Distribution has a vocabulary that is specific to the industry and not always self-evident. This glossary covers 50 terms across five categories: order management, billing and finance, inventory, account relationships, and technology.
Order Management
Standing Order — A recurring order placed at a fixed interval without requiring the buyer to manually reorder each time. Blanket Purchase Order — A purchase order for a defined total quantity to be fulfilled in multiple shipments over a specified period. Drop Ship — The supplier ships directly to the buyer; the distributor never takes physical possession. Cross-Dock — Inbound shipments transferred immediately to outbound vehicles with minimal warehousing time. Backorder — An order for a product currently out of stock, to be fulfilled on replenishment. Pick-and-Pack — Selecting items from inventory and assembling them into a shipment for a specific order. FOB (Free On Board) — Specifies the point at which the buyer takes title and risk for goods in transit. Landed Cost — Total cost including purchase price, transportation, customs, duties, and handling fees. Proof of Delivery (POD) — Documentation confirming receipt of delivery, including timestamp and signature. Bill of Lading (BOL) — A legally binding document detailing the type, quantity, and destination of goods being shipped.
Billing and Finance
Net-30/60/90 — Payment terms specifying invoice is due 30, 60, or 90 days from invoice date. Days Sales Outstanding (DSO) — Average number of days to collect payment after a sale. Aging Report — Categorizes outstanding AR by how long each invoice has been outstanding. Credit Memo — Reduces a buyer's outstanding balance, issued for returns, pricing adjustments, or delivery errors. Early Payment Discount (2/10 Net 30) — 2% discount if paid within 10 days, full amount due within 30. Factoring — Selling accounts receivable to a third party at a discount for immediate cash. Credit Limit — Maximum outstanding AR balance extended to a buyer at any point in time.
Inventory
FIFO — First In, First Out: oldest inventory sold first. Standard for perishables. SKU — Stock Keeping Unit: unique identifier for each distinct product. Catch Weight — Products sold by weight but delivered in variable-weight units. Lot Number / Batch Number — Unique identifier for a group of products processed together, enabling recall traceability. Safety Stock — Extra inventory beyond the reorder point to protect against demand variability. Cycle Count — Regular partial inventory count on a rotating schedule rather than a full facility count.
Account Relationships
Tier Pricing — Different unit prices based on purchase volume or relationship status. Volume Discount — Price reduction when a buyer purchases above a specified quantity threshold. Rebate — Post-purchase payment for achieving a defined purchasing milestone. Exclusivity — Distributor carries only one supplier's product in a category within a defined territory. Account Health Score — Composite metric evaluating relationship strength based on order recency, frequency, monetary value, payment history, and portal engagement.
Technology
ERP — Enterprise Resource Planning: integrated platform managing accounting, procurement, inventory, and order management. Designed for $30M+ operations. WMS — Warehouse Management System: manages receiving, put-away, pick-and-pack, and inventory location tracking. Designed for large-scale warehouses. EDI — Electronic Data Interchange: standardized electronic format for exchanging business documents, required by large retail buyers. B2B Ordering Portal — Client-facing digital platform for placing orders, viewing order history, accessing invoices, and managing account with a distributor. API — Application Programming Interface: defined method for two software systems to exchange data programmatically. RFM Scoring — Recency, Frequency, Monetary: customer segmentation methodology scoring buyers on how recently they ordered, how often, and how much.