Retail EDI Glossary

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3-Way Match

When used in the retailer/buyer process, this is the process of validating the supplier invoice against the inventory receiving details as well as against the purchase order. Retailers/buyers not trading electronically are doing this process manually. For those trading electronically, the systems do this function and report any exceptions that would require additional review coordinated by the Accounts Payable personnel. Read more about the benefits of automating the 3-way match.

3PL (third-party logistics providers)

Freight forwarders, courier companies and other companies integrating and offering subcontracted logistics and transportation services. In the “PL” terminology, it is important to differentiate the 3PL from the 1PL, which are the shipper or the consignee and 2PL, which are actual carriers. Check out our 3PL guide.

4PL (fourth-party logistics provider)

Originally just consulting firms specializing in logistics, transportation and supply chain management such as Rollins, Deloitte, SCMO (company) or BMT Limited. Now a new crop of companies has emerged who are actual transportation companies, too. While a 4PL is sometimes described as a non-asset-owning service provider, their role is to provide broader managing of the entire supply chain, making way for 5PLs (fifth-party logistics providers), who define themselves as broadening the scope further to e-business.

A

ACH

Automated clearing house. ACH transfers are bank-to-bank transfers that are done electronically.

Adjacencies (store shelves)

Intentionally positioning products near each other in a retail store as a strategy to expand sales. For example, there might be a “Summer Cook-out” end-cap that brings together products from different store aisles (paper plates, condiments, grilling tools), leveraging their adjacency to increase sales.

Adjencies (retail expansion)

A retail strategy of expanding a successful product into adjacent regions, segments, or channels. For example, a women’s beauty care line might expand into men’s products; a luxury brand in Europe might expand into the Chinese market; breweries may add hard seltzers to their line of beers. Retailers find more success in making small steps into adjacencies rather than large, risky leaps.

ANSI

The American National Standards Institute (ANSI) is a private, non-profit organization that oversees the development of voluntary consensus standards for products, services, processes, systems and personnel in the United States. This body represents the US in interactions with ISO, IEC and IEF. Business documents are often referred to by their ANSI codes, such as 856 for ASN, 810 for Invoice, 850 for Purchase Order. See our full code reference page.

ANSI ASC X12

Also referred to ANSI X12 or just X12, this is the most common EDI standard used in North America.

API

An Application Program Interface is an interface that software publishers provide for other software to communicate through. This allows the transmission of data and messages from one application to another, provided the correct protocols are use.

Applicability Statement (AS1, AS2, AS3, AS4)

AS1 is a specification for transporting data over the Internet using SMTP (email). AS2 uses HTTP. AS3 uses FTP. AS4 is another B2B protocol which uses the SOAP protocol for web services. AS2 is a common communication method used for EDI in the retail industry and AS4 is considered an expansion of it. Encryption and digital certificates make these methods secure.

ASN (Advanced ship notice)

The ASN contains critical information regarding the shipment of an order, including completeness, destination, delivery date and tracking number. The ASN is critical for order and inventory visibility and lets everyone know what’s happening to an order.

B

Back order

A product ordered that is out of stock. Usually it will be shipped when the product becomes available.

Batch Processing

Instead of handling invoices or other business transactions one at a time, an automated system will process documents in large groups, or batches. The goal is to minimize human errors and increase speed, but it can take technical skills to set up and trouble-shoot automated systems.

Banners

When a parent company has different names for their stores than the title of the company. Example: Dick’s Sporting Goods has stores named Dick’s Sporting Goods, Golf Galaxy and Field & Stream, so they have three banners.

Barcode

A visual symbol on a package or label that can be read by optical scanners. A barcode may be parallel lines that vary in width and spacing, but newer patterns include dots and shapes embedded in images.

Big-box store

A large retail store with a physical layout that resembles a large square or box. Has a large amount of floor space (generally more than 50,000 square feet), a wide array of items available for sale and a location in suburban areas. Big-box stores often can offer lower prices because they buy products in high volume.

Bill of lading

A document exchanged between a vendor and a freight carrier to classify the goods being shipped. EDI 211, also called Motor Carrier Bill of Lading.

Blackout

A timeframe in which changes are not allowed. Typically refers to system or process changes not allowed during critical high traffic or selling periods (i.e., holidays).

Blanket purchase order

A long-term commitment to a supplier for material against which short-term releases will be generated to satisfy requirements. Often blanket orders cover only one item, with predetermined delivery dates. Shipments do not normally occur against the blanket order, but are managed by release orders.

Blanket release order

The order authorization to ship against a blanket purchase order, agreement, forecast or contract.

Blockchain

Blockchain is a sophisticated technology designed to offer reliability, security and transparency through a shared, distributed database made of blocks. Blockchain records are encrypted, which makes the data secure, yet transparent such that transactions can be followed while remaining anonymous. This traceability makes blockchain useful for tracking shipments through the supply chain, such as tracking back products in the case of a recall, verifying the authenticity of a branded product or carrying a certified “organic” label. Blockchain databases are distributed across many computers, so they are not easily tampered with or stolen. Blockchain has great potential for supply chain logistics, but may be expensive and complex to develop.

