Management by walking around is observing employees working. Ordering costs include the paperwork, follow up, inspection upon arrival, and other processing costs. Purchase costs are the purchase price plus delivery charges minus discounts. A standard is any guideline established as the basis for measurement. Stockout costs are loss of income from the product not being available, the cost of reestablishing goodwill, and additional expenses incurred to expedite shipping.
Tolerance is permissible deviation from the standard.