50 Essential Product Sourcing Terms You Need to Know!

October 14, 2025

In the world of global trade, supply chains, and private-label manufacturing, the vocabulary you use matters. Whether you’re negotiating with a Chinese OEM, evaluating a supplier in Vietnam, or discussing compliance with a logistics provider, clarity and precision are key.

Having a strong understanding of product sourcing terms gives you a real advantage. It allows you to communicate clearly with suppliers, avoid costly misunderstandings, and make more informed decisions throughout the sourcing process.

The 50 Key Product Sourcing Terms

1. Supplier & Manufacturer Types

Choosing the right type of supplier is the first major step toward successful sourcing. By understanding the different kinds of suppliers and manufacturers, you can find the one that best matches your business goals, production requirements, and budget.

OEM (Original Equipment Manufacturer) – A factory that produces products for other brands to sell under their own name.
ODM (Original Design Manufacturer) – A supplier that designs and manufactures products, allowing you to rebrand them easily.
Private Label Manufacturer – A company that produces products exclusively for your brand, often based on your packaging or formula requirements.
Distributor – A middleman that buys products in bulk from manufacturers and sells them to retailers or resellers.
Trading Company / Sourcing Agent – Acts as your representative to find and manage suppliers, often handling logistics and quality checks.
Dropshipping Supplier – A supplier that ships products directly to your customers on your behalf, so you don’t hold any inventory.

2. Procurement & Contracting Terms

Good contracts and clear quotes protect you from costly surprises later. Understanding key procurement and contracting terms helps you negotiate better, manage supplier relationships effectively, and ensure transparency throughout the sourcing process.

RFQ (Request for Quotation) – A request sent to suppliers asking for pricing based on specific product details.
RFP (Request for Proposal) – A more detailed request that invites suppliers to provide pricing, design, and strategy options.
Contract Manufacturing – When you outsource the production of your product to a third-party manufacturer.
Blanket Order – An agreement to purchase products in bulk over a set time, often at pre-agreed prices.
Change Order / Amendment – A formal change to an existing contract, such as quantity, delivery date, or product specification.
Sole Sourcing – Buying from only one supplier because no alternatives exist.
Single Sourcing – Choosing to work with one supplier even when others are available, for consistency or better terms.
Multiple Sourcing – Using several suppliers for the same product to reduce risk and maintain flexibility.
BAFO (Best and Final Offer) – The supplier’s final quoted price after negotiation.
BATNA (Best Alternative to a Negotiated Agreement) – Your backup plan if negotiations don’t lead to a deal.

Note: Always know your BATNA to help you negotiate confidently

3. Logistics, Shipping & Delivery

Most sourcing problems happen during shipping, not production. Knowing key logistics and delivery terms helps you prevent delays, manage costs, and keep your supply chain running smoothly.

Incoterms – International trade rules (like FOB, CIF, EXW) defining who pays for shipping and when the risk transfers.
FOB (Free on Board) – The seller delivers goods to a named port; the buyer takes over cost and risk afterward.
EXW (Ex Works) – The buyer handles all logistics from the seller’s factory gate onward.
CIF (Cost, Insurance, Freight) – The seller pays for shipping and insurance to the buyer’s port of destination.
DAP / DDP (Delivered at Place / Delivered Duty Paid) – The seller handles delivery to the buyer’s location; DDP includes customs and duties.
Bill of Lading (B/L) – A document that proves shipment ownership and details the cargo.
Packing List / Commercial Invoice – Documents listing what’s in the shipment, essential for customs clearance.
Customs Clearance / Import Duty / Tariffs – The process and fees required to legally import goods into a country.
FCL / LCL (Full Container Load / Less than Container Load) – FCL is when you fill a container; LCL means sharing container space with others. If your volume is small, LCL helps you start but it’s slower and costs more per unit

4. Quality, Inspection & Compliance

Quality control is what separates great sourcing from average sourcing. Understanding inspection and compliance terms helps you maintain product standards, meet regulations, and build trust with your buyers.

AQL (Acceptable Quality Level) – The maximum number of defects allowed in a product batch during inspection.
Quality Assurance (QA) – Processes that ensure your product meets required standards during production.
Quality Control (QC) – Final inspection and testing to check product quality before shipment.
Sampling / Batch Testing – Inspecting a small group of items from a production batch to represent overall quality.
Non-Conformance Report (NCR) – A record of defects or issues found during inspection.
Corrective & Preventive Action (CAPA) – Measures taken to fix problems and prevent them from happening again.
Compliance / Regulatory Standards – Ensuring your product meets laws and safety requirements in target markets.
CE, RoHS, REACH Certifications – Examples of international safety and environmental standards for certain product categories.

5. Cost, Pricing & Financial Terms

Knowing the true cost (not just the factory price) helps you protect your margins. Understanding key cost, pricing, and financial terms ensures you make smarter decisions and avoid unexpected expenses.

