B2B Distribution Terminology: Essential Terms for Wholesalers

B2B Distribution Terminology: Essential
Terms for Wholesalers

Your complete guide to understanding the language of wholesale distribution
and B2B ecommerce

Your complete guide to understanding the language of wholesale distribution and B2B ecommerce, Whether you’re launching your first wholesale operation or expanding your distribution network, understanding industry terminology is critical for success. This comprehensive guide covers over 200+ essential terms used in B2B distribution, wholesale operations, supply chain management, and ecommerce.

Communicate effectively with suppliers, customers, and logistics partners
Negotiate better contracts and payment terms
Understand your ERP and ecommerce platform capabilities
Navigate compliance and regulatory requirements
Make informed decisions about inventory and fulfillment strategies

We’ve organized these terms into logical categories for easy reference.

Order Management & Processing

Order Types

Purchase Order (PO)
A commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services. In B2B distribution, POs serve as legally binding contracts between buyers and sellers.

Sales Order (SO)
The distributor’s internal document confirming receipt of a customer’s purchase order. This triggers the fulfillment process and inventory allocation.

Blanket Order
A long-term purchase agreement between a buyer and seller for multiple deliveries over a specified period, often with predetermined pricing. Common in ongoing B2B relationships where demand is predictable.

Drop Ship Order
An order fulfilled directly from the manufacturer or another supplier to the end customer, without the distributor physically handling the inventory.

Back Order
An order for a product that is temporarily out of stock but will be fulfilled once inventory is replenished. Managing backorders effectively is crucial for maintaining customer relationships.

Standing Order
A recurring order placed automatically at regular intervals (weekly, monthly, quarterly) without requiring manual reorder. Often used for consumables and high-turnover items.

Partial Order
When only a portion of an order can be fulfilled immediately due to stock availability, with the remainder shipped later.

Split Shipment
Dividing a single order into multiple shipments, either due to inventory constraints or customer requests for staged delivery.

Order Management Terms

Order Fulfillment Rate
The percentage of customer orders that are completely fulfilled on the first shipment. A key performance indicator for distribution efficiency.

Perfect Order Rate
The percentage of orders delivered complete, on-time, damage-free, and with accurate documentation. Industry benchmark typically ranges from 85-95%.

Order Lead Time
The total time from when a customer places an order until they receive it. Includes order processing, picking, packing, and shipping time.

Order Cycle Time
The time between when inventory is ordered from a supplier until it arrives at your warehouse and is available for sale.

Minimum Order Quantity (MOQ)
The smallest quantity of a product that a supplier is willing to sell in a single order. Distributors often set their own MOQs for customers.

Maximum Order Quantity
The largest quantity a customer can order in a single transaction, often set to prevent stockouts or manage allocation during high-demand periods.

Economic Order Quantity (EOQ)
A formula-based calculation that determines the optimal order quantity that minimizes total inventory costs (ordering costs + holding costs).

Reorder Point (ROP)
The inventory level at which a new purchase order should be triggered to replenish stock before running out.

Safety Stock
Extra inventory held as a buffer against uncertainties in demand or supply, preventing stockouts during lead time.

Pricing & Financial Terms

Pricing Models

Wholesale Price
The price at which distributors sell products to retailers or other businesses, typically lower than the manufacturer’s suggested retail price (MSRP).

Cost-Plus Pricing
A pricing strategy where the selling price is determined by adding a fixed percentage markup to the product’s cost.

Tiered Pricing
A pricing structure where unit prices decrease as order quantities increase. For example: 1-99 units at $10 each, 100-499 at $9 each, 500+ at $8 each.

Volume Discount
A price reduction offered to customers who purchase large quantities, incentivizing bulk orders and increasing order values.

Customer-Specific Pricing
Custom pricing negotiated with individual customers based on their purchase volume, relationship history, or strategic importance.

Contract Pricing
Special pricing agreed upon for a specific time period or volume commitment, often documented in a formal agreement.

Dynamic Pricing
Pricing that adjusts automatically based on factors like demand, competition, inventory levels, or customer segments.

MAP (Minimum Advertised Price)
The lowest price at which retailers can advertise a product, set by manufacturers to maintain brand value and prevent price wars.

Payment Terms

Net Terms (Net 30, Net 60, Net 90)
Payment is due in full within the specified number of days after the invoice date. Net 30 means payment is due 30 days after invoice.

