Other Wholesale Trade Industry Terminology

ABC Analysis

An inventory classification method that ranks items into A, B, and C categories based on their impact (often sales value or velocity) to prioritize control efforts. Helps allocate resources to the most critical items.

We reclassified SKUs using ABC analysis so cycle counts focus on A-items; The ABC report showed 20% of items drive 80% of revenue; We set stricter service levels for A-class items and longer lead times for C-class items

Advance Ship Notice (ASN)

A pre-shipment notification (often EDI 856) that details what’s being shipped, how it’s packed, and when it will arrive, enabling faster receiving and cross-docking.

The retailer requires an EDI 856 ASN before the truck arrives; Our WMS creates the ASN once pallets are labeled with SSCC; Without an ASN, the DC dock refused the delivery

Available to Promise (ATP)

A calculated view of uncommitted inventory and planned receipts that a company can promise to customers by date.

Sales checked ATP to commit a delivery date to the customer; Our OMS recalculates ATP after each large order; ATP dropped after the supplier pushed out raw material lead times

Backorder

An unfulfilled order or order line due to a stockout, held for later fulfillment when inventory becomes available.

The system converted out-of-stock lines to backorders; We notify customers when backorders exceed 10 days; Backorders spiked after the promotion outperformed the forecast

Bill of Lading (BOL)

A legal document issued by a carrier to acknowledge receipt of cargo, serving as a contract of carriage and, for some modes, a document of title.

The carrier wouldn’t release the freight without the original BOL; We used the BOL to file a damage claim; Ensure the BOL lists pallet count and NMFC class correctly

Cash Conversion Cycle (CCC)

A metric that measures how long cash is tied up in operations: days inventory outstanding + days sales outstanding − days payables outstanding. Lower is better.

Negotiating longer supplier terms improved our CCC by 7 days; Reducing days-in-inventory shortened the CCC; Our CCC worsened when customers stretched payments

Consignment Inventory

Stock held at the buyer’s location but owned by the supplier until it is used or sold, with billing triggered upon consumption.

The vendor stocks our DC on consignment and bills only when we ship; Consignment reduced our working capital needs; We audit consigned stock monthly for shrink

Cost of Goods Sold (COGS)

The direct costs attributable to the goods sold in a period, typically including purchase price and inbound freight/duties.

After freight increases, COGS rose 2%; We include duties and inland freight in COGS for landed cost accuracy; Lower COGS improved gross margin by 150 bps

Cross-Docking

A distribution practice where inbound shipments are moved directly to outbound shipping with minimal or no storage to reduce handling and lead time.

High-volume SKUs are cross-docked to cut storage time; The ASN-enabled cross-dock reduced touches; We dedicated two doors for supplier cross-docks during peak

Demand Forecasting

The process of predicting future customer demand using historical data, market signals, and statistical or machine learning models.

We used a seasonal model to forecast holiday demand; The buyer overrode the forecast before the promo; Forecast error (MAPE) improved after we added POS data

Distribution Center (DC)

A facility where goods are received, stored, processed, and shipped to customers or downstream locations.

The Midwest DC supports two-day ground service; The DC added automation to increase throughput; Our DC network redesign cut transit times by a day

Dropshipping

A fulfillment model in which the supplier ships directly to the end customer on behalf of the wholesaler or retailer, bypassing the wholesaler’s warehouse.

We dropship direct from the manufacturer for bulky items; The retailer prefers dropship to avoid DC handling; Our OMS routes orders to dropship when DC stock is low

Economic Order Quantity (EOQ)

A formula that determines an optimal order size that minimizes the sum of ordering and holding costs under stable demand and lead time assumptions.

EOQ suggested fewer, larger buys to cut ordering cost; We recalculated EOQ after carrying cost changed; EOQ isn’t used for long lead-time, lumpy-demand SKUs

Electronic Data Interchange (EDI)

Standardized, computer-to-computer exchange of business documents (e.g., POs, ASNs, invoices) between trading partners, reducing manual entry and errors.

We exchange 850 POs, 856 ASNs, and 810 invoices via EDI; The retailer fined us for missing EDI compliance; Our 3PL integrated EDI 940/945 for shipping updates

Enterprise Resource Planning (ERP)

A suite of integrated applications that manage core business processes such as finance, purchasing, inventory, and order management.

The ERP is our system of record for inventory and AR; We integrated ERP with WMS and TMS; ERP item masters feed pricing to the OMS

FIFO (First-In, First-Out)

An inventory rotation and accounting method where the earliest received units are sold or used first.

