| The Wholesale
Distribution definition includes establishments engaged in
wholesaling merchandise, generally without transformation, and the
rendering of services incidental to the sale of merchandise.
First, the basics. The Wholesaling process is an intermediate
step in the distribution of merchandise. Wholesalers organize for
sale/resale or arrange the purchase or sale of:
- goods for resale (for sale to other
wholesalers or retailers),
- capital or durable non-consumer
goods, or
- raw and intermediate materials and
supplies used in production.
Wholesalers sell merchandise to other
businesses, operating from a warehouse or office. These warehouses and
offices often have little or no display of available merchandise. Most
often, the wholesaler's location is intended to easily accommodate
walk-in traffic. Wholesalers normally do not advertising attracting
the general public. Wholesaler's customer base is generally reached
initially by telephone, in-person marketing at, for instance, trade
shows, or by specialized advertising such as internet search or fax.
Follow-up orders are either vendor-initiated or client-initiated,
generally based on previous sales from the established client base.
Second, a few Commonly Used
Shipping term defined.
F.O.B. - Refers to a the
commodity placed "free on board" the carrier at shipping point
in suitable shipping condition, and that the buyer assumes all
risk of damage and delay in transit not caused by the seller.
This means, for example, that if a load is wrecked or stolen in
transit, the buyer must pay the invoice price to the seller and
file a claim with the carrier to recover damages. Under F.O.B.
terms, the seller guarantees that the product, when loaded onto
the carrier, is in "Suitable Shipping Condition."
Suitable Shipping Condition
- Commonly referred to as the warranty of suitable shipping
condition, is applicable only in F.O.B. sales, and means that
product, at the time of shipment, is in a condition which if
handled under normal transportation conditions will assure
delivery at the contract destination without abnormal
deterioration.
There is normally no F.O.B.
Suitable Condition Warranty, no warranty of merchantability, nor
any other "sale" warranty applicable to consigned goods.
Consequently, a consignee, under normal conditions, can not
reject consigned goods. Should a consignee receive goods that it
does not believe are merchantable, the consignee should consult
with the owner of the goods to determine what the owner wants
done with them. The same advice applies if the goods are
salable, but in poor condition. In both cases, the consignee
would be well advised to secure a US or Canadian Federal
inspection, or other international governmental inspection, in
case any dispute arises in the future over how the goods were
handled.
Good Delivery - A
term used in F.O.B. sales to describe the arrival of goods at
the contract destination without abnormal deterioration or
damage. For all commodities other than perishables, for which
specific good delivery standards must be defined as a part of
the Purchase Order, what is "normal" or abnormal deterioration
is determined on a case-by-case basis by agreement.
Delivered - The product is
to be delivered at the 'Deliver To' point as specified in the
Purchase Order contract, exclusive and free of any
transportation charges. In this case, the seller assumes all
risks of loss and damage in transit not caused by the buyer. It
also means that if Construction machinery, for example, is sold
"Delivered Jakarta Container Port (JCP)," the shipment, upon
delivery in Jakarta Container Port, must meet all quality and
condition requirements of the Purchase Order contract, with no
allowance for normal deterioration.
Open - Describes a sale,
like any other sale, except that the price has not been settled.
An "open" sale is either F.O.B. or delivered, depending upon the
agreement of the parties. The purchaser of product on an "open"
basis has all the benefits of the normal sales warranties, and
may accept, or reject and claim damages if the seller breaches
the Purchase Order contract. If the parties fail to agree upon a
price, the purchaser of product on an "open" basis is liable to
the seller for a "reasonable price".
Price After Sale - Defined
as meaning that the parties will agree upon a price after the
buyer completes its re-sale at the 'Shipped To' destination.
Consignment - A
consignment is not a sale. A Consignment creates an agency
relationship between the consignor and the consignee, whereby
the product continues to belong to the consignor until the
consignee sells it on the consignor’s behalf. After such sale,
the proceeds of the sale, as agreed to in the Consignment
Agreement, belong to the consignor, with the consignee allowed
only to retain expenses of the resale and commission, per the
Agreement.
There is normally no F.O.B.
Suitable Condition Warranty, no warranty of merchantability, nor
any other "sale" warranty applicable to consigned goods.
Consequently, a consignee, under normal conditions, can not
reject consigned goods. Should a consignee receive goods that it
does not believe are merchantable, the consignee should consult
with the owner of the goods to determine what the owner wants
done with them. The same advice applies if the goods are
salable, but in poor condition. In both cases, the consignee
would be well advised to secure a US or Canadian Federal
inspection, or other international governmental inspection, in
case any dispute arises in the future over how the goods were
handled.
