CPG Operations Reference
CPG Operations Glossary
180 terms covering inventory, costing, organic compliance, co-manufacturing, FSMA traceability, and every operational concept your brand needs to understand.
A
Absorption Costing
Absorption costing is an accounting method that includes all manufacturing costs, both fixed and var
Accounts Payable
Accounts Payable (AP) refers to the money a company owes to its suppliers and vendors for goods or s
Accounts Receivable
Accounts Receivable (AR) refers to the money owed to your CPG brand by customers who have purchased
Actual Cost
Actual Cost refers to the true, final cost incurred to produce a product or deliver a service, refle
Allergen Declaration
An Allergen Declaration is a mandatory statement on food product labels that lists all major food al
Allergen Management
Allergen management is a systematic process to identify, control, and prevent the presence of food a
Annual Update (Organic)
The Annual Update (Organic) is a mandatory yearly process where certified organic CPG brands submit
API Integration
API Integration is the process of connecting two or more software applications so they can share dat
Approved Supplier List
An Approved Supplier List (ASL) is a documented roster of vendors that a CPG brand has vetted and ap
Available to Promise (ATP)
Available to Promise (ATP) is a business function that provides a customer with a delivery commitmen
B
Barcode
A barcode is a machine-readable optical label that contains information about the item to which it i
Batch Record
A Batch Record is a comprehensive document that details every step and ingredient used in producing
Bill of Lading
A Bill of Lading (BoL) is a legal document issued by a carrier to a shipper, detailing the type, qua
Bill of Materials (BOM)
A comprehensive list of the raw materials, ingredients, packaging components, and quantities require
Blanket Purchase Order
A Blanket Purchase Order (BPO) is a long-term agreement with a supplier to purchase goods or service
BRC (British Retail Consortium)
BRC, or British Retail Consortium, refers to a set of global standards for food safety, quality, and
Break-Even Analysis
Break-even analysis helps CPG brands determine the point at which total costs and total revenue are
Buffer Stock
Buffer stock is an extra quantity of inventory held to prevent stockouts due to unexpected demand sp
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Capable to Promise (CTP)
Capable to Promise (CTP) is a business process that allows CPG brands to provide realistic delivery
Capacity Planning
Capacity planning is the process of determining the production capabilities a CPG brand needs to mee
Carrying Cost
Carrying cost refers to the total expenses a CPG brand incurs for holding inventory in storage, incl
Cash Conversion Cycle
The Cash Conversion Cycle (CCC) measures the time it takes for a CPG brand to convert its investment
Category Manager
A Category Manager is a retail professional responsible for managing a specific product category to
Certificate of Analysis (COA)
A Certificate of Analysis (COA) is a document issued by a manufacturer or supplier that confirms a p
Certified Organic
Certified Organic refers to products that meet stringent government-regulated standards for organic
Certifying Agent
A Certifying Agent is an accredited third-party organization that verifies a product, process, or sy
cGMP (Current Good Manufacturing Practice)
cGMP stands for Current Good Manufacturing Practice, a set of regulations enforced by the FDA to ens
Changeover
Changeover refers to the process of switching a production line or machine from making one product t
Chargeback
A chargeback is a deduction or penalty that a retailer or distributor applies to a CPG brand's invoi
CIP (Clean-in-Place)
Clean-in-Place (CIP) is an automated method for cleaning the interior surfaces of pipes, vessels, pr
Co-Manufacturing Agreement
A Co-Manufacturing Agreement is a legally binding contract between a CPG brand and a third-party man
Co-Packer (Contract Manufacturer)
A company that manufactures and packages foods or similar products for their clients. Many small to
Commodity Risk
Commodity risk is the potential for financial loss due to unexpected changes in the prices of raw ma
Consignment Inventory
Consignment inventory is stock held by a retailer or distributor but still owned by the supplier (th
Contract Manufacturing
Contract manufacturing is when a CPG brand hires an external company to produce its products, rather
Contribution Margin
Contribution Margin is the revenue remaining after subtracting variable costs associated with produc
Cost of Goods Sold (COGS)
The direct costs attributable to the production of the goods sold by a company. For food brands, tru
Country of Origin Labeling (COOL)
Country of Origin Labeling (COOL) is a law requiring retailers to inform consumers about the country
CPG Brand (Consumer Packaged Goods)
A Consumer Packaged Goods (CPG) brand is a company that manufactures and sells packaged goods to con
Critical Tracking Events (CTEs)
Critical Tracking Events (CTEs) are specific points in a product's supply chain where key informatio
Customs Bond
A Customs Bond is a financial guarantee required by customs authorities to ensure that importers pay
Cycle Count
Cycle counting is a method of regularly counting a small portion of your inventory on a rotating bas
Cycle Time
Cycle time is the total time it takes to complete one unit of a product from start to finish. It mea
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Data Integration
Data integration is the process of combining data from different sources into a unified view. This a
Days on Hand
Days on Hand (DOH) measures the average number of days a company can meet its sales demand with its
Dead Stock
Dead stock refers to inventory that is unsellable or obsolete and unlikely to be sold in the future.