We enforce FIFO to reduce expiration risk; FIFO affects COGS when purchase costs are rising; WMS allocates lots using FIFO rules

Fill Rate

A service metric that measures the percentage of orders, order lines, or units fulfilled as requested at the time of shipment.

Line fill rate improved to 97% after safety stock changes; The customer’s OTIF requirement includes a 98% fill rate; We target case fill rate over each fill rate

FOB (Free On Board)

A shipping term indicating the point at which ownership and risk transfer from seller to buyer; in Incoterms, FOB applies to ocean shipments at the port of loading.

Under FOB Origin, risk transfers at the seller’s dock; The contract specifies FOB Shanghai per Incoterms 2020; Clarify domestic FOB vs. Incoterms usage in the PO

Freight Forwarder

A logistics intermediary that arranges international transportation, consolidation, documentation, and customs-related services on behalf of shippers.

Our forwarder consolidates LCL into weekly sailings; The forwarder filed ISF and arranged customs clearance; We bid out forwarders to lower ocean rates

GS1

A global standards organization that governs identifiers, barcodes, data capture, and EDI standards (e.g., GTIN, GLN, SSCC) used in supply chains.

We license GTINs from GS1; The retailer mandates GS1-128 pallet labels; GS1 standards enabled our global product identification

GTIN (Global Trade Item Number)

A unique product identifier defined by GS1 for trade items, encompassing formats like GTIN-8, GTIN-12 (UPC), GTIN-13 (EAN), and GTIN-14.

The UPC is a GTIN-12; Case packs use GTIN-14; We corrected mismatched GTINs that caused receiving errors

Harmonized System (HS) Code

An international nomenclature for classifying traded goods, used to determine tariffs, trade statistics, and regulatory requirements.

Misclassified HS code triggered a customs penalty; We verified HS codes before filing entry; The duty rate changed when the HS code updated

Hazardous Materials (HAZMAT)

Goods that pose risks to health, safety, or property and require special handling, packaging, documentation, and transport compliance.

HAZMAT cartons require special labels and MSDS/SDS; Our team follows DOT/IMDG/IATA rules for HAZMAT; The carrier needed a HAZMAT endorsement

Incoterms

International commercial terms published by ICC that define responsibilities, risk transfer, and cost allocation between buyers and sellers in cross-border trade.

We buy FCA supplier’s warehouse; The PC quoted DDP to simplify delivery; Switching to FOB shifted risk earlier to the buyer

Inventory Turnover

A ratio showing how many times inventory is sold or used in a period, typically calculated as COGS divided by average inventory.

Turnover improved from 5x to 7x after SKU rationalization; Slow turns tied up cash and space; We benchmark turnover by category

Landed Cost

The total cost of a product to the point of receipt, including purchase price, freight, duties, insurance, and other import and handling fees.

We include ocean, duty, and drayage in landed cost; The new tariff raised landed cost by 8%; Landed cost analysis changed our pricing tiers

Lead Time

The elapsed time from order initiation to receipt, including supplier processing and transportation time; variability impacts service levels.

Supplier lead time extended from 30 to 45 days; We buffer long lead times with safety stock; Lead time variability drove stockouts

Less-Than-Truckload (LTL)

A freight mode for shipments that don’t require a full trailer, where multiple shippers’ freight is consolidated by the carrier.

We ship LTL for orders under six pallets; Accessorials increased our LTL costs; TMS selects the best LTL carrier based on rate and transit

MAP (Minimum Advertised Price)

A policy that restricts the lowest price at which dealers can advertise a product, commonly used to maintain channel pricing integrity.

We issued a MAP violation notice to a reseller; MAP helps protect brand value in online channels; The distributor asked for a MAP holiday during promo

MOQ (Minimum Order Quantity)

The smallest quantity a supplier is willing to sell in one order, often set to optimize production or logistics efficiency.

The supplier’s MOQ is 1,000 units per SKU; We negotiated a lower MOQ for new launches; High MOQs increase carrying costs and risk

MRP (Material Requirements Planning)

A planning method that calculates material and component requirements based on demand, lead times, and inventory balances.

MRP exploded component demand from the master schedule; We aligned MRP with supplier calendars; Parameter errors in MRP created excess stock

Net Terms

Payment terms defining when invoices are due (e.g., Net 30) and any discounts for early payment.

We extended Net 60 to key distributors; Early-pay 2/10 Net 30 improved cash flow; The customer requested net terms instead of prepay

On-Time In-Full (OTIF)

A delivery performance metric measuring whether orders arrive by the required date (on time) and with all items/quantities shipped (in full).