BOPIS (Buy Online, Pick up In Store)

Curbside pickup shot up in demand during the Covid pandemic when shoppers wanted to avoid going into brick-and-mortar stores. The BOPIS strategy allows stores to retain their regular customers who appreciate the familiar products and quick access of their local stores over finding a new online retailer. BOPIS is often faster and cheaper than shipping products, and online portals can show accurate inventory levels for customers, but it can also require store investment in staffing and space for picking and packing orders.

Brick-and-mortar

A traditional “street-side” business that deals with its customers face to face in an office or store that the business owns or rents. The local grocery store and the corner bank are examples of “brick-and-mortar” companies. Brick-and-mortar businesses can find it difficult to compete with web-based businesses because the latter often have lower operating costs and greater flexibility.

Business to business (B2B)

A type of commerce transaction that exists between businesses, such as those involving a manufacturer and wholesaler, or a wholesaler and a retailer. Business to business refers to trade that is conducted between companies, rather than between a company and individual consumers (B2C)or between a company and government (B2G).

Business to consumer (B2C)

Business to consumer refers to transactions and business between companies and individual consumers.

Business to government (B2G)

Business to government refers to transactions and business between companies and government agencies.

C

Carrier

A company that transports product from point A to point B; includes truck, rail, ocean, small package and air carriers. Carriers are critical for complete and timely delivery of retail and wholesale products, so streamlining communications with carriers is essential for retail success.

Carrier PRO Number

A carrier-generated number representing the load number or load ID. Can be used for tracking and billing purposes (the carrier’s representation of the load). This may be a shipment identifier that is included on the ASN and the freight bill.

Casepack / Masterpack

A standard packaging configuration of products that may be the shipping unit. This configuration is usually assigned a unique GTIN identifier which may also be barcoded on the outside of the pack/carton.

Categorization

The process used by retailers to put products into groups with other like products. For example, T-shirts are in the apparel category. Categorization is now broadening out to include store categories (high volume, low volume) in addition to categorizing customers.

Category management

A practice by which a key supplier in a category (or 3rd party) leverages a retailer’s data to provide category recommendations and insights for managing the business. They are expected to be brand-agnostic recommendations that benefit the entire category.

Category review

A practice between retailers and their supplier/category managers in which they review the performance of the business. Typically done prior to a seasonal plan or category transition planning.

Centralized booking platform

Shop for transportation services in a single place using a centralized booking platform rather than switching between various provider portals. Whether you have small parcels, less-than-load (LTL) quantities, or need containers on ocean vessels, seeing all options in a centralized booking platform saves time and money, and makes it easier to comply with trading partner requirements.

Chargebacks (Deductions)

Penalties or cost offsets that are assessed by a retailer to a supplier for not following vendor procedures, the compliance manual or vendor agreements established in the contract with the retailer. Chargebacks can be associated with incorrect discounts, order fill rates, missing data, data quality, labeling, packing and carton-marking requirements.

Check lanes

The merchandising space located at the brick-and-mortar checkout aisles. Typically features highly impulsive items.

Class / Sub-class

In merchandising, this is an item’s category and sub-category as defined by the retailer.

Commodities

Essential household items (i.e., toilet paper, milk, laundry detergent) that are typically carried by a high percentage of retailers. They are extremely price-sensitive items, they tend to be lower margin, and are sometimes also used as loss leaders (to get consumers into the store).

Consignee

In the movement of freight, the consignee is the person or company to whom goods are officially sent or delivered.

Consignment

The process by which the supplier ships product to a retailer’s DC or store, but does not invoice the retailer until the product has been sold by the retailer. Sharing the buying organization’s Point of Sale information is what drives the invoicing process. The EDI 852 Sales & Inventory transaction> is usually a requirement for this type of relationship.>

Consolidator (Freight forwarder)

An organization that takes small shipments and combines them into larger shipments to garner better freight rates. Commonly used in import operations and may also provide customs clearance services.

Consumer

The end user, but not necessarily a purchaser, in the distribution chain of goods or services.

Contract carrier

A transport line that moves product under contract with a shipper or consignee.

Cost of Goods Sold (COGS)

The cost of an item as charged by the supplier to the retailer. This typically includes all costs charged by the supplier to get the item to the retailer, including production, packaging and freight.

Cost of Goods Sold (COGS) formula

COGS = Beginning Inventory + Purchases – Closing Inventory.

Country of Origin Labeling (COOL)

A USDA labeling law the requires grocery retailers to notify the consumer regarding the source country of certain foods such as meat, fish, fruit and nuts.

Credit memo

A financial document issued by the seller of goods or services to the buyer, reducing the amount that the buyer owes the seller. Some common credit memo examples are billing errors, rebates, returns, and volume discounts. EDI 812 is the Credit/Debit Adjustment document.

CRM Contact Center (Customer service, call center, etc)

A computer-based system that provides call and contact routing for high-volume telephony transactions, with specialized answering “agent” stations and a sophisticated real-time contact management system. The definition includes all contact center systems that provide inbound contact handling capabilities and automatic contact distribution, combined with a high degree of sophistication in dynamic contact traffic management. There are a lot of synonyms for this important function.

Cross-dock / Cross-docking

Cross-docking is a logistics practice of unloading goods at a warehouse from an incoming truck and loading them directly into outbound trucks. Unlike other methods, cross-docking does not involve storing goods in the warehouse or distribution center. There are many benefits to cross-docking when it’s done correctly.