2/10 Net 30
A common early payment discount structure meaning “2% discount if paid within 10 days, otherwise full payment due in 30 days.”

COD (Cash on Delivery)
Payment is collected at the time of delivery before goods are released to the customer.

CIA (Cash in Advance)
Full payment is required before goods are shipped, common for new customers or high-value orders.

Letter of Credit (LC)
A bank guarantee ensuring the seller receives payment if they meet specified delivery conditions, commonly used in international trade.

Credit Hold
When a customer’s account is blocked from placing new orders due to overdue payments or exceeding their credit limit.

Credit Limit
The maximum amount of outstanding credit extended to a customer before payment is required or new orders are blocked.

Days Sales Outstanding (DSO)
A measure of the average number of days it takes to collect payment after a sale. Lower DSO indicates faster cash collection.

Accounts Receivable (AR)
Money owed to your business by customers who have purchased on credit terms.

Accounts Payable (AP)
Money your business owes to suppliers for inventory and services purchased on credit.

Financial Metrics

Gross Margin
The difference between revenue and cost of goods sold, expressed as a percentage of revenue. Key profitability metric for distributors.

Net Margin
Profit after all expenses (including operating costs, interest, and taxes) are deducted, expressed as a percentage of revenue.

GMROI (Gross Margin Return on Investment)
A metric showing how much gross profit you earn for every dollar invested in inventory. Calculated as: Gross Margin ÷ Average Inventory Cost.

Inventory Turnover Ratio
How many times inventory is sold and replaced during a period. Higher turnover generally indicates efficient inventory management. Calculated as: Cost of Goods Sold ÷ Average Inventory Value.

Carrying Cost
The total cost of holding inventory, including warehousing, insurance, depreciation, and opportunity cost. Typically 20-30% of inventory value annually.

Landed Cost
The total cost to get a product into your warehouse, including purchase price, shipping, customs, duties, and handling fees.

Logistics & Fulfillment

Shipping & Transportation

LTL (Less Than Truckload)
Shipping method for freight that doesn’t require a full truck, where multiple shippers’ goods share space on one truck, reducing costs.

FTL (Full Truckload)
Shipping method where a single customer’s freight occupies an entire truck, typically more cost-effective for large shipments.

Parcel Shipping
Small package shipping via carriers like UPS, FedEx, and USPS, typically for packages under 150 lbs.

Freight Forwarder
A company that arranges transportation and logistics on behalf of shippers, often handling international shipments and customs clearance.

3PL (Third-Party Logistics Provider)
An external company that manages warehousing, fulfillment, and distribution operations on behalf of businesses.

4PL (Fourth-Party Logistics Provider)
A logistics integrator that manages an entire supply chain, including coordinating multiple 3PLs and other service providers.

Cross-Docking
A logistics practice where incoming shipments are immediately transferred to outbound trucks with minimal or no warehouse storage time, reducing handling costs.

Inbound Logistics
The process of receiving, storing, and managing inventory coming into your warehouse from suppliers.

Outbound Logistics
The process of picking, packing, and shipping orders from your warehouse to customers.

Last Mile Delivery
The final stage of delivery from a distribution center or hub to the end customer’s location, often the most expensive part of the shipping process.

Shipping Terms & Incoterms

FOB (Free on Board)
Indicates when ownership and liability transfer from seller to buyer. Common variants:

FOB Origin: Buyer assumes ownership and shipping costs when goods leave seller’s facility
FOB Destination: Seller retains ownership and shipping costs until goods reach buyer’s location

CIF (Cost, Insurance, and Freight)
The seller pays for shipping and insurance to get goods to the destination port. Used in international trade.

DDP (Delivered Duty Paid)
The seller is responsible for all costs and risks until the goods are delivered to the buyer’s specified location, including customs and duties.

EXW (Ex Works)
The buyer is responsible for all transportation costs and risks from the seller’s premises. The seller only makes goods available for pickup.

Freight Class
A standardized classification system (Class 50-500) used in LTL shipping based on density, handling, stowability, and liability. Higher class numbers mean higher shipping costs.

Bill of Lading (BOL)
A legal document between shipper and carrier detailing the type, quantity, and destination of goods being transported.

Packing Slip
A document included with a shipment listing all items in the package, used by the receiver to verify contents.

Commercial Invoice
A document required for international shipments showing the value of goods, used for customs clearance.

Warehouse Operations

Receiving
The process of accepting incoming inventory, verifying quantities and quality, and updating inventory systems.