Our OTIF target with the retailer is 95%; Penalties apply when OTIF falls below threshold; We track OTIF by lane and customer

Order Management System (OMS)

Software that captures, validates, allocates, and tracks customer orders across channels and fulfillment nodes.

The OMS allocates orders across DCs and dropship; We used the OMS to split orders by availability; OMS exposes ATP to sales reps

Over, Short, and Damaged (OS&D)

A freight receiving discrepancy category covering overages, shortages, and damages, often used for claims with carriers or suppliers.

We filed an OS&D claim for two missing pallets; The receiver noted OS&D exceptions on the BOL; OS&D rates dropped after better packaging

Pick, Pack, and Ship

Core warehouse processes: selecting items (pick), preparing orders (pack), and dispatching them (ship) to customers.

We reduced pick, pack, and ship time with zone picking; Errors in packing triggered chargebacks; The WMS optimized pick paths to speed PPS

Purchase Order (PO)

A formal document from a buyer to a supplier authorizing a purchase, specifying items, quantities, prices, and terms.

The buyer issued a PO with Net 30 terms; We require a PO for all replenishment; PO acknowledgments (EDI 855) confirm dates and quantities

Quality Control (QC)

Processes and inspections to ensure goods meet defined specifications and quality standards before acceptance or shipment.

QC rejected the lot due to spec variance; We added AQL inspections at the 3PL; QC checks reduced returns by 20%

Rebate

A post-sale incentive or refund tied to volume, growth, or promotional performance, often settled periodically.

The distributor earned a year-end volume rebate; We track bill-back rebates as part of trade spend; Rebate accruals hit the P&L monthly

Reverse Logistics

The process of moving goods from customers back to the seller or upstream for return, repair, refurbishing, recycling, or disposal.

We process returns to vendors (RTV) weekly; Reverse logistics costs are tracked separately; Refurbish-and-resell programs reduce write-offs

Safety Stock

Buffer inventory maintained to protect against demand and lead time variability, targeting a desired service level.

We recalculated safety stock to hit a 98% service level; High variability requires higher safety stock; Safety stock covers supplier delays

SKU (Stock Keeping Unit)

A unique identifier for a distinct product and its specific attributes used for inventory tracking and management.

Each color/size variant is a separate SKU; We rationalized SKUs to reduce complexity; SKU barcodes must match the item master

Tariff

A government-imposed duty on imported goods, determined by HS classification, country of origin, and trade agreements.

Tariffs on HS 9403 increased costs 10%; We shifted sourcing to a lower-tariff country; Brokers confirmed the tariff rate before booking

Third-Party Logistics (3PL)

An external provider that performs logistics services such as warehousing, fulfillment, and transportation on behalf of a company.

We outsourced warehousing and fulfillment to a 3PL; The 3PL integrates via EDI 940/945; Seasonal overflow goes to our 3PL network

Trade Spend

Funds and allowances invested to promote sales through distribution channels (e.g., rebates, co-op ads, allowances, promotions).

Co-op advertising and bill-backs are part of trade spend; We analyze trade spend ROI by account; Excessive trade spend eroded net margins

Transportation Management System (TMS)

Software that plans, executes, and optimizes the movement of goods, including carrier selection, load tendering, tracking, and freight audit.

TMS optimized mode selection and carrier routing; We tender loads to carriers via the TMS; TMS analytics lowered freight cost per pound

Unit of Measure (UOM)

A standardized quantity used to measure and transact items (e.g., each, inner pack, case, pallet), often with defined conversions.

We sell in EA, inner, case, and pallet UOMs; UOM mismatches caused over-shipments; Pricing is per case UOM, not each

Universal Product Code (UPC)

A 12-digit GTIN and associated barcode widely used in North America to identify consumer trade items at the unit level.

The retailer requires a scannable UPC on each unit; UPC misprints slowed receiving; We registered new UPCs with GS1

Vendor Managed Inventory (VMI)

A replenishment model where the supplier monitors the customer’s inventory and generates orders to agreed targets.

Under VMI, the supplier replenishes to min/max; VMI improved on-shelf availability; We share POS and inventory data to support VMI

Warehouse Management System (WMS)

Software that manages warehouse operations, including receiving, putaway, inventory control, picking, packing, and shipping.

The WMS supports RF scanning and wave picking; We integrated WMS with our ERP and TMS; WMS-directed putaway improved space utilization