Understanding the different elements of the fulfillment and shipping process can get overwhelming. This glossary of common terms used in our industry will help you get started.
3PL: Third-Party Logistics. A 3PL is an outsourced logistics provider, which just handles the aspects of shipping ranging from warehousing and fulfillment to freight bills and transportation.
4PL: Fourth-Party Logistics: A 4PL is an outsourced logistics provider, which handles both the organization and management of an entire supply chain for E-Commerce manufacturers and wholesalers. This includes logistics, packaging, warehousing, product delivery, project management, business planning and transportation management strategy.
ABC Inventory: This is a widely used method of categorizing your products into what sells best and what doesn’t, based on how long their shelf life is, relative profitability and percentage of your total inventory.
Active Stock: Products which are stored in readily-accessible areas for easy order fulfillment.
Advanced Shipping Notice (ASN): A notification to the warehouse that there is a pending inbound shipment.
Application Programming Interface (API): An API is a set of programming instructions and standards. It’s often used to help different software applications work together.
Arrival Notice: Also referred to as a delivery notice. This is a message, usually automated, where the carrier notifies the appropriate party that the shipment has arrived.
Automated Fulfillment: Automating any of the tasks involved in fulfillment, such as receiving, putting away, storage, retrieval, picking, packing, inventory updates, inventory management integration with marketplaces and warehouses,labelling and shipping to be performed by both mechanized equipment like conveyor belts, pick towers, sorters, and robots, and through API’s and dashboards.
Backorder: Taking orders while waiting on stock to arrive in the warehouse.
Balloon Payment: This is a lump sum payment paid at the end of a contract, term, or defined period of time, that is significantly larger than all the payments made before it. This is generally the outstanding amount.
Base Currency: Whenever a transaction takes place between two countries, the base currency is the one used for quoting purposes. For example, when importing goods from China to the US, the base currency is usually US Dollars, as opposed to Chinese Yuan.
Bill of Lading (BOL): A BOL is used to indicate where a shipment is going, the weight of the shipment, the commodity, etc. There are usually 3 copies for reference – one for the transportation company, one for the 3PL, and one for the customer.
Bundling: When two or more products are purchased in one order for one price. E.g. Buy-one, take-one.
Cancellation Rate: The Cancellation Rate (CR) is all seller-cancelled orders represented as a percentage of total orders during a given 7-day time period. CR only applies to seller-fulfilled orders.
Carrier: Businesses that deliver a shipment, often called a courier or shipping company.
Carrier Liability: Circumstances in which carriers are liable for damage to your stock. Often carriers limit the liability for an individual shipment, as well as for the total sum of shipments under one client account. Watch out for this to ensure that your products are fully insured while in transit.
Case Picking: This is when a full case is shipped as a single unit instead of individual items.
Chargeable Weight: The amount of weight a freight carrier can charge for. Chargeable weight is computed as the higher of a) the actual weight of the package (kg), and b) the volume-metric weight (dimensional weight) of the package, which is a function of the size of the shipment, and computed as (L x W x H)/Denominator. The denominator sometimes varies depending on the country and the freight type (airfreight vs sea freight), it usually ranges from 3,500 to 6,000. Make sure to check this with your carrier, as it can lead to significant differences in freight charges.
Code 128: A type of barcode, often used in logistics. It is often used for the product bar code in lieu of a UPC.
Commercial Invoice: A document created by the seller with their contact information, and information on the products being shipped such as their value for customs and insurance.
Commodity Code: A code used for defining the type of goods and the applicable tariffs when importing or exporting.
Consignee: Another term for the receiver of a shipment of goods. Typically, the buyer is the consignee.
Container: Packaging used in shipping, such as cartons, cases, boxes, bundles, and bags.
Containerization: A shipment method in which goods are placed in containers and then unloaded at the destination.
Courier Service: A premium and fast door-to-door delivery service. Can be both local or international.
Customs: The authorities who collect duties on imports and exports. Also colloquially used to refer to duties paid on imports and exports.
Customs Value: The value of the imported goods on which duties will be assessed. Usually includes the price of the goods themselves and the prorated price of the freight or air shipping.
