Medical Products Distributors Industry Terminology

ABC Analysis

Inventory categorization that segments SKUs into A (high value/impact), B, and C (low) to prioritize controls and effort.

How it’s used: Prioritized cycle counts to A-class sutures; Focused GPO conversions on A items; Shifted safety stock from C to A/B SKUs.

Acceptable Quality Limit (AQL)

A statistical sampling threshold that defines the maximum percentage of defective units allowed in a lot for acceptance.

How it’s used: Sampled inbound gloves at 1.5% AQL; Suppliers proposed 2.5% AQL to reduce rejects; QA rejected lots failing AQL sampling.

Advance Ship Notice (ASN)

An electronic pre-alert (typically EDI 856) detailing shipment contents, quantities, lots/expiry, and logistics IDs before arrival.

How it’s used: Receiving pre-books dock based on ASN times; ASN with SSCC barcodes sped pallet check-in; Missing ASN delayed LTL unloads.

Available to Promise (ATP)

Real-time computable inventory available for new orders after accounting for current allocations, safety stock, and planned receipts.

How it’s used: Sales confirmed ventilator accessories using ATP; Low ATP on N95s triggered allocation; Portal shows ATP by DC in real time.

Backorder

Unfilled order quantity due to stockout that remains open until replenished or canceled.

How it’s used: Backorder lines older than 7 days escalated; Partial shipped gowns, left drapes on backorder; Allocation reduced backorders by 40%.

Bill of Lading (BOL)

A legal document issued by a carrier acknowledging receipt of goods and serving as a contract of carriage and receipt.

How it’s used: Driver required signed BOL before pickup; BOL number used to trace a missing pallet; Damages noted on BOL at delivery.

Buy-and-Bill

Physician-office model where the provider purchases a product, administers it, and bills payers for reimbursement.

How it’s used: Practices buy biologics and bill payers; Distributor offers drop-ship for buy-and-bill drugs; ASP changes impact buy-and-bill margins.

CAPA (Corrective and Preventive Action)

A structured QMS process to fix root causes of nonconformities (corrective) and prevent their recurrence (preventive).

How it’s used: CAPA opened after temperature excursion; Barcode mis-scan CAPA added human-factors training; CAPA verified via effectiveness check.

Chargeback (Contract Pricing Chargeback)

Reimbursement from manufacturer to distributor when sales are made to eligible customers at contracted prices below distributor cost.

How it’s used: Submitted chargebacks with NDC, HIN, contract ID; Denials spiked after price update; Automating 844/849 EDI reduced lag.

Cold Chain

Temperature-controlled storage and transport processes that maintain product quality within specified ranges (e.g., 2–8°C, frozen).

How it’s used: Validated 2–8°C lanes with data loggers; Gel-pack failure caused excursion; WMS enforces FEFO for refrigerated lots.

Consigned Inventory

Stock stored at a customer site but owned by the distributor or manufacturer until used or consumed.

How it’s used: Orthopedic implants consigned to cath lab; Monthly usage reconciliation bills consumption; Reduced capital via consignment.

Cycle Counting

A periodic, sample-based inventory verification method replacing or supplementing annual physical counts.

How it’s used: A-class items counted weekly; Variances >0.5% trigger root-cause; Counts scheduled by zone to avoid dock peaks.

Demand Forecasting

Estimating future demand using historical sales, seasonality, causal factors, and statistical or machine-learning models.

How it’s used: Modeled PPE spikes for flu season; Promotions adjusted forecast for syringes; MAPE used to score forecast accuracy.

Distribution Requirements Planning (DRP)

Multi-echelon planning that nets requirements and plans replenishment across distribution centers to meet service goals.

How it’s used: DRP shifted masks to Dallas DC; Lot-sizing rules reduced transfers; DRP pegged replenishment to projected PAR breaks.

Drop Shipment

Direct shipment from manufacturer to end customer on a distributor’s order, often for bulky or specialized items.

How it’s used: Manufacturer drop-shipped MRI coil; Distributor invoiced though order bypassed WMS; Drop-ship lines included in OTIF.

DSCSA (Drug Supply Chain Security Act)

U.S. law requiring pharma serialization, traceability data exchange (TI/TH/TS), and authorized trading partner verification.

