Glossary

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3PL Fulfillment: Third-party logistics (3PL) fulfillment involves outsourcing the fulfillment process to a third-party provider. The provider handles inventory management, warehousing, picking, packing, and shipping of products. This can be a cost-effective option for retailers who want to scale their business without investing in their own logistics infrastructure. However, retailers must carefully select a 3PL provider to ensure quality control and timely delivery.

AOV -Average Order Volume: Average Order Value, or AOV, is one of the most crucial metrics in e-commerce. It measures the average amount spent on each order. It is important to note that this should be calculated based on the number of sales per order and not per customer.

By increasing the amount of money per order, you increase your revenue, along with additional benefits that we cover below.

Monitoring your AOV regularly helps you evaluate your business performance and make profitable decisions by finding ways to increase it.

Accuracy of Forecast Demand: Accuracy of forecast demand, also known as the demand forecast accuracy, is a percent of how close the actual on-hand quantity is to the forecast. It checks on what a company forecasted, ordered and sold in the prior period.

Active destocking: Active destocking in supply chain management is an active decision to reduce the inventory-to-sales ratio of a company. The inventory can include finished products, raw materials and goods in process. In general, active destocking is done following an autonomous, often financial decision by a company to improve its efficiency, free up cash and reduce its costs. Decisions for active destocking in general are made by financial executives or general managers.

Available Inventory Accuracy: Available inventory accuracy relates to the company’s stock status. This KPI shows the difference between the number of items the company claims in electronic records and what is on the shelf for sale. The physical inventory count confirms the electronic file totals. The difference can be due to theft, breakage, fraud and loss.

Average Delivery Lead Time: Average delivery lead time is the time it usually takes for product shipments to arrive.

Average Inventory: Average inventory is the amount of inventory a company has on-hand during a period. The goal is for companies to keep their average inventory consistent over the course of a year.

Average New Deal Size/Length: By tracking sales dollars generated by new deals and the related duration of the sales stream, teams can gauge which offerings are most profitable for the business. Managers use this metric to compare rep performance, as well. For example, one rep may have sold 100 month-to-month subscriptions last month, while another has landed 20 bigger contracts for annual subscriptions.

Average Profit Margin: Average profit margin is how much of overall sales revenue results in profits and is an important financial KPI. It’s calculated by subtracting the costs associated with producing the company’s goods and services from sales revenue

Average Purchase Value: Average purchase value is the average amount each customer spends on a business’s products or services. One of the most cost-effective ways to boost revenue is to sell more to each customer. Teams use the average purchase value to develop sales strategies that incent customers to spend more and to forecast the value of leads.

Average Sales Cycle Length: Average sales cycle length is the average length of time from an initial interaction with a prospective customer to closing a sale. Track this metric in your sales cycle length dashboard to evaluate the efficiency of your sales process. Once a business sets a sales cycle length benchmark, it can look for ways to shorten the sales cycle. Sales managers can analyze the average sales cycle by rep to see who closes sales quickly and who needs improvement. Like many metrics, it is important to understand context. If a rep is closing a complex deal, it may take longer than closing a few smaller deals.

Average Transaction Value: Retail average transaction value is calculated by dividing the total value of all transactions by the number of transactions or sales.

BOPIS: The BOPIS strategy is also referred to as click and collect, curbside pickup, and ROPIS (reserve online, pick up in-store). With BOPIS, shoppers don’t have to deal with shipping costs, long delivery timelines, and shipping back items that don’t fit or meet their expectations.

Retailers around the world are adopting the BOPIS model to meet customer expectations. This popular retail strategy gives customers the best of both worlds by integrating online shopping and in-person pickup.

BORIS: BORIS is Buy Online, Return In-Store… which allows customers to visit your website, purchase the item they want, have it delivered to their home, and if unsatisfied, return that online item in a physical store. This return could even happen at a location the customer has never visited before.