Distributed Fulfillment: This is the splitting of physical goods across different fulfillment centers that are strategically chosen to keep inventory closer to the end customer. This way, it is nearby when it’s ready to be shipped to achieve a lower transit time and cheaper shipping costs.
Distribution: All logistics from the end of production to shipment to the end user.
Distribution Center (DC): A warehouse facility which holds inventory before being sent to end users/customers.
Distribution Channel: A company or person who participates in distribution of goods.
Distributor: A business that purchases and resells products.
Dock to Dock: This term is used to ascertain if there is a lift gate or a dock at the end location, so that the truck can pick up from one dock, deliver to another, no lift gate needed.
Dock to Stock: is a receiving method where specified quality and packaging requirements are met before the product is released, and materials are delivered directly to point of use (storage or manufacturing), skipping the normal receiving inspection.
Dropship: Dropshipping is a method of order fulfillment in which a company sells products by delivering them directly from the E-Commerce store/manufacturer or third party. Dropshipping merchants do not warehouse nor ever handle their inventory.
Expediting: Shipping faster than normal.
Export: Sending goods to another country.
Export Broker: A company that intermediates between a buyer and seller. They require a fee for their services.
First Mile: First mile delivery is the first stage of transportation in the business-to-consumer (B2C) logistics supply chain. This is where the parcel first leaves the merchant’s doorsteps.
Flat Rate Shipping: Means the price of shipping is not connected to the weight, shape, or size of the shipped item.
Forecasting: (Also known as inventory estimation) is a process of predicting inventory in future time periods, by predicting sales based on a proposed marketing plan and a set of uncontrollable and competitive forces.
Freight: Goods being transported from one place to another.
Fulfillment: The act of fulfilling a customer order. Fulfillment includes order management, picking, packaging, and shipping. This is what we specialize in at Locad.
Fulfillment Services Provider: A company that provides fulfillment services.
General-Merchandise Warehouse: A warehouse used to store goods that do not have special requirements.
GTIN (Global Trade Item Number): A numeric system that provides globally unique codes to goods and services. Related concepts include UPC, ISBN, and NDC.
Handling Costs: The cost involved in moving, transferring, preparing, and otherwise handling inventory.
Hub: A common connection point in transportation.
Hyperlocal Fulfillment: relies on small, numerous fulfillment centers, located in urban areas (either right downtown or close to the core) to stock and ship out goods for eCommerce orders. By bringing the product closer to the customer, the orders can be fulfilled faster, with a smaller footprint, and rely on innovative final mile delivery solutions.
Import: Goods brought into one country from another.
Inbound logistics: The management of materials from suppliers and vendors into production processes or storage facilities.
Inventory: The quantity of products you own and store for later sale.
Invoice: A detailed statement showing goods sold or shipped and amounts for each.
Item: Any unique manufactured or purchased part, material, intermediate, sub-assembly, or product.
Just-in-Time Inventory: This is manufacturing to demand. You make your product only when the order comes in, and not before. This involves careful planning and serves to cut down costs from the production process, while creating customized and high-quality products.
Kitting: Assembling different products and components as a single SKU into custom packaging. When you sell packs and product bundles, this usually involves kitting either on factory or warehouse level.
Landed Cost: Cost of product plus relevant logistics costs, such as transportation, warehousing, handling, etc.
Last Mile: The final leg of delivery, where the shipment is delivered to the customer.
Less-Than-Truckload (LTL): When goods take up less than a full truckload of space.
Localized Fulfillment: Investing in the country’s local infrastructure, such as warehouses, staff and a delivery fleet and do the fulfillment nationally. Another option is outsourcing to a third-party service provider to do the localization for you
Logistics: Logistics refers to the processes involved in the organization, implementation and services which facilitate the efficient movement and management of inventory from storage to fulfillment and delivery.
Logistics Channel: The network of supply chain participants engaged in storage, handling, transfer, transportation, and communications functions that contribute to the efficient flow of goods.
Marketplace Seller Rating: Displayed on a scale, this is the percentage of positive ratings provided by verified customers. This is impacted by your level of customer service, speed and ease of shipping, and quality of product. On most marketplaces, the visibility of your products (catalogue ranking) is impacted by your seller rating. The higher your seller rating, the more visible are your products, leading to a direct correlation between seller rating and sales.
Manifest: A document which describes individual orders contained within a shipment.