CSV file

Comma-Separated Values is a file format that separates data elements with commas in plain text. It is often a choice when exporting a spreadsheet and can be used to exchange data between systems.

Customer Experience (CX)

Everything a customer goes through as they interact with your business, including brand, product, price and service. To succeed, a business must study, evaluate and optimize CX to eliminate any negative experiences and take advantage of all opportunities to improve the entire shopping and purchasing experience.

Customer journey

All of the interactions that a customer may go through before, during or after the customer experiences a product or service. This includes any initial exposure to the brand or product (advertising, marketing, word-of-mouth), their browsing experience (in-store or online), their shopping experience (searching for products, comparing and price-shopping), their buying experience (shopping cart, checkout), their delivery experience (notifications, package appearance), their actual product use (unboxing, performance), any follow up regarding the purchase (satisfaction surveys, ratings) and subsequent communications to retain them as a customer.

Customs

A government agency entrusted with the enforcement of laws and regulations of import and export. Customs agencies are empowerd to collect and protect import revenues and to regulate and document the flow of goods in and out of the country.

Customer Experience Management (CEM)

A business strategy that focuses and redefines the business from the customer viewpoint. CEM assumes that products and services are no longer sufficient to satisfy the customer and elevates the value proposition to the level of an experience. At the core of the CEM strategy is an organizational experience that defines the value for both employees and customers.

D

Data element

A unit of data for which the definition, identification, representation and/or permissible values are specified by means of a set of attributes/values.

Date code

The date information assigned by the manufacturing or packing plant for tracking purposes of a product. Specifically, a means of identification of the products prepared, processed or packaged on a certain date for the purpose of track and trace. Examples: Use-by date, production date, sell-by date.

Days / Weeks of Supply (WOS)

A calculation used to determine and evaluate optimal inventory levels: current inventory level divided by average sales over a given time period.

Debit memo

A financial document issued from a buying organization to a seller that notifies the seller that a deduction was made to the seller’s payment. Some common debit memo examples are billing errors, rebates, returns, and volume discounts.EDI 812 is the Credit/Debit Adjustment document.

Deconsolidation

The act of separating a “consolidated” (usually containerized) shipment into smaller shipments for delivery to one or more destinations, typically to a regional distribution center or to store locations.

Direct import

Direct product is imported directly by the retailer and not through the manufacturer’s authorized agent/distributor. This process allows the retailer to take control of inventory sooner, resulting in lower cost of goods sold and transportation costs.

Direct store delivery (DSD)

A method of delivering product from a supplier/distributor directly to a retail store, thereby bypassing a retailer’s distribution center. DSD products are typically, but not always, fast-turning, high-velocity and high-consumer-demand merchandise. The supplier is normally responsible for creating the order and merchandising the product on the sales floor. Examples: soda, chips, greeting cards and bread.

Direct to consumer (DTC)

See Manufacturer-direct. Also called Factory-direct. Startup manufacturers often start out by selling directly to consumers online until their brand takes off and they can attract retail partners or afford their own brick-and-mortar stores.

Discontinued

An item that is currently being sold and replenished, but will soon be no longer sold or replenished. This can be determined at the supplier or retailer level.

Display ready (or Floor ready)

See Shelf-ready packaging (SRP).

Distribution center (DC)

A facility that warehouses inventory or flows inventory for pending distribution to stores, other warehouse facilities, or the eCommerce consumer. Also called branch warehouse or distribution warehouse. EDI 856 is the ASN for DC/cross-dock shipments.

Distributor

An entity that buys noncompeting products or product lines, warehouses them, and resells them to retailers or direct to the end users or customers. Distributors allow for smaller minimum order quantities than manufacturers and they support multi-vendor consolidated shipments.

Domestic

When product is purchased and shipped within the same country.

Drop ship / Drop shipping

A supply chain management method in which the retailer does not keep goods in stock but instead transfers customer orders and shipment details to the manufacturer, another retailer or to a wholesaler, who then ships the goods directly to the customer.

DUNS number (D-U-N-S number)

A nine-digit identification number assigned by Dun & Bradstreet to businesses and used for uniquely identifying companies. For EDI, some companies will use this number as a corporate identifier, but may also assign a 4-digit suffix to indicate a specific location or business entity.

E

eCommerce (Electronic commerce or EC)

The buying and selling of goods and services on the Internet. In practice, this term and a newer term, e-business, are often used interchangeably. For online retail selling, the term e-tailing is sometimes used.

Electronic Data Interchange (EDI)

The system-to-system transmission of business messages in a standards-based format, developed and managed by standards governing bodies.

EDI mapping

To exchange business documents electronically between trading partners, an EDI map is created to translate one data structure to another. For example, a supplier may use the EDIFACT data standard while a buyer may use SAP, so a map is needed to make sure all data items land in the proper place. Onboarding a new trading partner means making (and maintaining) a custom map, which makes hiring a full-service EDI company to handle ongoing map updates a valuable service for any business.

EDI provider

An outsourced technology company that provides a secure and automated network for exchanging electronic data interchange (EDI) documents throughout an entire supply chain. EDI providers maintain platform security and update EDI maps whenever a retailer changes requirements or specifications.

EDI standard

Standard that prescribes the formats, character sets and data elements (and in some instances code values) used in the exchange of business documents. EDI standards commonly used are X12 (North American based), EDIFACT (all other countries) and Tradacoms (UK).