While having items shipped directly to them is convenient and often preferred by customers, having to ship items back to companies isn’t. This is why a “return-to-store” process is an important piece of the omnichannel puzzle to achieving higher levels of customer satisfaction and loyalty

Backorder Rate: Backorder rate is a measurement of the number of orders a company cannot fulfill when a customer places an order. It shows how well a company stocks in-demand products.

Bank remittance: The term ‘remittance’ is derived from ‘remit’, meaning ‘to send back’. A bank remittance refers to the funds sent or transferred to another entity or account as payment for services or a product. Remittances can also be personal money transfers made to family and friends overseas and any sort of business payments.

Bin management: Bin management allows for inventory to be received at the warehouse and put-away into preferred bins within the rack system of the warehouse for easy picking later during the order fulfillment process

You can use bin management to identify places in your warehouse where you store inventory items. Bins help you track on-hand quantities within a warehouse. Tracking items by bins can help organize receiving items and simplify picking items to fulfill orders.

bill of materials (BOM): A bill of materials (BOM) is an extensive list of raw materials, components, and instructions required to construct, manufacture, or repair a product or service. A bill of materials usually appears in a hierarchical format, with the highest level displaying the finished product and the bottom level showing individual components and materials.

Click and Collect: This refers to the practice of displaying or putting together products from different categories to drive add-on sales.

Clienteling: Clienteling is a strategy or tool retailers use to build long-term connections with consumers based on their behaviours and preferences. The data they collect helps retail staff provide a more personal and informed customer experience. Clienteling adds a highly personal touch to a customer’s buying experience.

Consignment: Consignment is an arrangement in which goods are left in the possession of an authorized third party to sell. Goods sold in this way are said to be “consigned” to a third party for sale. Items sold on consignment are typically sold by consignment shops, which receive a percentage of the revenue from the sale (sometimes a very large percentage) in the form of commission.

Cost Price: Cost price is also known as CP. cost price is the original price of an item. The cost is the total outlay required to produce a product or carry out a service. Cost price is used in establishing profitability in the following ways: Selling price (excluding tax) less cost results in the profit in money terms.

Cost per Unit: Cost per unit is how much a single unit of product costs a company to produce or buy. It is best used in companies that manufacture or sell large amounts of the same product.

Credit Note: A credit note, sometimes called a credit note or credit memorandum, is a document that allows you to change an invoice after it has been issued or paid.

When you issue a credit note, you are essentially deleting an amount from an invoice (and your financial records) without deleting the invoice itself.

That’s important because in many countries you need to keep all invoices for potential auditing purposes, even if they’re incorrect.

Credit notes can be used to cancel part or all of an invoice for products or services.

For example, let’s say you accidentally issued an invoice for $100 instead of $75. You would then need to issue a credit note for $25 to correct the outstanding balance.

If a customer were to cancel their order after you had issued an invoice, you could also use a credit note to cancel the full amount of the invoice.

Curbside Delivery: Curbside delivery is when the delivery driver drops your package to the curb at the end of your driveway. It helps businesses make a contactless delivery to their customers.

Curbside PickUp: Curbside pickup is a service offered by retailers where a customer places an order online and drives to their local store to pick it up. The customers can stay in their car and a store assistant will bring their package to them.

Curbside Retail: is the process of combinig Curbside Pickup and Curbside Delivery

Customer Lifetime Value: Customer lifetime value (CLV) refers to how much a company expects to earn over the entire time it conducts business with a customer. Businesses use this important metric to determine which customer segments generate the most revenue and how much to spend to acquire new customers. The calculation for customer lifetime value involves several components.

Customer Satisfaction Score: Customer satisfaction score (CSAT) is a measure of the level of customer happiness with the product and the company. Customers rate the product and company on a scale with a short survey. Use this formula to calculate the customer satisfaction score:

Days on Hand: Days on hand (DOH), also known as the average days to sell inventory (DSI) or average age of inventory, is the rate of inventory turns by day. This daily interval is the most common timeframe after an annual range.