Master Carton: A master carton holds multiple units of the same SKU. Shipping products in a master carton help the customer save money by consolidating the shipment.
Multi-Channel Fulfillment: Where a fulfillment partner handles the storage, packaging, and shipping of a consolidated inventory of products that are sold on various online channels.
Net Weight: The weight of the merchandise, unpacked.
Node: A place in a logistics system where goods rest – plants, warehouses, etc.
Omni-Channel: The way a customer interacts with a retailer over multiple channels without experiencing a noticeable change in customer experience.
Order: An order is a request to ship products, following a purchase by a customer. Orders can be received and processed through the E-Commerce store’s website, or via an online platform.
Order Fulfillment: Order fulfillment is the start-to-finish process of an order being received, prepared, packed and shipped to the customer.
Order Fulfillment Lead Time: This is a measure of an organization’s ability to quickly serve customer demands. This figure measures speed of service and indicates the average time from order placement to customer receipt.
Order Tracking: Order tracking allows a merchant and a customer to track the status of a shipped package, via a tracking number that represents the specific order.
Outbound Logistics: The movement and storage of products from the production line to the customer.
Packing: Preparing a container to ship. This term is also used for packing “products” for an order.
Packing List: All shipped orders include a list which itemizes the SKU, description and quantities of every item contained in the order. This list is prepared by the fulfillment center.
Periodic Inventory: A method of tracking inventory with regularly scheduled stock counts (either weekly, biweekly or monthly.) Any inventory changes that transpired after a count isn’t recorded until the next count.
Perpetual Inventory: The system where you update your inventory every time an order is placed, or stock is moved around. This maintains a real-time inventory count.
Pick and Pack: The process of pulling the products of an order from storage and packing it in preparation for shipping.
Picking: Pulling products from storage for an order.
Port of Entry: A port at which foreign goods are admitted into the receiving country.
Prepaid Freight: Freight paid by the shipper to the carrier.
Purchase Order (PO): A purchaser’s authorization to formalize purchase with a supplier.
Reorder Point: The reorder point is an inventory level set by the merchant which indicates that inventory levels are approaching a low count and it is time to reorder them to keep stock at the desired level.
Return Merchandise Authorization (RMA): An RMA is used as an authorization for return. RMAs help the E-Commerce merchant keep an organized record of their returns and allows the customer to return the item with a reference number to the fulfillment house.
Reverse Logistics: Logistics for management of products after delivery to customer, such as returns and repairs.
Safety Stock: This is the amount of inventory you keep in the warehouse in case of spikes in demand, or shortages in your supply chain.
Seasonality: Changes in demand based on time periods (weekly, monthly, etc.)
Serial Number: Often used with items such as electronics, serial numbers are used to represent a specific unique item; as opposed to an SKU, which represents a group of the same items.
Shipment Cut-off Time: This represents the cut-off time for an order to be entered in order for it to be shipped that day.
Shipping Notice: A message, usually automated, where the carrier notifies the appropriate party that the item or items have shipped.
Shipper: The party that tenders goods for transportation.
Shipping: Tasks related to the outgoing shipment of goods. It includes packaging, weighing, labeling and loading for shipment.
Slotting: The placement of products within a warehouse.
SKU: Acronym for a Stock Keeping Unit, a code which identifies a product so that it may be tracked in inventory.
Shopping Cart Integration: Shopping cart integration allows fulfillment software to be directly linked and integrated with a shopping cart platform. This direct integration provides the fulfillment house instructions for packing and shipping the order. A shopping cart integration usually automates the transmission of customer orders to the fulfillment center, saving time for manual processing of orders.
Staging: Pulling material from inventory before it’s required.
Stockout (out of stock): When you have inadequate inventory levels to meet current demand.
Supply Chain: Everything from the acquisition of raw materials to the delivery of finished products to the end user.
Tariff Code: A tariff code is a number field used for customs clearance which classifies a product, allowing customs to clearly define what the product is.
Uniform Product Code (UPC): A common type of barcode.
Vendor: The manufacturer or distributor of an item or product line.
Warehouse: A place to store goods.
Waybill: Document describing goods in a freight shipment.
Web Portal: The web portal is your account dashboard. It provides all of your account information, inventory counts and tracking as well as order tracking.