Put-Away
Moving received goods from the receiving dock to their designated storage locations in the warehouse.

Picking
The process of retrieving items from storage locations to fulfill customer orders.

Pick List
A document or digital list showing items to be picked, their locations, and quantities for a specific order or batch of orders.

Batch Picking
Picking multiple orders simultaneously to increase efficiency, then sorting items to individual orders afterward.

Zone Picking
Dividing the warehouse into zones with pickers assigned to specific zones, passing orders between zones for completion.

Wave Picking
Scheduling picking activities in waves based on factors like carrier pickup times, order priorities, or product categories.

Packing
The process of preparing picked items for shipment, including protective materials, labeling, and documentation.

Kitting
Assembling multiple individual products into a ready-to-ship package or set, creating a new SKU from component parts.

Cycle Counting
Regularly counting a subset of inventory throughout the year rather than conducting a full annual physical inventory count.

Physical Inventory Count
A complete count of all inventory items, typically conducted annually to verify records and identify discrepancies.

Slotting
Strategically assigning products to warehouse locations based on factors like sales velocity, size, and picking efficiency.

WMS (Warehouse Management System)
Software that manages and optimizes warehouse operations including receiving, storage, picking, packing, and shipping.

Technology & Integration

System Types

ERP (Enterprise Resource Planning)
Integrated software that manages core business processes including inventory, purchasing, accounting, sales, and operations in a unified system.

PIM (Product Information Management)
A system for centrally managing product data, descriptions, images, specifications, and pricing across multiple sales channels.

OMS (Order Management System)
Software that tracks orders from entry through fulfillment, coordinating between ecommerce platforms, inventory systems, and fulfillment operations.

CRM (Customer Relationship Management)
Software for managing customer interactions, sales pipelines, and relationship history to improve customer service and retention.

EDI (Electronic Data Interchange)
A standardized electronic format for exchanging business documents (purchase orders, invoices, shipping notices) between companies’ systems.

API (Application Programming Interface)
A set of protocols allowing different software systems to communicate and exchange data automatically.

Middleware
Software that connects different systems and enables data exchange between applications that weren’t designed to work together.

B2B Ecommerce Platform
Specialized online ordering system designed for wholesale and business-to-business transactions, featuring bulk ordering, custom pricing, and account management.

Integration & Data

Real-Time Sync
Immediate, continuous data exchange between systems ensuring all platforms show current information (inventory levels, orders, pricing).

Batch Sync
Periodic data updates between systems at scheduled intervals (hourly, daily) rather than in real-time.

Two-Way Sync
Bidirectional data exchange where information flows both from System A to System B and from System B to System A.

Master Data
Core business data that remains relatively stable, such as product information, customer details, and supplier records.

Transactional Data
Data related to business activities and events, such as orders, invoices, payments, and shipments.

Data Mapping
The process of matching fields between different systems to ensure data flows correctly during integration (e.g., matching “SKU” in one system to “Product Code” in another).

Webhook
An automated message sent from one application to another when a specific event occurs, triggering real-time actions.

Customer & Channel Management

Customer Types

B2B (Business-to-Business)
Transactions between businesses, such as a distributor selling to retailers or other businesses.

B2C (Business-to-Consumer)
Transactions between a business and individual consumers. Some distributors handle both B2B and B2C sales.

Reseller
A business that purchases products for the purpose of reselling them to end customers rather than for their own use.

VAR (Value-Added Reseller)
A reseller that enhances products with additional features or services before selling to end customers.

Direct Customer
A customer who purchases directly from the distributor without intermediaries.

Authorized Dealer
A business officially approved by a manufacturer or distributor to sell their products, often receiving special pricing or support.

Account Management

Customer Portal
A secure online area where B2B customers can log in to place orders, view order history, track shipments, and access account information.

Quick Order Form
A streamlined ordering interface allowing customers to enter multiple SKUs and quantities quickly, often supporting SKU lookup and Excel upload.

Saved Order Templates
Pre-configured order templates that customers can reuse for recurring purchases, saving time on regular reorders.

Customer Group
A segmentation method for organizing customers with similar characteristics (industry, size, location) to apply group-specific pricing, promotions, or terms.

User Roles & Permissions
A system for controlling what different users within a customer’s organization can do (view-only, order placement, payment approval, etc.).