Dead Stock: Sometimes called dead inventory, this is one thing no retailer wants to have, ever. Dead stock pertains to merchandise that has never been sold or has been in stock for a while. Sometimes this is because a particular item is just seasonal, but other times it’s because the product simply isn’t in demand.

Retailers can get rid of dead or unmoving inventory through sales or donations, but the best way to deal with dead stock is not to have it in the first place. Analyze the demand in your market to determine the items that you should keep in stock. Also, be sure to manage your inventory well and keep communication lines open between your sales and your purchasing departments.

Dead Stock/Spoilage: Dead stock is inventory no one wants to buy. When the company cannot sell the remaining inventory after a time, the stock is “dead.” Spoilage is the same concept, but for fresh items such as expired food.

Delivery Note: Delivery notes are an inventory tool that assure a smooth packing and shipping process. It provides the logistics department with improved stock management of the input and output of goods, as well improving communication between the accounting and warehouse departments. What are the benefits to customers?

Demand restocking method: The demand restocking method refers to restocking based on future demand predictions.

To be able to fill everyday orders and meet future demand fluctuations, it’s also recommended you maintain healthy levels of buffer inventory, which reduces the risk of a stockout in case of a sudden increase in demand.

Deported stocks: are stocks established at the customer’s site, but that remain the property of the supplier. Through this consignment technique, the distributor can increase its inventory levels and improve its working capital requirements (WCR). The supplier gains visibility through the dispersal of its products and can adjust its production accordingly. For the manufacturer, it also assures better in-store availability of its products, and indirectly, a guarantee of satisfaction for the final customer. The practice of deported stock is similar to that of 3C (Center for Consolidation and Collaboration).

Lost Sales Ratio: A lost sales ratio is the number of days a specific product is out of stock compared to the expected rate of sales for that product. It indicates when a company runs too lean on its stock.

Monthly Sales Bookings: Sales bookings calculates the value — factoring in associated costs — of a committed, signed or won sale over a specific period. Software-as-a-service (SaaS) sales teams often use monthly sales bookings to track the value of their wins. Leaders also use this metric to develop sales strategy and prepare forecasts.

Monthly Sales Growth: A business can survive for only so long without growing its sales. By tracking this metric in your monthly sales dashboard, leaders can quickly spot problems and act on trends. Establishing realistic monthly sales growth targets can motivate a sales team and ensure consistent alignment of their efforts with an organization’s expectations.

Non-inventory Items: The use of non-inventory items, also referred to as non-stock items, makes data entry easier for a company since no inventory tracking is required. Such items are bought and sold, but quantities, locations and stages of the manufacturing process aren’t monitored in the organization’s inventory management system. While this may reduce administrative work, it also makes it harder to determine how many such items a company sells, or if any are still available for sale. A few common examples of non-inventory items include the items in a bill of materials (BOM), the items a construction company buys for a particular job, or office supplies a company buys for its own use.

OMS: An order management system (OMS) supports all the stages in your company’s sales process — from order creation through delivery and even returns.

OMS platforms provide a single, centralized system for managing orders from multiple sales channels, include brick-and-mortar locations, websites, call centers, mobile orders, kiosks and more. It simplifies the buying process for customers, and makes it easier to manage orders, inventory, fulfillment and returns for businesses.

Omnichannel Retail: Omnichannel retail is a business model in which all existing channels become completely integrated to offer customers a seamless shopping experience. This omnichannel retail strategy is empowered by centralized data management, which means that the distinctions among channels, both physical and online, are blurred.

Order Cycle Time: Order cycle time (OCT), also known as order timeliness, is the average time it takes for a company to fulfill a customer order. It demonstrates how well companies meet demand, including shipping readiness, shipping and delivery.

Order Routing: Order Routing is the process of taking an order from customer submission to product delivery. A good system helps a retailer boost their efficiency and effectiveness on key business priorities. When a customer orders a product the Order Management System (OMS) chooses the best location from which to fulfill, based on a set of business rules.

