Wholesalers and Distributors Industry Terminology

3PL (Third-Party Logistics)

An external provider that performs logistics services such as warehousing, fulfillment, and transportation on behalf of a shipper, typically under contract with service-level agreements.

We moved our B2B fulfillment to a 3PL ahead of peak season; The 3PL’s WMS integrates with our ERP via EDI; We are issuing an RFP to select a new 3PL.

4PL (Fourth-Party Logistics)

A lead logistics integrator that designs, manages, and optimizes the end-to-end supply chain, often coordinating multiple 3PLs and carriers through a control-tower model.

Our 4PL runs a control tower over multiple regional 3PLs; The 4PL consolidates freight to improve network efficiency; We engaged a 4PL to orchestrate inbound from Asia and domestic distribution.

ABC Analysis

An inventory classification method that groups items (A, B, C) by value or velocity to prioritize control, forecasting, and replenishment effort.

A-items are 20% of SKUs but 80% of revenue; We cycle count A-items weekly and C-items quarterly; ABC classes drive safety stock and service levels.

Advanced Shipping Notice (ASN)

A pre-receipt electronic notification from the shipper to the receiver detailing what is en route (items, quantities, packaging, carrier, ETA) to speed and error-proof receiving.

Send an ASN (EDI 856) before the truck arrives; The ASN includes pallet IDs and SSCC labels; No ASN means receiving delays and possible retailer chargebacks.

Available to Promise (ATP)

The uncommitted portion of current and planned inventory available to accept new orders by date, based on on-hand, allocations, and scheduled receipts.

The site shows ATP for next Friday; Sales checks ATP before confirming the PO; ATP drops when planned receipts slip a week.

Backorder

Demand that could not be fulfilled at order time and is scheduled to be shipped later when inventory becomes available.

We have 1,200 units on backorder for SKU123; The customer agreed to split ship the backordered lines; Reduce backorders by increasing safety stock on A-items.

Bill of Lading (BOL)

A legal document between shipper and carrier acknowledging receipt of goods for transport, detailing shipment terms, contents, and responsibilities.

The carrier needs the BOL at pickup; The BOL lists the NMFC class and pallet count; Keep the signed BOL as proof of tender.

Cash Conversion Cycle (CCC)

A working-capital metric measuring how quickly a company converts investments in inventory and receivables into cash (CCC = DSO + DIO − DPO).

Our CCC is 62 days; Shorten CCC by reducing DIO and negotiating longer DPO; Improving fill rate increased DSO but lowered DIO.

Consignment

An arrangement where the supplier retains ownership of inventory stored at the customer’s site or a distributor until it is used or sold.

The distributor holds consigned inventory at the hospital; We bill only when the customer consumes the consigned stock; Consignment reduced the customer’s carrying costs.

Cross-Docking

A flow-through process moving goods directly from receiving to shipping with minimal or no storage, consolidating or deconsolidating for rapid transfer.

We cross-dock inbound imports to outbound LTL the same day; Cross-docking cut dwell time and storage costs; The ASN enables efficient cross-dock allocation.

Dead Stock

Inventory with little to no demand, often obsolete, damaged, or discontinued, tying up capital and storage space.

These SKUs haven’t moved in 12 months—dead stock; We’ll liquidate dead stock via secondary channels; ABC reclassification flagged potential dead stock early.

Demand Planning

The process of forecasting customer demand using historical data, market intelligence, and collaboration to drive replenishment and capacity decisions.

Demand planning lowered our MAPE to 18%; We collaborate with key accounts on POS data to refine the forecast; S&OP aligns demand plans with supply constraints.

Dropshipping

A fulfillment model where the supplier ships directly to the end customer on behalf of the seller, reducing inventory and handling for the intermediary.

We dropship direct from the manufacturer to the consumer; Marketplace orders are fulfilled via dropship to avoid double handling; Dropship SKUs bypass our DC.

EDI (Electronic Data Interchange)

A standard for computer-to-computer exchange of business documents (e.g., purchase orders, ASNs, invoices) between trading partners.

Retailer POs arrive via EDI 850; We send ASNs via EDI 856 and invoices via EDI 810; EDI compliance reduces manual order entry errors.

EOQ (Economic Order Quantity)

A formula that determines the optimal replenishment lot size that minimizes the total cost of ordering and holding inventory under steady demand assumptions.

The EOQ for SKU789 is 2,400 units; We recalculated EOQ after freight rates increased; EOQ balances ordering cost and carrying cost.