EDI version

EDI standards are supported by updates to the standard, known as versions, that are published (typically annually) to allow for new data elements, transactions needed to support changing systems and business requirements.

EDIFACT

United Nations/Electronic Data Interchange for Administration, Commerce, and Transport (UN/EDIFACT or EDIFACT) is the international EDI standard developed under the United Nations.

Electronic Funds Transfer (EFT)

A hands-off, electronic system that moves money between bank accounts or financial institutions.

Electronic trading

The electronic exchange of business messages between parties. Electronic trading can be any format as long as both parties are in agreement on structure, content and code/values.

Endcaps

The space at the end of the aisle for merchandise facing the main aisles. Higher traffic areas that drive sales for items located in that space. The space typically gets changed out for seasonal or promotional relevancy.

Enterprise app stores

Applications that are being developed with the features and functionality of Amazon, Google, Facebook and the Apple App Store in mind, in order to improve consumer experience.

E-retailer (e-tailer)

A company whose primary business is the sale of goods and services through the Internet. Electronic retailing, or e-tailing, can include business-to-business and business-to-consumer sales. E-tailing revenue can come from the sale of products and services, through subscriptions to website content, or through advertising. It is a play on the words “retail” and “eCommerce.”

European Article Number (EAN)

A numbering mechanism used in Europe to uniquely identify every retail product and packaging option. The EAN is similar in concept and design to the UPC code and is usually what the barcode represents on goods. This value is also identified as a GTIN.

Every Day Low Pricing (EDLP)

A pricing strategy that signals to the consumer that an item is rarely on promotion but instead is offered at a low price at all times. This is in direct contradiction to a high/low strategy, when an item is purposely sold by the retailer at a high price on non-promotional weeks, so they can go low on promotion and therefore see the majority of the volume when on promotion. EDLP usually matches closely to what the high/low price is when item is sold on promotion.

F

Factor

A factor is a financial intermediary that purchases receivables from a company. A factor is essentially a funding source that agrees to pay the company the value of the invoice less a discount for commission and fees. The factor advances most of the invoiced amount to the company immediately and the balance upon receipt of funds from the invoiced party.

Fill rate

When some amount other than 100% of an order is fulfilled, the percentage of items (or the percentage of a single item) that is actually shipped is called the fill rate.

First In, First Out (FIFO)

In the supply chain, this is the monitoring of inventory and shipping of the oldest products first, where shelf life is a concern. In accounting, this is a method of valuing the cost of inventory using the oldest item price paid for a product.

Flow through

A process in which products from various locations are sent to a distribution center, re-sorted by destination and shipped out the same day, with no storage time. The retailer determines the item inventory allocation by store prior to when the products arrive at the DC and commonly uses the ASN to determine distribution. This eliminates warehousing time and reduces inventory levels.

FOB (Free on Board or Freight on Board)

Indicates whether the seller or the buyer has ownership and/ or liability for goods during shipment between the two parties. “FOB Origin” or FOB Shipping Point” means the buyer accepts the title of the goods at the shipment point and assumes all risk once the seller ships the product. The buyer is responsible if the goods are damaged or lost while in transit.

“FOB Destination” means the seller retains the title of the goods and all responsibility during transit until the items reach the buyer.

Forecast

A number associated with an expected outcome. Typically used as part of business planning internally but also a number that is shared between retailers and suppliers so they have more insight into what to expect from the other party.

Freight

For a carrier, feight is the product being moved by a carrier between two points. For a buyer/seller, freight refers to the cost of shipping products between two points.

Freight bill

The carrier invoice for the movement of products and services that includes some shipment/product details and may include additional charges. EDI 210 Motor Carrier Freight Details and Invoice.

Freight carriers

The companies that haul freight, also called “for-hire” carriers. Methods of transportation include trucking, railroads, airlines and ocean shipping.

Freight charge

The rate and other charges determined by the carrier for moving goods between two points.

Freight collect

The consignee is responsible for shipping charges and any ancillary charges. Also known as “collect upon arrival”

Freight prepaid

The shipper is responsible for shipping charges and any ancillary charges. Also known as “prepaid and add”.

Fulfillment

Sequence of steps involved in processing an order to the satisfaction of the customer and making the necessary changes in the inventory records. It may also include processing of returns and adjustment of the records. Also called order processing. Examples: Direct to Store, Direct Ship, Drop Ship, Cross dock.

Functional Acknowledgement

EDI 997 is a confirmation of receipt of an EDI transaction, indicating “I got it” to the sender, along with time and date.

G

Global Data Synchronisation (GDS)

The messaging used within the GDSN that supports the exchange of standardized item data between trading partners based on GS1 message standards.

Global Data Synchronisation Network (GDSN)

An internet-based, interconnected network of interoperable data pools and a global registry known as the GS1 Global Registry. Enables companies around the globe to exchange standardized and synchronized supply chain data with their trading partners using a standardized Global Product Classification.

Global Trade Item Number (GTIN)

A globally unique 14-digit number used to identify trade items, products or services. GTIN is also an umbrella term that refers to the entire family of UCC.EAN data structures. The entire family of data structures within the GTIN is: UPC and EAN-13, and GTIN-8, ISBN.