PIM: Product information management (PIM) systems let users store, enrich, and manage complex product information. PIM tools centralize product-related data, streamlining the process of updating and managing accurate information throughout multiple sales and marketing channels.

PIM tools integrate with most ecommerce platforms, customer relationship management (CRM) systems, and enterprise resource management (ERP) software, ensuring up-to-date product information is accessible across your organization. PIM systems are particularly valuable for ecommerce businesses whose product catalog, sales strategy, and marketing messaging are continually changing.

PLU Price Look Up: Price Look-Up (PLU) codes are used in retail locations to facilitate the checkout process. PLUs identify bulk and random or variable weight fruits and vegetables (and related items, such as nuts and herbs).

POS: A POS or point of sale is a device that is used to process transactions by retail customers. A cash register is a type of POS. The cash register has largely been replaced by electronic POS terminals that can be used to process credit cards and debit cards as well as cash.

A POS may be a physical device in a brick-and-mortar store or a checkout point in a web-based store.

Perfect Order Rate: Perfect order rate is a measurement of how many orders a company ships without any issues, such as damage, inaccuracies or delays. Every company aspires to 100%. This metric leads to excellent customer satisfaction and denotes an efficient company.

Product Sales: Product sales, also known as sales revenue, is the income from customer purchases minus any returns or canceled sales. This metric is normally reported for a standard period, such as a month or year.

Profit-based restocking method: Using the profit-based restocking method, you decide whether to restock the inventory (or not) based on how profitable the SKU is.

If your inventory analysis shows that a certain SKU leads to more profit, then you will ensure that your storage facilities have enough stock at all times. For this method to work, you will need to be able to regularly track sales profitability by SKU.

Put Away Time: Put away time is the amount of time it takes for a company to stow inventory. Chronologically, the actions that determine put away time follow those that determine time to receive. With increased efficiencies in this metric, lead time decreases.

Quote-to-Close Ratio: The quote-to close ratio is the number of deals closed and won compared to the total number of quotes sent to prospects. This conversion ratio analyzes salesperson effectiveness and is typically compared to historical trends and current targets to assess performance.

RFID: An acronym for Radio Frequency Identification, RFID is a chip embedded in an item’s label or packaging. It stores information about the product and is primarily used for tracking purposes. Thanks to RFID technology, retailers can increase their inventory accuracy and reduce out of stocks.

Inventory however, is only the beginning. Retailers are now looking into using RFID to get additional customer insights that would allow them to implement more effective marketing strategies and provide better customer experiences.

ROPIS: ROPIS is Reserve Online, Pickup In-Store… which allows customers to visit your website, reserve the item they want, and visit your stores with confidence to purchase their item. In the case of a device, this would allow them to know you have their desired item in stock, but still discuss rate plan options with a sales associate and receive assistance on the actual activation of the device.

Rate of Return: Rate of return (ROR), also called the return on investment (ROI), is a percentage that shows the profit on an investment over a period. This percentage is a proportion of the original investment and usually expressed for a year.

Reorder Point Formula (ROP): The reorder point (ROP) is the minimum stock level a specific product can reach before you’re prompted to order more inventory.

Revenue per Unit: Revenue per unit is how much one unit of product is worth. This metric is particularly helpful for subscription-based businesses.

Sales Opportunities: The sales opportunity metric calculates the estimated sales value of a lead based on the probability of closing the sale. Prospects are categorized into stages in your sales opportunity dashboard, such as proposal, qualified or negotiation, with each stage assigned a weighted value.

Sales Per Rep: A key sales KPI for most businesses is sales generated per rep. Comparing this measurement to previous periods can help teams assess sales growth and trends. Sales managers use sales per rep to set sales targets, identify top-performing and underperforming reps, and improve individual and team performance. Since sales reps tend to be competitive, businesses use sales leaderboards to create transparency across the team and inspire reps to reach their peak performance.