Deduction Management
Deduction management is the process of tracking, validating, and resolving unauthorized or disputed
Demand Planning
Demand planning is the process of forecasting customer demand for finished goods in order to plan pr
Demand Signal
A demand signal is any piece of information that indicates current or future customer interest and p
Direct Labor Cost
Direct labor cost refers to the wages and benefits paid to employees directly involved in manufactur
Direct Materials Cost
Direct materials cost is the total cost of raw ingredients and packaging directly used to produce a
Distributor Margin
Distributor margin is the profit a distributor makes on the products they sell from a CPG brand, cal
DSD (Direct Store Delivery)
Direct Store Delivery (DSD) is a distribution method where manufacturers or their agents deliver pro
Duty Drawback
Duty Drawback is a refund of customs duties, taxes, and fees previously paid on imported merchandise
E
EBITDA
EBITDA is a key financial metric that shows a company's profitability before accounting for non-oper
EDI (Electronic Data Interchange)
EDI, or Electronic Data Interchange, is a standardized way for businesses to exchange documents like
EDI Integration
EDI Integration automates the electronic exchange of business documents, such as purchase orders and
EOQ (Economic Order Quantity)
EOQ, or Economic Order Quantity, is a formula used to calculate the ideal order quantity that minimi
ERP (Enterprise Resource Planning) for Food Manufacturing
Enterprise Resource Planning (ERP) is a category of software that integrates core business processes
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FDA Food Facility Registration
FDA Food Facility Registration is a mandatory process for facilities that manufacture, process, pack
FEFO (First Expired, First Out)
FEFO is an inventory management principle where products with the earliest expiration dates are sold
FIFO (First In, First Out)
FIFO is an inventory management and valuation method where the first goods purchased or produced are
Finished Goods
Finished goods are products that have completed the manufacturing process and are ready for sale to
Fixed Cost
Fixed costs are business expenses that do not change, regardless of how much product your CPG brand
FOB (Free on Board)
FOB, or Free on Board, is a shipping term that defines when the ownership and responsibility for goo
Food Broker
A food broker is an independent sales agent who represents food and beverage brands to retailers, di
Food Safety Plan
A Food Safety Plan is a documented set of procedures and practices that a food business implements t
FSMA (Food Safety Modernization Act)
The Food Safety Modernization Act (FSMA) is a landmark US law enacted in 2011, fundamentally shiftin
FSMA Rule 204
Section 204 of the FDA Food Safety Modernization Act, which establishes additional traceability reco
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GFSI (Global Food Safety Initiative)
GFSI is an industry-driven initiative that harmonizes food safety standards worldwide, ensuring cons
GMP (Good Manufacturing Practice)
Good Manufacturing Practice (GMP) refers to a system of processes and procedures designed to ensure
Gross Margin
Gross Margin is the profit a company makes from its sales after subtracting the direct costs of prod
GS1
GS1 is a global, non-profit organization that develops and maintains standards for identifying produ
GTIN (Global Trade Item Number)
A GTIN (Global Trade Item Number) is a globally unique 8, 12, 13, or 14-digit number used to identif
H
I
Import Broker
An Import Broker is a licensed professional who helps businesses, like CPG brands, navigate the comp
Incoterms
Incoterms are a set of globally recognized rules published by the International Chamber of Commerce
Indirect Cost
Indirect costs are expenses not directly tied to producing a specific product but are necessary for
Inventory Turnover
Inventory turnover measures how many times a company has sold and replaced its inventory over a spec
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Landed Cost
Landed cost is the total cost of a product after all expenses required to bring it to its destinatio
Lead Time
Lead time is the total time from when an order is placed for raw materials or products until it is r
LIFO (Last In, First Out)
LIFO (Last In, First Out) is an inventory accounting method where the most recently purchased or pro
Lot Code
A lot code is a unique identifier assigned to a batch of products manufactured under similar conditi
Lot Traceability
The ability to track the movement of a specific batch (lot) of raw materials, work-in-progress, or f
M
Made With Organic Claim
The "Made With Organic" claim indicates that a product contains at least 70% certified organic ingre
Mass Balance Audit
A Mass Balance Audit is a verification process that tracks the quantity of inputs and outputs in a p
Master Production Schedule (MPS)
The Master Production Schedule (MPS) is a detailed plan outlining exactly what finished products wil
Material Requirements Planning (MRP)
A production planning and inventory control system used to manage manufacturing processes. MRP ensur
Minimum Run Quantity
Minimum Run Quantity (MRQ) is the smallest amount of a product a manufacturer or co-packer will prod