How it’s used: Verified dispenser before shipping Rx; EPCIS events captured for GTIN+serial; Investigated suspect product per DSCSA SOP.

Economic Order Quantity (EOQ)

A formula that balances ordering and holding costs to determine the most economical replenishment quantity.

How it’s used: Lowered EOQ after carrying cost rose; EOQ overridden for long-lead pumps; Bulk freight discounts adjusted EOQ.

Electronic Data Interchange (EDI)

Standards-based electronic exchange of business documents (e.g., 850, 855, 856, 810, 832) between trading partners.

How it’s used: Hospital sends 850 POs via AS2; Added 856 ASN cut receiving time 30%; 810 e-invoices improved cash flow.

Enterprise Resource Planning (ERP)

Integrated software suite managing finance, procurement, inventory, sales, and related processes across the enterprise.

How it’s used: Migrated to SAP S/4HANA; ERP master data feeds WMS item setup; Pricing logic executed in ERP at order-entry.

Expiry Date Management

Policies and controls to track, rotate (FEFO), and disposition dated lots to avoid out-of-date product reaching patients.

How it’s used: WMS blocks lots <30 days to expiry; Swap program for near-expiry contrast; FEFO enforced in cold rooms.

FEFO (First-Expire, First-Out)

A picking rule that prioritizes product with the earliest expiration date to minimize obsolescence.

How it’s used: Pick path prioritizes earlier expiring lots; FEFO exceptions documented for recalls; FEFO audits reduced waste.

Fill Rate

Service metric measuring the percentage of demand fulfilled at the requested time and quantity (unit or line level).

How it’s used: Unit fill rate target set at 97.5%; Supplier allocation cut PPE fill rates; Improved pick accuracy raised line fill.

Freight Forwarder

A logistics intermediary that organizes international shipments, documentation, and customs clearance on behalf of shippers.

How it’s used: Forwarder arranged glove imports; Switched forwarders to improve transit on Asia–US lane; Managed customs and ISF filings.

GDP (Good Distribution Practice)

Quality guidelines governing distribution, storage, and transport of medicinal products to ensure integrity and traceability.

How it’s used: Passed GDP audit for pharma storage; Temperature mapping updated per GDP; Training documented for GDP compliance.

GPO (Group Purchasing Organization)

An entity that aggregates member purchasing to negotiate better pricing and contracts with manufacturers and distributors.

How it’s used: GPO tier change lowered contract price; Eligibility drove chargeback approvals; GPO conversions coordinated with IDNs.

Gross Margin

Percentage or dollars remaining after cost of goods sold is subtracted from net sales, indicating product profitability.

How it’s used: Private-label dressings added 220 bps; Fuel surcharge protected margin on bulky equipment; SKU mix shift pressured margins.

GS1 Standards (GTIN/GLN/SSCC)

Global identification and barcoding standards for products (GTIN), locations (GLN), and logistics units (SSCC).

How it’s used: Required GTIN and UDI in GS1-128; SSCC labels improved pallet tracking; GLN mapped to ship-to locations.

Hazmat Shipping

Transportation of hazardous materials in compliance with DOT and IATA rules, including packaging, labeling, documentation, and training.

How it’s used: Aerosol disinfectants shipped as limited quantity; Lithium batteries packed under IATA DGR; Drivers carried hazmat placards.

IDN (Integrated Delivery Network)

A health system comprising hospitals and clinics that centralizes purchasing, operations, and standardization decisions.

How it’s used: IDN standardized on one suture line; Centralized IDN buying drove compliance; Value analysis committees approved conversions.

Incoterms

International commercial terms that define delivery obligations, risk transfer, and cost allocation between buyer and seller.

How it’s used: Bought gloves FOB Shanghai; Customer insisted on DDP to avoid customs; Switched to FCA for better control.

Inventory Turnover

A ratio (COGS ÷ average inventory) indicating how many times inventory is sold and replaced over a period.

How it’s used: Turns improved from 6x to 8x; Slow-mover purge lifted turns; Excess safety stock depressed turnover.

IQ/OQ/PQ (Qualification)

Installation, Operational, and Performance Qualification steps verifying equipment/systems are installed, function, and perform as intended.

How it’s used: IQ/OQ/PQ completed on cold rooms; Scales held until OQ passed; Validation packets archived per QMS.

