Distribution Glossary

New to the distribution industry and looking to get up to speed quickly? Bookmark this page as your go-to resource as you get acclimated, so you’re not lost in the lingo at the next meeting, and you’re more prepared to hit the ground running.

Bill To/Ship To

On an order, bill-to/ship-to instructs the distributor to send the invoice to one address and the product to a different address.


A physical location set up to provide the same services and products as the primary office or distribution center but closer to customers. A branch may include a showroom and will call and may stock inventory.

Category Management

A strategic approach to procurement that groups similar products together and segments spend within those categories for efficiency.

Cost of Goods Sold (COGS)

For a distributor, Cost of Goods Sold (COGS) generally includes the cost of the product from the supplier. For a manufacturer, these are direct costs, such as raw materials and labor, to make products and exclude other costs, such as marketing or sales.

Cooperative (Co-op)

A membership-based organization of distributors that pool their purchasing power for better pricing and rebates from manufacturers. These groups also tend to offer other benefits, including access to more vendors, product training support and networking with other distributors.


A calculation to determine the true cost and profitability of serving customers based on the actual activities required, such as time spent by sales reps, delivery costs, order processing, and more.

Customer Relationship Management (CRM)

A technology platform to manage interactions and relationships with a company’s customers and potential customers.


When you sell a supplementary service or product to an existing customer.

Distribution Center (DC)

A specialized warehouse, some with air conditioning or refrigeration, stocked with products to be redistributed to retailers, wholesalers, or consumers. 


An intermediary who purchases products in bulk from a manufacturer and then sells them to an entity downstream in the supply chain such as a retailer or commercial customer. Many distributors also offer value-added services to customers, such as product application selection and support, training, and inventory management

Distributor-Managed Inventory (DMI)

Also known as vendor-managed inventory. The distributor is responsible for all inventory management and delivering the right number of products at the right time.


Earnings before interest, taxes, depreciation, and amortization. EBITDA is a way of measuring profitability to net income.

eCommerce Customer Accounts

Customer accounts on eCommerce websites allow distributors to create personalized pricing and ecommerce experiences for customers. Rather than be a guest user, customers can log into their accounts to access information specific to them, place orders and enjoy a streamlined checkout process.

Electronic Data Interchange (EDI)

Using EDI, businesses can exchange documents electronically instead of processing paper-based documents, saving time and eliminating errors.

Enterprise Resources Planning (ERP)

Enterprise resource planning (ERP) software helps organizations manage and automate daily business activities such as accounting, procurement, project management, risk management and compliance, and supply chain operations.

Field Sales

Also known as outside sales, field sales reps go into the field to interact with and sell to customers and prospects at their locations. They are a primary channel to market for most distributors.

First In, First Out (FIFO)

An accounting and inventory method that assumes goods purchased or produced first are also the first sold. 

Gross Margin

Gross margin percentage is calculated by taking the difference between revenue and cost of goods sold and dividing that number by revenue. 

Inside Sales

Inside sales reps sell products or services via email, phone, or other remote channels instead of face-to-face with customers. 

Jan/San Distributor

A distributor of janitorial and sanitation products, tools, and equipment.

Joint-Managed Inventory (JMI)

An inventory management model where the supplier and customer share responsibility and risk.

Last In, First Out (LIFO)

An inventory management method which records the most recently produced product as being sold first.

Line Sheet

A document produced by a manufacturer that includes straightforward important product and ordering information.


An electronic platform that facilitates buying and selling between multiple parties funded by advertising and transaction fees. Examples include Amazon Business and eBay.

Master Distributor

A distributor whose primary business is to sell manufactured products through other distributors. Also known as a wholesaler or a redistributor, depending on the industry segment.

MRO Distributor

Maintenance, repair, and operations (MRO) distributors provide the products, tools, and equipment to keep a company running through maintenance and upgrades. Examples include tools, janitorial supplies, and safety equipment.

Material Safety Data Sheet (MSDS)

A material safety data sheet (MSDS) contains information about a product’s occupational safety and potential hazards and details how to work safely with it.

Original Equipment Manufacturer

An original equipment manufacturer (OEM) produces and sells non-aftermarket parts and equipment. A distributor that supports OEMs sells parts that are used in the actual manufactured product, such as chips or fasteners.


A multi-channeled approach to sales that aims to provide a seamless and consistent customer experience across channels.

Outside Sales

Also called field sales, outside sales reps go into the field to meet with and sell to customers and prospective customers.

Product Information Management (PIM)

Product information management (PIM) comprises the process and solutions distributors use to collect, manage, enrich, and store product data in a single place.

Personal Protective Equipment (PPE)

Personal protective equipment (PPE) is clothing or equipment such as gloves, gowns, masks, and respirators worn to protect workers from hazardous materials and minimize injuries. 

Private Equity Roll-Up

Consolidating several smaller businesses in the same industry into one larger entity.


Also known as master distributor. A company that purchases products from the manufacturer to consolidate quantities to enable purchases of smaller quantities. 

Reverse Distributor

A company involved in the processing of returned products for credit or disposal to remove the product from distribution channels.

Request for Proposal (RFP)

A request for proposal (RFP) announces a project and solicits bids from qualified suppliers that can meet the requirements of the project.

Return on Investment (ROI)

Return on investment (ROI) is a ratio between the investment and the net income used to measure the efficiency of the investment.

Share of Wallet (SOW)

An indicator of loyalty, SOW is the average amount an existing customer regularly spends with your company compared to what they spend with others. 

Stock Keeping Unit (SKU)

A stock keeping unit (SKU), pronounced “skew,” is a scannable barcode (usually eight alphanumeric digits) assigned to each product and its variants by retailers to track inventory. A different SKU is assigned to every variation of a single product.

Standard Industrial Classification (SIC)

A system established in the United States in 1937 of classifying industries with a four-digit code. 


A business that supplies products or services to another entity.

Two-step Distributor

A distributor that buys products from manufacturers and then sells them to independent dealer businesses. The dealers, in turn, sell it to the end user. This is common in the building materials industry.


A distributor that buys products from manufacturers and then sells them to independent dealer businesses. The dealers, in turn, sell it to the end user. This is common in the building materials industry.

Value-added Distributor

A distributor who provides additional benefits to their customers for the products they sell to differentiate themselves from the competition.

Vendor-Managed Inventory (VMI)

Vendor-managed inventory (VMI) is when a distributor manages inventory for a customer onsite, tracking usage and replenishing stock.

There are three different types of VMI:

Consigned: The vendor owns the inventory and ensures it’s stocked at the customer site. The customer is billed when the inventory is used.

Customer-owned: The vendor is responsible for keeping customer-owned inventory in stock by visiting the customer site and placing orders as needed.

Self-service: Vendors give customers self-service VMI apps so they can better control inventory, track usage, and get reports. 

Wallet Share

An indicator of loyalty, wallet share (also known as share of wallet) is the average amount an existing customer regularly spends with your company compared to what they spend with others. 


Wholesalers help distributors fill holes with a better price and smaller minimum quantities than what’s possible from a manufacturer directly. 

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