GS1-128

A linear barcode symbol that is more compact than methods like Code 39. It is used in global shipping and packaging at the container and pallet level.

H

Hardlines

A category of goods for retailers that includes the categories of Toys, Sporting Goods, Electronics, or Entertainment (think soft goods apparel/linen vs. hard goods plastic/electric). Sometimes used in replacement of the term “hard goods”.

I

Import

A good or service brought into one country from another.

Impulse buys

Items that the consumer was not intending to buy but added to their basket once they saw the item. Retailers utilize endcaps, check lanes and other high traffic areas to entice customers.

Item data (product data)

The key details that describe a product, such as color, size, weight, etc., and which are required for trading partners to align their systems. Detailed and accurate item data allows customers to search for products, retailers to track what sells, and everyone to manage inventory at optimized levels.

Item Management System / Item Management Services (IMS)

A system used by companies (retailers, distributors, suppliers) to store item details. Commonly referred to as the item master.

In-stock

Used to describe an item that is available for immediate purchase.

In-transit

Used to describe product that is in the process of moving from one point to another in the supply chain.

Internal Data management

Internal data refers to data gathered from inside a company, such as sales, finance, human resources and marketing, which can be used to evaluate and improve internal operations. Good management of internal data includes concepts such as data security, data backup, data cleansing, data archiving and data accuracy.

Inventory report/advice

More than just a count of the products on hand, a good inventory report identifies the reorder point for each product, so you avoid having too much or too little. It can also track perishable items using FIFO or LIFO for batched SKUs. An inventory report can be organized to emphasize inventory value, inventory performance, inventory forecasts or fulfillment and shipping data.

J

Just in Time (JIT) fulfillment

Forecasting and storing product inventory is a major risk and expense for retailers. With Just in Time fulfillment, an online retailer has no inventory, but instead only purchases an item from their supplier when a customer order comes in. When they receive the product from the supplier, they immediately ship it on to the customer, thus retaining no inventory. This differs from Drop-Ship, where the supplier ships directly to the customer, so JIT takes longer, but gives the retailer absolute control over how the package is packed and shipped.

K

L

Landed cost

The total price of a product once it has arrived at a buyer’s door. The landed cost includes the original price of the product, plus all transportation fees (both inland and ocean), customs, duties, taxes, insurance, currency conversion, crating, handling and payment fees.

Lead time

The total time that elapses between an order’s placement and its receipt. It includes the time required for order transmission, order processing, order preparation and transit.

Less-Than-Truckload (LTL)

A shipment that will not take up an entire truck. These types of shipments typically weigh between 100 and 10,000 pounds. LTL freight shipments will often take longer to reach their destinations. Carriers can combine LTL shipments to offer lower rates to their customers.

Line sheet

A line sheet is how fashion brands and designers present their product information to buyers in a short, simple way. A line sheet looks like a detailed product web page, but includes wholesale-specific information such as order minimums, wholesale prices and contact information. Many sellers now use online software to create and maintain cloud-based line sheets.

Load

The service provided by a carrier that includes a series of picks and drops from the time the product is loaded to the final delivery. Considered a single movement.

Load tender, load tendering

Load tendering is a process in which an entity submits a request (a load tender) to multiple carriers to get a bid. The load tender, EDI 204, includes all essential information, including type of cargo, shippment dates and times, location and total weight. Carriers can respond with offers and the buyer can choose the best option for them.

Localization

1. A retail strategy of making sure that a product or approach is aligned with the needs of the consumer in a specific market (as opposed to “standardization”, when a product or approach is the same everywhere). 2. A trend toward manufacturing, buying and selling in a local area or region in order to protect a supply chain from disruption. This was seen during and after the Covid pandemic, when international supply chains broke down.

Logistics

The part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers requirements.

Loss leader

A product is sold at a price below its market cost or normal margin. Used to bring customers in the door and stimulate other sales of more profitable goods or services.

Lot number

An identification number assigned to a particular production run or batch from a single manufacturer. Lot numbers can typically be found on the outside of packaging.

M

Manufacturer-direct

Also known as factory-direct, or direct to consumer (DTC) this refers to a business model in which the manufacturer sells its goods directly to the end user of the product. There are four types of manufacturers who sell directly to consumers (DTC) online: 1. No retail stores, sell only through retail partners (e.g., Bose); 2. Retail stores and retail partners (e.g., Sony Store); 3. Retail stores, no retail partners (e.g., American Apparel); 4. No retail stores or retail partners, only available online/phone (countless distruptor brands like Allbirds shoes, Dollar Shave). Many successful DTC brands end up adding retail partners or opening brick-and-mortar stores.

Manufacturer (in addition to Manufacturer-direct)

A manufacturer does the material work of creating products. They may also act as the suppliers of those products (see “Manufacturer-direct”), or they may use independent suppliers to handle relationships with buyers.

Margin

A metric that looks at the difference between the cost of an item and the selling price.

Mark-down

A reduction of the retail price by the retailer, or of the product cost by the supplier.

Mark-up

The difference between the cost of an item and the selling price.

Master Data Management (MDM)

A comprehensive method and/or system of enabling an enterprise to link all of its critical data to a master file, providing a single source of truth. This could include items, locations or any other product data. Maintaining an MDM is critical to providing customers with accurate product information.