Just-in-Time (JIT)

Inventory strategy to replenish close to time of use, reducing on-hand stock but increasing supply risk sensitivity.

How it’s used: JIT trays delivered to OR daily; Shortages exposed JIT risk; JIT reduced distributor holding costs.

Kitting

Bundling multiple SKUs into one sellable unit or procedure pack, often with unique labeling and traceability.

How it’s used: Assembled OR procedure packs; Promotional wound-care kits prebuilt; Kitting reduced pick lines and errors.

Lead Time

Elapsed time from order placement to receipt, including supplier processing, production, transit, and internal handling.

How it’s used: Pumps have 12-week lead time; Safety stock buffers lead variability; Supplier delays extended purchase lead time.

Last-Mile Delivery

The final transport leg to the customer site or point of use, often time-sensitive and service-intensive.

How it’s used: White-glove delivery for imaging tables; Route optimization improved last-mile OTIF; POD captured via mobile app.

Lot Traceability

The ability to track product lots from supplier to end-customer and back for quality events and recalls.

How it’s used: WMS captures lot/expiry at receipt; Lot queries support recall drills; Trace-back identified affected clinics.

Master Data Management (MDM)

Processes and governance ensuring accuracy and consistency of core data such as items, customers, vendors, and pricing.

How it’s used: Resolved duplicate HINs; Corrected UOM to fix pick errors; Governance added for UDI attributes.

MDR (EU Medical Device Regulation)

European regulation setting safety, UDI, post-market surveillance, and distributor obligations for medical devices.

How it’s used: Distributors verify CE mark and UDI; IFU translation controls updated; Vigilance reporting workflows revised.

MDSAP (Medical Device Single Audit Program)

A harmonized audit program recognized by multiple regulators to assess device QMS compliance in one audit.

How it’s used: 3PL passed MDSAP audit scope; CAPA and training records reviewed; Audit reduced duplicative country inspections.

Minimum Order Quantity (MOQ)

The minimum quantity a supplier will accept per order or per release, often set for efficiency or cost.

How it’s used: MOQ for syringes is 10 cases; Negotiated MOQ waiver during shortage; MOQ influenced EOQ and DC space.

NDC (National Drug Code)

A unique U.S. identifier for drugs (10–11 digits) used for identification, billing, and compliance.

How it’s used: DSCSA and Medicaid billing rely on NDC; Catalog cross-referenced NDC to GTIN; Chargebacks validated NDC accuracy.

On-Time In-Full (OTIF)

Customer service metric measuring whether orders arrive by the promised time and in the promised quantities.

How it’s used: OTIF dipped with carrier delays; Penalties for sub-95% OTIF; Slotting changes improved OTIF.

Order-to-Cash (O2C)

End-to-end business process from order entry through fulfillment, invoicing, and collections.

How it’s used: EDI automation shortened O2C cycle; Pricing errors slowed O2C; Credit holds gated O2C releases.

Par Level

The target quantity to hold at the point of use; when inventory falls below PAR, a replenishment is triggered.

How it’s used: Nurses scan PAR bins to reorder; Reset PARs after volume fell; PAR breaches trigger emergency replenishment.

PDMA (Prescription Drug Marketing Act)

U.S. law governing prescription drug samples and certain distribution practices, including storage and recordkeeping.

How it’s used: Sample storage logged per PDMA; Verified licensed trading partners; Documented pedigrees for sample transfers.

Pick-Pack-Ship

Core warehouse processes of order picking, packing, and shipping to fulfill customer orders accurately and efficiently.

How it’s used: Wave picking feeds pack stations; QA audits labels before ship; Pack density improved freight costs.

Product Recall Management

Coordinated activities to identify, notify, retrieve, and document affected products, often by lot/serial, to protect patients.

How it’s used: Executed Class II recall in 48 hours; Portal notified customers by lot; Reverse logistics processed returned kits.

Safety Stock

Extra inventory held to protect against demand and supply variability while meeting service-level goals.

How it’s used: Increased safety stock for critical drapes; Dynamic safety stock based on service targets; Buffer covers lead-time variability.

UDI (Unique Device Identification)

A standardized identifier on medical devices (DI plus production identifiers like lot/serial/expiry) enabling traceability and safety.

How it’s used: Scanned UDI-DI and -PI at receipt; Customer required UDI on invoices; Catalog stored UDI for e-commerce search.