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Net Margin
Net Margin is the percentage of revenue left after all expenses, including operating costs, interest
Net Payment Terms
Net Payment Terms specify the total period allowed for a buyer to pay an invoice, excluding any earl
New Item Forecast
A New Item Forecast is an estimate of future sales for a product that has not yet been released to t
Non-GMO Verification
Non-GMO Verification is a process that confirms a product, ingredient, or process is free from genet
NOP (National Organic Program)
The National Organic Program (NOP) is a regulatory program managed by the USDA that sets the standar
O
Obsolete Inventory
Obsolete inventory refers to products that are at the end of their product lifecycle and are no long
OEE (Overall Equipment Effectiveness)
OEE (Overall Equipment Effectiveness) is a key performance indicator (KPI) that measures how effecti
OMS (Order Management System)
An Order Management System (OMS) is a software solution that tracks and manages customer orders from
Organic Appeal
Organic Appeal refers to the strong and increasing consumer preference for products made with organi
Organic Certificate
An Organic Certificate is an official document confirming a food product, farm, or processing facili
Organic Handler
An Organic Handler is any operation that processes, packages, or stores organic agricultural product
Organic Ingredient
An organic ingredient is an agricultural product grown and processed according to specific standards
Organic Inspector
An Organic Inspector is a trained professional who conducts on-site audits to verify that farms and
Organic Integrity
Organic Integrity refers to maintaining the organic status of a product throughout its entire journe
Organic Mass Balance
The process of reconciling the volume of certified organic raw materials purchased against the volum
Organic Percentage Calculation
Organic Percentage Calculation is the process of determining the exact proportion of organic ingredi
Organic Processor
An Organic Processor is any business involved in handling, manufacturing, or packaging organic agric
Organic Revocation
Organic Revocation is when a brand's or facility's USDA Organic certification is officially withdraw
Organic Suspension
Organic Suspension is a temporary halt of an organic operation's certification, meaning they cannot
Organic System Plan (OSP)
A detailed, written management plan that outlines the practices and procedures a certified organic o
Organic System Plan Amendment
An Organic System Plan (OSP) Amendment is a formal update or change made to a CPG brand's existing O
Overhead Allocation
Overhead allocation is the accounting process of assigning indirect costs (like rent, utilities, or
P
Packing Slip
A packing slip is a document included with shipments that lists the items enclosed in the package, h
Parallel Production
Parallel production refers to the practice of manufacturing both organic and non-organic versions of
Phase-In/Phase-Out Planning
Phase-In/Phase-Out Planning is the strategic process of managing the introduction of new products or
Physical Inventory
Physical inventory is the process of manually counting all inventory items on hand at a specific poi
Pick Ticket
A pick ticket is a document used in a warehouse or fulfillment center that lists items an order pick
Pick-Pack-Ship
Pick-Pack-Ship refers to the three core steps in the order fulfillment process: retrieving products
Planogram
A planogram is a visual diagram or drawing that shows where and how retail products should be placed
PLM (Product Lifecycle Management)
PLM is a system that helps CPG brands manage all information and processes related to a product thro
Preventive Controls
Preventive Controls are science-based, proactive measures implemented to prevent or significantly mi
Price Variance
Price variance is the difference between the actual price paid for materials or services and the sta
Price-Volume-Mix Analysis
Price-Volume-Mix (PVM) Analysis is a financial tool used to break down the changes in a company's re
Production Order
A Production Order is a document or digital record that authorizes and controls the manufacturing of
Production Planning
Production planning is the process of organizing and scheduling manufacturing operations to meet cus
Production Variance
Production variance is the difference between the actual cost of producing goods and the standard or
Prohibited Substance
A prohibited substance is an ingredient, additive, or material that is forbidden from being used in
Promotional Allowance
A promotional allowance is a payment or discount offered by a CPG brand to a retailer to encourage t
Promotional Lift
Promotional lift is the increase in sales volume or revenue that occurs during and immediately after
Proof of Delivery
Proof of Delivery (POD) is a document or electronic record that confirms a shipment has been success
Purchase Order (PO)
A purchase order (PO) is a formal document issued by a buyer to a supplier authorizing the purchase
Purchase Requisition
A Purchase Requisition (PR) is an internal document used by a company to request the purchase of goo
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Raw Material Inventory