Quote Request (RFQ – Request for Quote)
A formal request from a customer for pricing on products or custom orders before placing a purchase order.

Credit Application
A formal request from a new customer to establish net payment terms, requiring financial information and credit checks.

Channel & Sales Terms

Omnichannel
A unified approach to sales and customer service across multiple channels (online, phone, email, in-person) with consistent experience and data.

Multi-Channel
Selling through multiple channels (online store, phone orders, EDI, marketplace) that may operate independently.

Channel Conflict
When different sales channels compete for the same customers, potentially causing pricing inconsistencies or customer confusion.

Exclusive Distribution
An agreement where a distributor has sole rights to sell a product within a specific territory or market segment.

Selective Distribution
A manufacturer limits the number of distributors in a given area, maintaining some control while reaching broader markets than exclusive distribution.

Gray Market
The sale of authentic products through unauthorized distribution channels, often at discounted prices, potentially violating territorial or contractual agreements.

Promotions & Marketing

BOGO (Buy One Get One)
A promotional offer where customers receive a free or discounted item when purchasing another. Variants include BOGO 50% off, Buy 2 Get 1 Free, etc.

Volume Incentive
A promotion encouraging customers to purchase larger quantities by offering progressive discounts or bonuses at specific volume thresholds.

Rebate
A partial refund given to customers after purchase, often requiring submission of proof of purchase. Used to incentivize sales while maintaining advertised pricing.

Co-op Marketing (Cooperative Marketing)
A partnership where manufacturers and distributors share marketing costs and efforts to promote products mutually.

Trade Promotion
Marketing initiatives directed at distribution channel partners (wholesalers, retailers) rather than end consumers, such as volume discounts or display allowances.

Markdown
A reduction in the selling price of products, often to clear slow-moving inventory or respond to competitive pressure.

Promotional Period
A defined timeframe during which special pricing or offers are valid, creating urgency and driving time-sensitive purchasing.

Compliance & Security

CCPA (California Consumer Privacy Act)
California law giving consumers rights over their personal data. Relevant for B2B distributors handling customer information from California residents.

GDPR (General Data Protection Regulation)
European Union regulation governing data protection and privacy. Applies to businesses processing data of EU customers.

PCI DSS (Payment Card Industry Data Security Standard)
Security standards for businesses that handle credit card information, requiring specific technical and operational measures.

Audit Trail
A chronological record of system activities, user actions, and data changes, essential for compliance, security, and troubleshooting.

SOC 2 Compliance
An auditing procedure ensuring service providers securely manage data to protect customer privacy. Indicates a platform meets high security standards.

Two-Factor Authentication (2FA)
A security process requiring two different authentication factors (password + phone code, for example) to verify user identity.

SSL Certificate (Secure Sockets Layer)
A digital certificate that encrypts data transmitted between a website and users’ browsers, indicated by “https://” and a padlock icon.

Data Encryption
Converting data into coded form to prevent unauthorized access, both during transmission and while stored.

Performance Metrics & KPIs

Average Order Value (AOV)
The average dollar amount spent per order. Calculated as: Total Revenue ÷ Number of Orders.

Customer Lifetime Value (CLV)
The total revenue expected from a customer over the entire relationship, helping prioritize customer acquisition and retention efforts.

Customer Acquisition Cost (CAC)
The total cost of acquiring a new customer, including sales and marketing expenses divided by the number of new customers acquired.

Churn Rate
The percentage of customers who stop buying from you over a given period, indicating customer retention challenges.

On-Time Delivery Rate
The percentage of orders delivered by the promised date, a critical customer satisfaction metric.

Order Accuracy Rate
The percentage of orders shipped without errors (wrong items, quantities, or addresses).

Pick Accuracy
The percentage of items picked correctly during the warehouse picking process, directly impacting order accuracy.

Return Rate
The percentage of orders or items returned by customers, indicating product quality, description accuracy, or fulfillment issues.

Warehouse Utilization Rate
The percentage of available warehouse space actively used for storage, indicating space efficiency.

Conclusion

Mastering B2B distribution terminology is an ongoing process as the industry evolves with new technologies, practices, and business models. This guide provides a solid foundation, but language in wholesale and distribution continues to expand.

Next Steps:

Download our printable terminology reference guide (PDF) for quick access
Share this resource with your sales team and new employees as part of onboarding
Bookmark this page and return whenever you encounter unfamiliar terms
Explore our other guides for deeper dives into specific operational areas

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