Glossary

Purchasing has a lot of shorthand, and the same word sometimes means different things to a warehouse team and an accountant. This glossary defines the terms used across the purchase order guides in one or two plain sentences — no prior jargon assumed.

Numbers

3-way match — A check that lines up three documents for the same goods — your purchase order, your goods receipt, and the supplier's invoice — and flags any line where the quantity or price doesn't agree. It's what stops you paying for stock you never received, or at a price nobody agreed to.

3PL (Third-Party Logistics) — An outside company you pay to store your inventory and pack and ship your orders for you, instead of doing it in your own warehouse.

A

ASN (Advanced Shipment Notice) — A heads-up document a supplier sends before a shipment arrives, listing exactly what's coming and how it's packed, so your receiving team knows what to expect.

AWD (Amazon Warehousing & Distribution) — Amazon's bulk storage service. You send inventory to Amazon's warehouses in large quantities, and Amazon automatically restocks it into the fulfillment network as it's needed.

B

Backorder — Stock a customer has ordered that you can't ship yet because it's out of stock. The order stays open and is filled once new inventory arrives.

C

COGS (Cost of Goods Sold) — The direct cost of the products you actually sold in a period — essentially what you paid your suppliers for those specific units. It's the figure subtracted from sales to work out gross profit.

D

Dropship — A fulfillment method where your supplier ships an order directly to your customer on your behalf, so the goods never pass through your own warehouse.

E

ETA / ETD — Estimated Time of Arrival (when a shipment is expected to reach you) and Estimated Time of Departure (when it's expected to leave the supplier or port). Used to plan when incoming stock will be available.

Exposure — Your total financial commitment tied up in stock you've ordered but not yet sold — the money at risk if that inventory doesn't sell as planned.

F

FBA (Fulfillment by Amazon) — A service where you send inventory to Amazon, and Amazon stores it, then picks, packs, and ships your orders and handles customer service for them.

FIFO (First In, First Out) — An inventory rule where the oldest stock is used or sold first. It keeps older goods from expiring or aging on the shelf and is a common way to value inventory.

I

Incoming inventory (vs on-hand) — Stock that's on order or in transit and will arrive in the future, as opposed to on-hand inventory, which is physically in your warehouse and available to sell right now.

Incoterm — A standard three-letter trade term (such as FOB or DDP) that spells out, for an international shipment, who pays for freight, insurance, and duties, and exactly where responsibility passes from the seller to the buyer.

L

Landed cost — The true, all-in cost of a product once it reaches you — the purchase price plus freight, duties, insurance, and handling — rather than just the supplier's unit price.

Lead time — How long it takes from placing a purchase order to actually having the stock available to sell, including the supplier's production time and shipping.

M

MOQ (Minimum Order Quantity) — The smallest quantity a supplier will let you order in a single purchase, whether per product or per order.

N

Nominal code — An accounting reference (also called a general-ledger or account code) that tells your bookkeeping system which category a cost or sale belongs to, so numbers land in the right place on your financial reports.

O

On-hand inventory — Stock that's physically present in your warehouse right now and available to sell, as opposed to inventory that's still on order or reserved.

P

Pending inbound — Inventory that has been sent to a fulfillment center (such as Amazon or a 3PL) and is on its way, but hasn't yet been received and made available for sale at that location.

Proration / allocation — Spreading a shared cost — such as freight or a discount on a whole shipment — across the individual product lines in fair proportion, usually by each line's value or quantity, so every unit carries its correct share.

Purchase order (PO) — A formal document you send a supplier to buy goods, listing the products, quantities, and agreed prices. It's the official record of what you ordered and the starting point for receiving and invoicing.

R

Receipt / goods receipt — The record you create when a shipment physically arrives, noting what and how much you actually received against a purchase order.

Reconcile — To compare two or more records covering the same thing — for example an invoice against a receipt — and resolve any differences so they agree.

S

Short-close — Deliberately closing a purchase order line for fewer units than you originally ordered, when you accept the supplier won't send the rest. It lowers the expected quantity so the line can be considered complete.

T

Target Stock Days — In the demand-planning forecast, how many days of stock you want to have on hand for a product. The forecast recommends ordering enough to reach this cover after accounting for lead time and existing stock.

V

Vendor credit — An amount a supplier owes back to you — for over-billing, returns, or damaged goods — that offsets what you owe them, much like a refund applied to your account rather than paid in cash.

Vendor deposit — Money you pay a supplier up front, before goods are delivered, as a prepayment against a purchase order. It's later applied to the final invoice.

W

WFS (Walmart Fulfillment Services) — Walmart's version of outsourced fulfillment. You send inventory to Walmart, and Walmart stores it, then picks, packs, and ships your Walmart orders.