ERP (Enterprise Resource Planning)

A system that integrates core business processes—finance, purchasing, sales, inventory—providing a single source of transactional and master data.

Finance and inventory live in the ERP; The ERP integrates with WMS and TMS; We migrated price lists and customer terms into the ERP.

FIFO (First In, First Out)

An inventory rotation and costing method where the oldest stock is issued or sold first to prevent aging and align cost flow with physical flow.

We pick FIFO for non-perishables; FIFO reduces the risk of aging inventory; WMS enforces FIFO using receipt dates.

Fill Rate

A service-level metric indicating the percentage of demand (by lines, units, or orders) fulfilled immediately from available inventory.

Our line fill rate is 96% and case fill is 94%; The retailer’s SLA requires 98% OTIF and 95% fill rate; Safety stock changes improved fill rate on A-items.

Freight Class (NMFC)

A standardized LTL classification (NMFC) based on density, handling, stowability, and liability that determines freight rates.

Reclassifying to a lower NMFC class cut LTL costs; Density affects the NMFC class; Incorrect class can trigger re-bills.

FTL (Full Truckload)

A mode where a single shipper uses an entire trailer, typically enabling faster transit and lower per-unit costs at sufficient volumes.

We booked FTL to meet the promo date; FTL is cheaper per unit than LTL at higher volumes; The lane tender is for three weekly FTLs.

Gross Margin

Sales minus cost of goods sold, often expressed as a percentage of sales, representing the contribution available to cover operating expenses and profit.

This customer’s gross margin is 18%; Raising price or lowering landed cost improves margin; Promotions temporarily compress gross margin.

GTIN (Global Trade Item Number)

A globally unique product identifier (e.g., UPC/EAN/ITF) used across packaging hierarchies for cataloging, barcoding, and EDI.

The case GTIN differs from the inner pack GTIN; We require GTINs for marketplace listings; GTINs drive barcode and catalog accuracy.

HAZMAT (Hazardous Materials)

Products classified as hazardous due to safety or environmental risks, requiring regulated packaging, labeling, documentation, and transport procedures.

HAZMAT requires placards and special carrier certification; The SDS sheet must accompany HAZMAT shipments; We trained staff on HAZMAT handling.

HS Code (Harmonized System Code)

A standardized numerical system for classifying traded products for customs, tariffs, and trade statistics (HTS/HS codes).

Use HS codes on commercial invoices; Misclassification can cause customs delays; The broker requested the 10-digit HTS code.

Incoterms

International commercial terms defining the allocation of costs, risk, and responsibilities between buyer and seller in global trade (e.g., FOB, CIF, DDP).

Supplier quotes FOB Shanghai; We prefer DDP for e-commerce parcels; Switching to FCA changed our risk transfer point.

Inventory Turnover

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

Turnover improved from 4x to 6x after SKU rationalization; Low turns signal excess inventory; Turns vary by category and seasonality.

JIT (Just-in-Time)

An approach that aims to receive or produce goods only as needed to reduce inventory levels and carrying costs, relying on stable, reliable supply.

JIT deliveries cut on-hand stock at the DC; JIT failed during port congestion; JIT requires tight supplier reliability and short lead times.

Kitting

The process of assembling multiple SKUs into a single sellable unit or package to simplify fulfillment and improve efficiency.

We kit components into a field-service set; Kitting lowers pick transactions for common bundles; The WMS triggers kitting work orders from demand.

Landed Cost

The total cost to bring a product to its destination, including purchase price, freight, duties, taxes, insurance, and handling.

Landed cost includes duty, freight, and brokerage; We price using landed cost plus margin; Currency shifts changed our landed cost assumptions.

Lead Time

The elapsed time from placing an order to receiving usable goods; includes supplier production, transit, and internal processing.

Supplier lead time is 45 days plus 10 days ocean; We reduced internal putaway lead time by 30%; Forecast error plus long lead time increases safety stock.

Lot/Batch Tracking

A traceability practice that records batch or lot identifiers for received and shipped goods to support recalls, compliance, and rotation rules.

Record lot numbers at receiving and picking; A recall requires tracing all shipped lots; FEFO/FIFO rely on accurate lot control.

LTL (Less-Than-Truckload)

A freight mode where shipments from multiple shippers share trailer space, with hub-and-spoke terminal handling and class-based pricing.

LTL consolidates multiple customers’ freight; Accessorials increased our LTL bill; Density and NMFC class drive LTL pricing.