Micro fulfillment center (MFC)

Micro fulfillment centers are a trend in warehousing that emphasizes smaller facilities in densely populated locations. The advantages include shorter delivery times to customers and a lower cost for entry into a new market compared with large warehouses. Read more about the risks and benefits of micro fulfillment centers.

Mobile Commerce

The use of wireless handheld devices such as smart phones and laptops to conduct commercial transactions online. Mobile commerce transactions continue to grow, and the term includes the purchase and sale of a wide range of goods and services, online banking, bill payment, information delivery and so on. Also known as m-commerce and mobile engagement.

Multichannel

Interacting with customers using more than one channel: physical store, eCommerce website, etc.).

Musical Size Runs

A method of ordering that consists of one style, one color and multiple sizes to a case or assortment.

N

O

Omnichannel

A multichannel approach to sales that seeks to provide the customer with a seamless shopping experience whether the customer is shopping online from a desktop or mobile device, by telephone, or in a brick and mortar store.

Omnichannel Fulfillment

Prioritizes order delivery based on individual customer needs or preferences. The goal is to fulfill every SKU from every channel for every demand source. Omnichannel fulfillment presents many IT challenges for small, medium and even large retailers and suppliers.

On Order

The total number of stock-keeping units (SKUs) that have been ordered from a supplier. These units are not counted as part of the quantity on hand until they actually arrive.

Open to Buy

A metric used to manage the amount of inventory a certain category can own at any point. Open to Buy is the difference between the inventory goal amount and the amount of inventory anticipated to be owned at any given point. Calculation tends to be: Planned Inventory – (Current inventory + incoming receipts for an order leadtime – expected sales during order lead time).

Order Management System (OMS)

Brings together orders from multiple suppliers and portals into one cohesive solution. This increases visibility into order details and supplier performance, so you can make informed decisions and forecasts.

Out of Stock (stockout)

Products that are currently not available for purchase because no inventory is available. Optimizing inventory requires a good window into analytics for products at a detailed level.

Overstock

Too much inventory of a product that’s not selling, leading to waster shelf space and missed opportunties. Optimizing inventory requires a good window into analytics for products at a detailed level.

P

Packing Slip

An itemized list of items included with each shipment/order. Some common details are quantity, description and weight of the contents. This document is prepared by the shipper and included with the shipment/order. Retailers who drop-ship through third parties often brand their packing slips to be clear that the products came from them and not the shipper.

Peer-to-Peer (P2P)

A type of Internet network that allows a group of digital device users with the same networking program to connect with each other without a middle man. Napster, a music-sharing network, was the first popular P2P network. Bitcoin and other cryptocurrencies facilitate P2P payments, bypassing formal financial institutions.

Pick, Pack & Ship

Staff in a fulfillment center/warehouse pick products off shelves, pack them and ship them directly to consumers. This service allows eCommerce retailers to sell products without handling them at all.

Plan – Merchandising

A financial road map that sets goals at the category level and is created seasonally or annually.

Planogram

A visual representation, diagram or model that illustrates the placement of products within a store to maximize visual impact and productivity.

POA (Purchase Order Acknowledgement)

This EDI 855 document acknowledges the receipt of a purchase order (EDI 850), signals the supplier’s intent to fulfill the order, reports any errors on the order, indicates any issues with fulfillment an order (backorders, requests for changes) and provides delivery status information. Automating orders with a POA can greatly streamline your trading partner communications.

Point of Sale (POS) System

A combination of hardware (cash register) and software (payment and inventory) that allows retailers to process transactions while updating operations. A more complex POS system provides information to measure sales history, pricing metrics, customer records, inventory levels and more.

Procurement

The process of finding and purchasing supplies and goods. For some businesses, this encompasses end-to-end activities including defining product requirements, locating suppliers, negotiating terms, issuing purchase orders, tracking receipts and maintaining records.

Product Information Management (PIM)

The centralized system to manage product item information in one place. A single shared master set of product data can be used to feed information to websites, marketing teams, ERP systems and trading partners.

Product Planning

The process of taking a product from concepting, through analysis of competition and markets, to establishing price points and revenue goals, and continuing through launch, product lifecycle and sunsetting.

Product Turns

A calculation used to measure productivity of an item or category that represents the number of times inventory is sold during a specific timeframe. Measured as the sales or cost of goods sold during a specific time period divided by the average inventory level.

Purchase Order change process

After a purchase order is exchanged, a buyer may wish to alter the amount of the order, or a seller may not have sufficient inventory, and the purchase order needs to be changed. If the order process requires purchase orders to be authorized, then directly changing an existing purchase order may not be allowed. Instead, a Purchase Order Change request (EDI 860) can be issued by the buyer or the seller to ensure that the change is agreed upon and the subsequent invoice will be correct.

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Racetrack

The term used for the aisles that experience the highest amount of traffic flow through the store. Useful for strategically placing products in front of customers.

Radio frequency identification (RFID)

A data collection technology that uses electronic tags for storing data. The tag, also known as an “electronic label,” “transponder” or “code plate,” is made up of an RFID chip attached to an antenna. Like bar codes, RFID tags identify items. However, unlike bar codes, which must be in close proximity and line of sight to the scanner for reading, RFID tags do not require line of sight and can be embedded within packages. Depending on the type of tag and application, they can be read at a varying range of distances. In addition, RFID-tagged cartons rolling on a conveyer belt can be read many times faster than bar-coded boxes.

