Supply Chain and Retail Terminology: Distribution, RFID, VMI, Pricing Strategies

Distribution Center

A facility used for receipt, storage, and redistribution of goods to company stores.

Fulfillment Center

A facility that ships products directly to customers.

Raincheck

A retailer's promise allowing a customer to buy an advertised, out-of-stock item later at the sale price.

EDI

Electronic Data Interchange — computer-to-computer exchange of business documents between retailer and vendor.

EDI Benefits

Allows fast communication and reduces errors across channel partners.

RFID Tags

Provide accurate, real-time inventory data; hold more info than barcodes; no line-of-sight needed.

RFID Limitation

Tag cost — adds about 10 cents per item.

UPC Codes

Universal Product Codes — 12-digit numeric barcodes placed on retail products.

DSD

Direct Store Delivery — goods delivered directly to stores, skipping the distribution center.

CPFR

Collaborative Planning, Forecasting, and Replenishment — works with VMI to coordinate supply chain.

VMI

Vendor Managed Inventory — manufacturer maintains a retailer's inventory levels.

VMI Benefits

Reduces stockouts and lowers costs for both retailer and vendor.

VMI Limitations

Requires collaboration; lack of two-way communication can cause issues.

Reverse Logistics

Moving goods backward in the supply chain (returns, recalls, overstock).

Reverse Logistics Examples

Includes returned items, recalled merchandise, and unsold goods.

Point of Sale Data

Purchase information collected at checkout and stored in a retailer's data warehouse.

High/Low Pricing

Strategy with frequent discounts to boost profits, create excitement, and sell slow-moving items.

EDLP

Everyday Low Pricing — consistent low prices that reduce advertising costs and stockouts.

Elasticity

Measure of how price changes affect consumer demand.

Inelastic Example

A 1% price decrease results in less than a 1% increase in quantity sold.

Geofencing

Offering localized promotions triggered by customer phone location.

Fixed Cost

Stable costs that do not change with production quantity.

Variable Cost

Costs that change with the level of sales or production.

Personalized Service

Tailored service; less consistent; costly; requires trained employees.

Standardized Service

Consistent service using set procedures; efficient and reliable; less personal.

Bait and Switch

Illegal practice of advertising a low-price item but pushing customers toward a higher-priced model.

Customer Loyalty

Customers repeatedly choosing the same retailer or brand.