In the case of a consignment, the
shipper normally chooses the agent, and absent a showing of
fraud or other hard evidence of substantial violation of the
terms of the Purchase Order Agreement, the shipper must bear the
risk of his agent not having done a proper job concerning the
product.
Average Inventory Cost - Average
wholesale inventory cost is calculated by adding the beginning cost of
inventory for each month added to the ending cost inventory for the
last month in any given period.
Bar Code/Barcode - A bar code (Barcode) is the small image of lines
or bars and
spaces that is affixed to such things as files, inventory items,
merchandise, identification cards,
and mail to identify a particular product number, person, or
location. The Bar Code uses a sequence of vertical bars and spaces to
represent numbers and other symbols. A bar code symbol typically
consists of five parts: a 'quiet' zone, a starting character, data
characters (including an optional check character), a stop character,
and another quiet zone.
Big Box Stores - A term given to large stand-alone stores
such as WalMart.
Booking Program - The opportunity to view new products or
samples and to place an order for chosen merchandise to be delivered
at a scheduled later date.
Break-Even Point - The price-point where the sales revenue
equals expenses; no profit or loss.
Business Plan - A business plan is a comprehensive, written
document that clearly describes how the business intends to operate.
It is an important communication tool detailing the financial strategy
and goals of the business.
Cash Discount - The percentage reduction in price for
scheduled payment within a specified period of time.
Cash Flow - The movement of money in and out of the
wholesale business and resulting availability of cash.
Comp Sales - Comparable-enterprise sales is a measurement of
productivity in revenue used to compare sales revenue of wholesale
distributors that have been operating for one year or more. Compiled
historical revenue data allows comparison of this year's sales to a
similar period the previous year.
Contribution Margin - The difference between total sales
revenue and total variable costs, as a percentage.
Cost of Goods Sold - The amount paid for a product, plus all
additional costs necessary to get the merchandise into inventory and
ready for resale.
CRM - Customer Relationship Management (CRM) is a common
wholesale distribution business strategy designed to reduce costs and
increase profitability by strengthening customer loyalty.
Customs - An
authority or authorized agency in a country which is
empowered to assess and to collect duties on certain
goods coming in to and going out of that country.
Additionally, the customs authority is often
responsible for controlling the flow of animals,
plants and certain restricted goods, including
personal effects and hazardous items. Depending on
local regulations, the import or export of some
goods may be forbidden, and the customs agency
enforces these rules. This agency is most often
separate from the immigration authority, which
monitors persons who leave or enter a country.
Declared Shipping Value - Should the customer choose
to declare a specific value of an ordered shipment for
loss/damage protection, this should be done at the time of the
writing of the Purchase Order.
Duty - A tax normally collected by a customs agency. Also
called a tariff on the import of or export of goods.
EIN - Employer Identification Number, issued by the US
Federal Government, also known as a Federal Tax Identification Number,
is used to identify a business entity.
FOB - the term used to indicate who is responsible for
paying shipping/transportation charges.
Gross Margin Return On Investment (GM-ROI) - The wholesale
inventory profitability evaluation ratio that analyzes a firm's
ability to turn inventory into revenue above the cost of the
inventory. It is calculated by dividing the gross margin by the
average inventory cost and is used often in the retail industry.
Gross Margin - The calculated difference between what an
item costs and what it sells for.
Inventory Turnover - The calculated average number of times
during a given period that the inventory on hand is sold, renewed
and/or replaced.
Keystone - An industry term for the method of marking
merchandise for resell to an amount that is double the purchase price.
Loss Leader - Merchandise sold below cost by a wholesale
distributor in an effort to attract new customers, increase customer
loyalty or stimulate other profitable sales.
Loss Prevention - The policy reducing the amount of in-house
theft, damage and shrinkage.
Margin - The amount of gross profit made when an item is
sold.
Markdown - A planned reduction in the selling price of a
given item.
Marketing Calendar - A financial tool used by wholesale
distributors to show what marketing events, media campaigns and
merchandising efforts are in the future.
Markup - Percentage added to the cost to get the selling
price.
Merchandise Mix - The range of products stocked by wholesale
distributors.
Open-to-Buy - Merchandise budgeted for purchase during
certain months, not yet ordered.
Operating Expenses - The sum of all expenses associated with
the normal course of running the business.
Pallet - A portable platform, most often made of wood, or
other rigid fibrous material, used for storing upon or moving cargo or
freight.