Regional Distribution Center (RDC)

The warehouses that are commonly located geographically to support the customer (suppliers, distributors, retail stores or end consumers).

Replenishment

The ordering and movement of inventory from upstream, or reserve product storage locations, to downstream or primary storage, picking and shipment locations. The purpose of replenishment is to keep inventory flowing through the supply chain by maintaining efficient order and line item fill rate.

Response to Load Tender

The transaction used to indicate acceptance of a load tender.

Retailer

A business or person that sells goods to the consumer, as opposed to a wholesaler or supplier, who normally sells goods to another business.

Return Merchandise Authorization (RMA)

An RMA is coded EDI 180 and is used by retailers to notify their suppliers that a return has been authorized. There are many benefits for trading partners who automate their RMA process.

Returns (Sales)

The merchandise sent back by a consumer or a retailer to a supplier, usually for one of the following reasons:

• Excess quantity shipped
• Excess quantity ordered
• Defective goods
• Goods shipped too late
• Product specifications are incorrect
• Items shipped

The return process is typically documented in the trading partner agreement.

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Safety stock

A level of inventory carried above and beyond basic levels to ensure the item is in stock when the customer needs it. This typically addresses issues like item sales fluctuations, inconsistent inventory supply, long supply lead times and variability or store stocking concerns.

Sales receipt

A sales receipt records a sale, acknowledging that the buyer has paid the seller for the goods or services and the transaction is complete. A partial receipt might indicate that the payment will be made in installments. An invoice is not a receipt, because it is issued when an order has been placed, but payment will not happen until the services are complete.

SCAC

A four-letter code to identify a transportation carrier.

Scan-Based Trading (SBT)

A method of using Point of Sale data from scanners and retail checkout to initiate invoicing between a manufacturer and retailer. (Also called pay-on-use).

Segmentation

A method used to break down a category into lower levels of classification based on certain consumers’ shopping habits, store pattern, regional pattern or seasonal pattern.

Sell-through rate

The percentage of purchased inventory that has been sold. Typically used in conjunction with seasonally variable businesses. It’s critical for retaiulers to have insight into sell-through rates in order to take advantage of opportunties and avoid product that doesn’t move. Suppliers can also take advantage of detailed sell-through information to optimize inventory levels and pitch the right products to buyers.

Shelf life

The recommended length of time that a commodity may be stored without becoming unfit for use, consumption or sale.

Shelf-ready packaging (also Display-ready or Floor-ready)

Shelf-ready packaging (SRP) refers to the preparation of a product so that it is delivered to a retailer in a ready-to-sell merchandised unit. Products which come in SRP can be easily placed on the shelf without the need for unpacking or repacking. SRP covers all types of packaging designed for the retail outlet. It is not limited to packaging that goes on the shelf; it also includes sales support mechanisms in all major distribution channels.

Shipper

The consignor, exporter or seller (who may be the same or different parties) named in the shipping documents as the party responsible for initiating a shipment, and who may also bear the freight cost.

Showrooming

Consumers using a physical retail establishment and resources to research a purchase later made on a website or through a mobile device.

Small parcel

Rather than truckloads or pallets of products that move in bulk, many products are shipped as “small parcels”, which fall under specific weight and size restrictions and are better handled by small parcel carriers such as UPS, FedEx, DHL, USPS, etc. These “less-than-load” shipments often require a separate logistics system from freight.

Software-as-a-Service (SaaS)

A software application delivery model wherein the provider hosts and operates the application for use by its customers over the Internet. It is typically thought of as a low-cost way for businesses to obtain the same benefits of commercially licensed, internally operated software without the associated complexity and high initial cost.

Sourcing Company

A company whose function is procuring products or services for another business partner using predefined criteria (pricing, supply chain capabilities, quality, etc).

Standard Carrier Alpha Code (SCAC)

A unique two-to-four-letter code used in the United States to identify transportation companies. Assigned by the NMFTA (National Motor Freight Traffic Association).

Statement of Work (SOW)

A document routinely employed in the field of project management. It defines specific activities, deliverables and timelines for a vendor providing services to a client.

Stock Keeping Unit (SKU)

A unique code consisting of letters and numbers that identify characteristics about each product, such as manufacturer, brand, style, color and size. It is used and assigned by retailers to identify and track a product’s inventory or stock..

Storage lockers for deliveries

Amazon has begun to use “delivery lockers” in various markets. They have quietly installed large metal cabinets—Amazon Lockers—in grocery, convenience and drugstore outlets that function like virtual doormen, accepting packages for customers for a later pickup. Customers gets a code to open the locker.

Store clusters

The groupings of stores with similar selling patterns or consumers.

Storefront

The entrance to the store which is typically viewed as a prized space because all customer traffic passes this location. Often includes customer returns, check lanes, information board/directory, etc.

Store location rationalization

A reorganization of a company in order to increase efficiency. This reorganization may lead to an expansion or reduction in company size, a change of policy or an alteration of strategy pertaining to particular products.

Suppliers

Companies whose business is to supply a particular service or commodity. Sometimes called vendors.