Sales Target Attainment: Will the sales team reach their sales targets, also known as quotas? Is actual revenue better or worse than forecasted? Which sales rep is trailing behind and can use some guidance? The sales target attainment KPI can help answer all these questions. In your dashboard, it compares sales performance against established targets or previous periods. Sales leaderboards are an effective way to visualize sales performance against targets.

Sales per Square Foot: All retail owners should ensure their point of sale system offers features which allow you to accurately track stock levels.

This data can also roughly calculate return on investment (ROI) and is used to calculate rent at a retail locations.

When measuring sales per square foot, keep in mind that selling space does not include the stock room or any area where products are not displayed – just the “usable” selling floor.

Sell-through Rate: Sell-through rate is a comparison of the inventory amount sold and the amount of inventory received from a manufacturer. This helps demonstrate the efficiency of a supply chain.

Service Level: Service level in the context of inventory management is a metric that addresses the percentage of customers who do not experience stock-outs. Use this metric to balance excess inventory costs and stock-out costs resulting from having too much and not enough inventory to fulfill orders

Stock replenishment: Stock replenishment is a standard retail practice, to ensure that the right products are in the best place, at the optimum quantity. Retailers can automate replenishment using intelligent algorithms, which can be particularly beneficial during promotional or seasonal events. Replenishment is essential to avoid stock-outs.

Stock to Sales Ratio: Stock to sales ratio is the measure of the inventory amount in storage versus the number of sales. This broad calculation can be used to adjust the stock to maintain high margins.

Stock-Outs: Stock-outs, also known as out-of-stock items, is the percentage of items not available in inventory when a customer places an order. This metric shows a company’s ability to meet customer demand. Companies hope to keep this percent low.

Supplier Quality Index: Supplier quality index (SQI) aggregates and weighs a vendor’s performance in important areas such as material quality, corrective actions, prompt reply, delivery quality, quality systems and commercial posture. This is the broadest metric companies can assign to their vendors.

sourcing management: is the process of finding suppliers that can provide your business with what it needs at the lowest possible cost without sacrificing quality or reliability.

stock-outs: a situation in which an item is out of stock

subsidiary: In the corporate world, a subsidiary is a company that belongs to another company, which is usually referred to as the parent company or the holding company.

The Travel Retail: The Travel Retail or Duty Free Retail industry sells goods to international travelers. Travel retail sales are exempt from taxes when the goods are immediately taken out of the country of purchase. Vital revenues for the aviation, travel, tourism and maritime industries are generated by travel retail.

Time to Receive: Time to receive is the rate at which staff bring in and prepare to sell new stock. This KPI measures the efficiency of a company’s stock receiving process.

Top-off restocking method: If you have a lot of fast-moving SKUs, the top-off strategy is likely to work well for your business. Also known as the “lean time replenishment” method, it ensures a high inventory turnover rate and low days sales in inventory while reducing the risk of stockouts.

Using this method, retailers replenish stock to acceptable levels at each storage location, every time there is a dip in demand. During the slow periods, the efforts of picking staff who will have less orders to fulfill can be can be redirected towards replenishment.

This method is also great for improving efficiency during busy holiday shopping season.

WMS: A warehouse management system (WMS) is a type of software that is widely used in the manufacturing and retail industries because it tracks all materials and goods as they come in and go out of the warehouse. In basic terms, a WMS helps optimize all your warehouse processes.

It’s extremely important not only because it tracks all of the materials in your warehouse, but it can also create systems to streamline how workers pick products and pack orders. It provides you with the ability to track merchandise entering the warehouse, being packed onto shelves and into various places, and when it leaves the warehouse for order fulfillment.

Since the warehouse management system has all of the information at hand, when a customer sends an order, it will immediately be able to check if the products are available. Instead of a person manually cross-referencing the order and the stock, the WMS will automatically mark the order as ready for packing. This saves a great deal of time and effort. In fact, many WMS services end up paying for themselves when used effectively.

Weeks on Hand: Weeks on hand demonstrates the average amount of time inventory sells per week: a high weeks on hand measure shows inefficient movement, while a low weeks on hand rate shows efficient inventory movement.

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