Landed Cost – The total cost of a product including manufacturing, shipping, customs, and handling fees.
Unit Cost – The price per individual item at a specific quantity.
MOQ (Minimum Order Quantity) – The smallest number of units a supplier is willing to produce or sell.
FOB Price / Ex-Factory Price – The cost of the product at the factory before additional logistics or shipping costs.
Payment Terms (Net 30, Net 60, T/T, L/C) – Conditions that specify how and when payment should be made.
Down Payment / Deposit – The upfront payment required before production starts.
Escrow / Trade Assurance – Payment protection methods to ensure both parties meet their obligations. Always tie part of the payment to final inspection approval

6. Sourcing Strategy & Risk Management

Strategic Sourcing – A long-term approach to supplier selection and negotiation based on data and performance.
Category Management – Organizing spending by product types and managing sourcing strategies accordingly.
Supplier Relationship Management (SRM) – Maintaining and improving relationships with suppliers for long-term success.
Supplier Audits / Factory Audits – On-site checks of a supplier’s capability, quality systems, and compliance.
Risk Mitigation / Diversification – Reducing dependency on a single supplier or region to avoid disruptions.
Global Sourcing / Domestic Sourcing – Choosing to source products internationally or within your country, depending on cost and reliability.
Lead Time – The total time between placing an order and receiving the goods.
Safety Stock / Buffer Stock – Extra inventory kept to prevent shortages due to demand or supply delays.
Just-in-Time (JIT) – Producing or ordering only when needed to reduce excess inventory.
Reverse Logistics – Managing product returns, repairs, and recycling efficiently.

How Zignify Helps You Source Smarter

Navigating the complex world of product sourcing can be challenging—especially when trying to balance quality, pricing, and supplier reliability. That’s where Zignify Global Sourcing makes the difference.

We specialize in helping retailers, DTC brands, and importers discover the best products and trusted suppliers through a data-driven, transparent, and efficient sourcing process. With decades of experience and a vast global network spanning Asia, Europe, and North America, our team takes care of everything from supplier research and price negotiation to quality checks, logistics, and shipment coordination.

Our mission is simple: to save you time and cost, minimize risks, and help your business grow sustainably. Talk to our team and start sourcing smarter today

Why Partner with Zignify?

Access thousands of verified manufacturers and suppliers worldwide.
End-to-end sourcing management—from product discovery to delivery
Clear, transparent pricing with no hidden fees or markups
Tailored sourcing solutions aligned with your category, budget, and business goals

Frequently Asked Questions about Product Sourcing

What is the difference between OEM, ODM, and private label?

OEM (Original Equipment Manufacturer) produces parts or full products for branding by others. ODM adds design capability, offering a ready design for rebranding. Private label typically means you provide the design or brand, and the supplier manufactures it under your brand name.

What is a good MOQ when starting with a new supplier?

There’s no one-size-fits-all MOQ. For small-scale launches, you might negotiate MOQs of 500–1,000 units (depending on product complexity). Use strategic sourcing and multiple quotes to find favorable terms.

How do I calculate landed cost properly?

Landed cost = (product unit cost) + (shipping & freight) + (import duty, VAT, customs fees) + (insurance, handling, port charges) + (domestic transport). Many manufacturers or sourcing agents can help you build this breakdown.

What is AQL and how strict should it be?

AQL (Acceptable Quality Level) sets the maximum number of allowable defects in a sample size. For consumer goods, common levels like AQL 1.5 or 2.5 are used. But if your products are safety-critical, you may demand 0 defects or more stringent criteria.

Should I use single sourcing or multiple sourcing?

Single sourcing can give you leverage and consistency, but it’s risky if the supplier has disruptions. Many companies prefer split sourcing or multiple sourcing for critical components to mitigate risk.

How do Incoterms affect cost and risk?

Incoterms define who holds responsibility for cost, risk, and logistics at each leg. E.g., under FOB, the buyer assumes risk after goods are loaded; under DDP, the seller handles nearly everything. Misunderstanding in terms often leads to hidden costs or supply chain surprises.

How can I protect myself when paying overseas suppliers?

Use mechanisms like Escrow, Letter of Credit (L/C), Trade Assurance (via platforms), or split payments with inspection holdbacks. Also, conduct due diligence and factory audits.

How do I evaluate if a supplier audit is trustworthy?

Ask for photographic evidence, independent third-party audits (e.g. SGS, Bureau Veritas), video walkthroughs, or refer to references from other buyers. Factories sometimes stage audits, so cross-check with multiple sources.

About the Author - Yulia Blinova

Yulia is the Founder of Zignify Global Product Sourcing and Co-founder of two successful Amazon brands. With 20 years of experience in global product sourcing, supply chain, logistics, import/export, and e-commerce, she brings a wealth of knowledge and expertise to the table. Before embarking on her entrepreneurial journey with Zignify, she served as the Managing Director for Flixbus in Russia, a position that leveraged her skills in a rapidly scaling German unicorn startup.