Private Label - Products which are generally manufactured or
made available by a given wholesale distributor under the brand of the
purchasing company brand.
Product Breadth - The variety of product lines warehoused by
the wholesale distributor.
Product Depth - The quantity of each item/style of each
product to be warehoused. Also known as product assortment or
merchandise depth.
Product Life Cycle - The value and customer acceptability
stages that a given product goes through from ordering into stock to
the sale: Budgeting; Space allocation; Introduction; Growth; Maturity;
Decline.
Profit Margin - The calculation of profitability of earnings
divided by revenues.
Purchase Order (PO) - The written contract between buyer and
wholesaler detailing the exact merchandise or services to be rendered
from a single vendor, including shipping, delivery and payment terms.
Quantity Discount - Price reduction earned on the
amount/quantity purchased.
Retailing - Sale of goods in small, non-wholesale quantities
directly to consumers.
RFID (Radio Frequency IDentification) - A technology that
incorporates the use of electromagnetic or electrostatic coupling in
the radio frequency (RF) portion of the electromagnetic spectrum
to identify, uniquely, an
object, animate or in-animate. RFID is in ever-widening use in
industry as an alternative to bar coding. RFID does not require direct
contact or line-of-sight scanning. An RFID system consists of three
components: an antenna and transceiver (often combined into one
reader) and a transponder (the tag).
Shrinkage - Loss in inventory due to theft, damage,
paperwork errors and supplier fraud.
SKU (Stock Keeping Unit) - The number assigned to a product
identifying price, options and manufacturer.
Standard Industrial Classification Code (SIC Code) - A
coding system using four digits to identify specific industrial
sectors within the Federal Government. The first two digits identify
the broad industrial sector and the last two digits represent a
facility's specialty within this broad sector.
Staple Goods - Staple goods are products purchased out of
necessity.
Tax - See Customs, Duty, Tariff
Tariff - A tax normally collected by a customs agency.
Also called a duty on the import of or export of goods.
Trade Credit - An open account with manufacturers of
inventory.
Trade Discount - The discount from the booked price given to
a client.
Weight - Measuring the load is the key to assessment of
accurate shipping costs. Following are the most important acronyms
and terms important in the shipping business.
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Base Curb Weight: the empty weight of a
vehicle including all standard equipment, 150# driver and a
full tank of fuel. Does not include cargo, options or
passengers. Base Curb Weight plus Cargo
Weight plus Passenger Weight equals Gross Vehicle Weight.
Cargo Weight: includes all weight added
to the Base Curb Weight. When towing , trailer tongue weight
is included in Cargo Weight.
Payload: the combined maximum
allowable weight of cargo and passengers that the truck is
designed to carry. Gross Vehicle Weight Rating minus the Curb
Weight equals Payload.
GVW: Gross Vehicle Weight - the
actual loaded weight of your vehicle, the Base Curb Weight
plus actual Cargo Weight plus passengers. Gross Vehicle Weight
plus Loaded Trailer Weight equals Gross Combination Weight,
GCW must not exceed GCWR.
GVWR: Gross Vehicle Weight Rating -
the maximum allowable weight of the fully-loaded vehicle with
axles (including passengers and cargo). The GVW must never
exceed the GVWR.
GAW: Gross Axle Weight- the total
weight placed on each axle, (front and rear.) The easiest way
to get this number is to drive just the front axle of the
loaded truck with the loaded trailer on a scales and then
drive the all the loaded truck's tires on the scale with the
loaded trailer still connected but not on the scale. Subtract
the front axle weight from the total loaded truck weight and
you have the rear axle weight.
GAWR: Gross Axle Weight Rating- the
maximum weight to be carried by a single axle, (front or
rear.) The total load of each axle must never exceed its GAWR.
GCW: Gross Combination Weight- the
weight of the loaded vehicle, (GVW) plus the weight of the
fully loaded trailer.
GCWR: Gross Combination Weight
Rating- the maximum allowable weight of the towing vehicle and
the loaded trailer, including all cargo and passengers. The
Gross Combination Weight must never exceed the GCWR.
GTW: Gross Trailer Weight - the
actual total weight of the loaded trailer. Trailer-
Gross Vehicle Weight not to exceed the GVWR of the trailer. |
Wholesale/Wholesaler - Goods, generally in large quantity,
prepared and held for resale purposes. Other terms in wholesale definitions defined glossary, dictionary are Supply chain, supply chain
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transportation, wholesale logistics, sourcing, procurement, product
life cycle.
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