MOQ (Minimum Order Quantity)

The smallest quantity a supplier will sell or produce per order, often set to optimize manufacturing or logistics efficiency.

The vendor’s MOQ is 500 units per color; We negotiated MOQ down to reduce working capital; MOQ drives our replenishment batch size.

Net Terms

The agreed payment period after invoice date (e.g., Net 30), sometimes with early payment discounts, affecting cash flow and customer credit risk.

We extended Net 45 to this distributor; Early-pay discounts are 2/10 Net 30; Enforcing net terms improved DSO.

On-Time In-Full (OTIF)

A delivery performance metric measuring whether shipments arrive by the agreed date and with complete quantities per order requirements.

The retailer requires 98% OTIF; Missed appointment windows hurt OTIF; Better slotting improved in-full performance.

Order-to-Cash (O2C)

The end-to-end business process from receiving a customer order through fulfillment, invoicing, collections, and posting of cash.

Automating O2C cut order entry time by 60%; O2C spans order capture, credit, fulfillment, invoicing, and cash application; EDI improves O2C accuracy.

Palletization

The practice of loading cases onto pallets to specified patterns and heights for safe, efficient storage and transport.

Standardize TI x HI for pallet builds; We moved to CHEP pooled pallets; Palletization rules reduce damage in transit.

Pick, Pack, and Ship

Core warehouse processes that select items (picking), prepare them for shipment (packing), and dispatch to carriers (shipping).

We switched to wave picking to speed pick, pack, and ship; QA checks happen during the pack step; Same-day orders cut off at 2 p.m. for shipping.

Proof of Delivery (POD)

Evidence that a shipment was delivered, often a signed document or electronic capture with timestamp, location, and recipient.

The driver captured ePOD with a signature; We need POD to resolve the shortage claim; POD images flow back via the carrier API.

Putaway

The warehouse process of moving received goods from the dock to assigned storage locations according to rules and capacity.

Directed putaway sends fast-movers to forward pick; Putaway SLA is two hours from receipt; We reduced travel time with zone-based putaway.

S&OP (Sales & Operations Planning)

A cross-functional cadence that aligns demand, supply, and financial plans to set a feasible operating plan and inventory strategy.

S&OP sets the consensus forecast and supply plan; Finance reconciles the S&OP plan to budget; Scenario planning is part of our S&OP cycle.

Safety Stock

Buffer inventory held to absorb demand and supply variability and achieve target service levels.

We recalculated safety stock using service targets and lead-time variability; Safety stock reduced stockouts during promotions; ROP = demand during lead time + safety stock.

SKU (Stock Keeping Unit)

A unique identifier for a discrete sellable item or variant used for cataloging, pricing, and inventory control.

We rationalized SKUs by 15%; Each color-size variant is a unique SKU; SKU-level forecasts drive replenishment.

TMS (Transportation Management System)

Software that plans, executes, and optimizes freight movements, including carrier selection, rating, tendering, tracking, and settlement.

The TMS tenders loads and audits freight bills; Route optimization in TMS cut miles by 8%; TMS APIs connect to key carriers.

Traceability

The ability to track the history, location, and movement of products and components through the supply chain using identifiers and records.

We can trace each case to a supplier lot; Food customers require farm-to-fork traceability; Serialized traceability supports recalls.

UPC (Universal Product Code)

A standardized barcode and number system used primarily in North America to identify retail items at the point of sale; a form of GTIN.

The retail UPC is 12 digits; Scanning the UPC speeds receiving; UPC mismatches cause chargebacks.

Vendor Managed Inventory (VMI)

A replenishment model in which the supplier monitors the customer’s inventory and is responsible for generating orders to agreed service levels.

Under VMI we replenish the retailer’s DC based on their inventory and POS; VMI improved in-stocks and reduced bullwhip; We set VMI min/max levels by SKU.

Volume Discount

A pricing structure that reduces unit price at higher purchase quantities or revenue thresholds to incentivize larger orders.

Tiered pricing gives 5% off at 500 units and 10% at 1,000; Volume discounts encourage load consolidation; We modeled margin impact of volume rebates.

WMS (Warehouse Management System)

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

The WMS controls picking, packing, and cycle counting; RF scanning in WMS improved accuracy to 99.7%; We integrated WMS with ERP and TMS.

Working Capital

Short-term operating liquidity typically measured as current assets minus current liabilities, heavily influenced by inventory, receivables, and payables.

Reducing DIO freed up working capital; Tighter credit policies improved working capital; We balance service levels with working-capital targets.