Supply chain

A supply chain is a network or structure that takes a product through all the steps from manufacture, storage, distribution, ordering, retailing and shipping to the customer. All organizations have supply chains of varying degrees, depending upon the size of the organization and the type of product manufactured. These networks obtain supplies and components, change these materials into finished products and then distribute them to the customer.

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Tare Weight

When consumer products are shipped in specific sized containers, called casepacks or masterpacks, the Tare Weight is the weight of an empty container. Thus, tare weight plus net weight (weight of the goods) equals gross weight of the entire shipment, which is subject to regulations such as in trucking.

Taxonomy

A system for naming and organizing things.

Tender

To offer (tender) a shipment to a motor carrier, including detailed scheduling, equipment requirements, commodities and shipping instructions pertinent to a moving products.

Terminal

A building that handles and stores freight temporarily as it is transferred between trucks. Also referred to as a hub.

Terms (Payment)

The conditions under which a seller will make a sale. Typically, these terms specify the period allowed to a buyer to pay off the amount due, and may demand cash in advance, cash on delivery, deferred payment period of 30 days or more, etc.

Total cost of ownership (TCO)

The purchase price of an item is only the starting point. The TCO, or total cost of ownership, adds the costs of operation over time, which could include ongoing maintenance, repair, training, insurance, depreciation, and disposal. The TCO of a machine or vehicle might suggest an alternative such as leasing or outsourcing specific items or services.

Truck-Load (TL)

TL stands for full truckload, meaning that the shipment will take up an entire truck by itself. TL shipments stay on the same truck the entire time and are not transferred during transport. This method of transportation is much quicker than LTL, since there is not a need to transfer the load or deconsolidate the freight through a hub/terminal network.

Tracking number

The number assigned to a shipment to identify and trace it as it travels to its destination.

Trading partner

One of the two or more participants in an ongoing business relationship.

Trading partner agreement

An agreement between retailer and supplier (or any two trading partners) detailing how they will conduct business together. Also known as a vendor agreement.

Transfer

A change in ownership of an asset, or a movement of assets from one location to another. This term is generally used by retailers/distributors or suppliers to define moving inventory between inventory/storage facilities.

Transportation Management System (TMS)

An application used by 4PLs/3PL/shipper (anyone who’s shipping anything, despite their role in the supply chain) to optimize management of the building and transporting of loads. Used to manage costs such as freight spend and carrier rates.

Trip

Traditionally used by transportation or logistics companies to define the continuous movement representing two or more consecutive loads/trailers handled by one carrier.

U

Uniform Communication Standard (UCS)

An EDI standard designed for and used by trading partners within the grocery industry. A subset of the X12 national standard.

Universal Product Code (UPC)

A type of code printed on retail product packaging to identify a particular item. It consists of two parts: the machine-readable barcode, which is a series of unique black bars, and the unique 12-digit number below it.

V

Value-added Network (VAN)

A service providing a secure system for exchanging EDI (electronic data interchange) documents. Other services include private messaging systems (email privacy) and workflow reporting.

Vendor compliance

The documented rules by which trading partners will conduct business with one another as define by the retailer/buyer. Vendor compliance rules are created by companies to facilitate streamlining and standardizing their internal procedures around supply chain management, resulting in trading partners adjusting their operations to react to their customer’s requests.

Vendor income

A fee paid from the supplier to the retailer, usually for inclusion in a coveted resource of the retailer, like weekly circular, endcap space, or marketing programs, but at times also used to cover clearance or promotional markdowns.

Vendor-managed inventory (VMI)

VMI refers to when a supplier (vendor) takes full responsibility for the inventory of their product(s) on behalf of the retail partner. A retailer provides access to both the EDI 850 purchase order and EDI 852 product activity data documents. It is the supplier’s job to review, maintain and suggest inventory levels across all the retailer’s platforms.

Vendor master agreement

A contract in which the parties agree to the terms of doing business that will govern future initiatives, transactions or future agreements. A master agreement permits the parties to quickly negotiate future transactions or agreements, because they can rely on the terms of the master agreement, so that the same terms need not be repetitively negotiated, and to negotiate only the deal-specific terms. Companies that use the Master Agreement commonly apply or attach amendments for new initiatives.

Vendor number

An accounting system such as for a government entity or a large company may assign numbers to vendors it does regular business with, to simplify communications.

Voluntary Inter-industry Communication Standard (VICS)

An EDI standard designed for and used by trading partners within the retail industry. A subset of the X12 national standard.

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Warehouse

A large building where raw materials or manufactured goods may be stored before their export or distribution for sale.

Warehouse Information Network Standards (WINS)

An EDI standard designed for and used by trading partners within the public warehouse industry. A subset of the X12 national standard.

Warehouse Management System (WMS)

A system used to effectively manage warehouse business processes and direct warehouse activities, including receiving, put-away, picking, shipping and inventory cycle counts. Also includes support of radio-frequency communications, allowing real-time data transfer between the system and warehouse personnel. A WMS also:

• Maximizes space and minimizes material handling by automating put-away processes
• Tracks inventory levels by tracking receiving, movement, and adjustments (i.e., for damage)
• Manages storage locations of product.

Wholesaler

A buying organization that purchases quantities of goods from various producers or suppliers, warehouses them and resells to retailers. Also called distributors.

X12

The most commonly used cross-industry B2B standard supported and adopted in North America. The standard incorporates many industry-related standards such as VICS, WINS and UCS.

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