Raw material inventory refers to all the unprocessed goods, components, and ingredients that a CPG b
Recall Plan
A Recall Plan is a documented strategy outlining the steps a CPG brand will take to remove unsafe or
Reorder Point
The Reorder Point (ROP) is the minimum inventory level that triggers a new order for a specific prod
Retail Buyer
A retail buyer is an individual responsible for selecting and purchasing products to be sold in reta
Retailer Compliance
Retailer compliance refers to a CPG brand's adherence to the specific rules, standards, and operatio
RFID
RFID, or Radio-Frequency Identification, is a technology that uses radio waves to automatically iden
Rolling Forecast
A rolling forecast is a continuously updated projection of future demand, sales, or production, typi
Run Rate
Run Rate is an estimate of future performance based on current or historical data, projecting annual
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S&OP (Sales & Operations Planning)
S&OP is a monthly cross-functional planning process that aligns sales forecasts with production capa
Safety Lead Time
Safety Lead Time is the extra time added to a product's standard lead time to account for unexpected
Safety Stock
Safety stock is an extra quantity of inventory held to prevent stockouts caused by unexpected demand
Sales Forecast
A sales forecast is an estimate of future sales, typically over a specific period, used to guide bus
Scan-Based Trading
Scan-Based Trading (SBT) is a retail partnership where a CPG brand retains ownership of its products
Seasonal Demand
Seasonal demand refers to predictable fluctuations in consumer purchasing patterns that occur at spe
Shrinkage
Shrinkage refers to the loss of inventory that occurs between the time goods are received and when t
SKU Rationalization
SKU rationalization is the process of analyzing and optimizing a company's product offerings to iden
Slotting Fee
A slotting fee is a payment made by a CPG brand to a retailer to secure shelf space for a new produc
SOP (Standard Operating Procedure)
A Standard Operating Procedure (SOP) is a set of written, step-by-step instructions that describes h
Split Operation
A split operation occurs when a single production order or batch is divided into multiple smaller ba
Spot Buy
A spot buy is a one-time, urgent purchase of goods or services made outside of a brand's established
SQF (Safe Quality Food)
SQF (Safe Quality Food) is a rigorous, globally recognized food safety and quality certification pro
Standard Cost
Standard cost is a pre-determined, estimated cost to produce a single unit of a product or service u
Standard Cost vs Actual Cost
Standard cost is a pre-determined, expected cost of producing a product, while actual cost is the re
Supplier Scorecard
A Supplier Scorecard is a tool used to systematically evaluate and track the performance of your sup
T
Tariff Classification
Tariff classification is the process of assigning a specific code to goods being imported or exporte
Throughput
Throughput is the rate at which a production system or process can produce finished goods or deliver
TMS (Transportation Management System)
A Transportation Management System (TMS) is a software platform that helps CPG brands manage and opt
Toll Manufacturing
Toll manufacturing is a process where a third-party manufacturer produces goods for your brand using
Traceback Exercise
A traceback exercise is a simulated recall or investigation to test a CPG brand's ability to track i
Trade Spend
Trade spend refers to the financial investments CPG brands make with retailers to promote their prod
Transitional Organic
Transitional Organic refers to agricultural products from farms actively converting from conventiona
Turns (Retail)
Retail turns, or inventory turns, measure how many times a CPG brand's entire inventory is sold and
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UPC (Universal Product Code)
A UPC, or Universal Product Code, is a 12-digit barcode used to identify individual retail products.
USDA Organic Certification
USDA Organic Certification is a certification issued by USDA-accredited certifying agents that verif
USDA Organic Seal
The USDA Organic Seal is a widely recognized label indicating that a product has been produced accor
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Variable Cost
Variable costs are expenses that change in direct proportion to the volume of goods a CPG brand prod
Velocity (Retail)
Retail Velocity measures how quickly a product sells within a specific store or across all retail lo
Vendor Managed Inventory
Vendor Managed Inventory (VMI) is an inventory management system where a supplier (vendor) takes res
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Warehouse Management System (WMS)
A Warehouse Management System (WMS) is software that helps manage and track inventory and operations
Work in Progress (WIP)
Partially finished goods awaiting completion. In food manufacturing, this could be a blended bulk in
Work Order
A work order is a formal document authorizing and detailing a specific job, task, or production run
Working Capital
Working capital is the difference between a company's current assets (like cash, inventory, and acco
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