus in transit falls to it, the scheduled order fires. Positioned higher when locations are busy, lower when inventory turns are the priority.
Why it matters: It makes ordering event-driven and systematic instead of depending on someone noticing.
Target penetration (TP)
How much of the target is missing, expressed as a percentage: 100% means completely out of stock, 0% means at target, negative values mean overstock. Viewable against stock on hand only, or including in-transit quantities.
Why it matters: TP creates a fair priority queue: scarce supply and picking capacity go to the products and locations missing the largest share of their target.
Lost sales & lost margin
The sales and margin missed while a product was unavailable: average daily sales × price (or margin) for each out-of-stock day, computed per product per location.
Why it matters: Recorded daily and kept as history, it turns availability from an opinion into a KPI usable in supplier reviews and bonus schemes. Almost no system keeps this history; Horizon does.
Aggregation
The statistical effect that combined demand fluctuates less than individual demand: one warehouse serving 100 stores sees far smoother consumption than any single store. The further upstream a stock point sits, the calmer its demand.
Why it matters: It is why central stock plus fast replenishment beats pushing inventory into stores — the warehouse absorbs the noise the stores cannot.
Pull-based replenishment
Each layer of the chain — store, regional warehouse, central warehouse — independently orders only what it needs to return to its own target, based on real consumption. Nothing is pushed downstream on a forecast.
Why it matters: Pull keeps inventory matched to actual demand at every layer and stops the bullwhip of push-based planning.
Safety stock
A deliberate extra layer below the target held for specific reasons: seasonal preparation, shelf presentation, protection against unreliable supply. It is a conscious, priced decision — not a default cushion on everything.
Why it matters: Named reasons and sizes keep safety stock honest; unnamed 'just in case' stock is how overstock begins.
Go deeper: Knowledge hub · The 18 technologies · Horizon vs the alternatives
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