Logistics Glossary
A
ABC Analysis
A classification of items in an inventory according to importance defined in terms of criteria such as sales volume and purchase volume.
Activity-Based Costing (ABC)
A methodology that measures the cost and performance of cost objects, activities, and resources. Cost objects consume activities and activities consume resources. Resource costs are assigned to activities based on their use of those resources, and activity costs are reassigned to cost objects (outputs) based on the cost objects proportional use of those activities
Agility
The ability to successfully manufacture and market a broad range of low-cost, high-quality products and services with short lead times and varying volumes that provide enhanced value to customers through customization. Agility merges the four distinctive competencies of cost, quality, dependability, and flexibility.
Air Waybill (AWB)
A bill of lading for air transport that serves as a receipt for the shipper, indicates that the carrier has accepted the goods listed, obligates the carrier to carry the consignment to the airport of destination according to specified conditions.
Automated Storage/Retrieval System (AS/RS)
A high-density rack inventory storage system with unmanned vehicles automatically loading and unloading products to/from the racks.
B
Backhaul
The process of moving goods from what was originally their final destination back to their origin point. In warehousing, backhauls can also be truckloads of goods that customers have returned or for which they have requested an exchange. An incoming backhaul will typically need to be inspected for damage and then, once approved for quality, restocked.
Bar coding
The machine-readable identification system used to track, scan, and process inventory.
Batch Picking
A method of picking orders in which order requirements are aggregated by product across orders to reduce movement to and from product locations. The aggregated quantities of each product are then transported to a common area where the individual orders are constructed.
Blanket Purchase Order
Bundling
An occurrence where two or more products are combined into one transaction for a single price.
C
Caged
Referring to the practice of placing high-value or sensitive products in a fenced off area within a warehouse.
Chain of Responsibility (CoR)
is the part of the Heavy Vehicle National Law (HVNL) that makes parties other than drivers responsible for the safety of heavy vehicles on the road. Everyone who works with heavy vehicles – from the business that employs a driver or owns a vehicle, to the business that sends or receives goods, is accountable for the safety of the heavy vehicle, its driver, and its load throughout the journey.
Change Order
A formal notification that a purchase order or shop order must be modified in some way. This change can result from a revised quantity, date, or specification by the customer; an engineering change; a change in inventory requirement data; etc.
Consignee
The receiver of transported products.
Consignment
A freight order transported by a carrier.
Conveyor
A materials handling device that moves freight from one warehouse area to another. Roller conveyors utilize gravity, whereas belt conveyors use motors.
Cross-docking
A distribution process in which goods are received from a supplier and immediately sorted, packed, and shipped to a customer rather than being moved to a warehouse shelf for storage. Cross-docking is often used in warehouses to fulfill customer orders for items that were on back order.
Cycle count
An auditing process in which inventory is counted on a cyclical basis. Inventory is counted in sections on a regular basis to make auditing more manageable and ensure that inventory records are accurate.
D
Dangerous Goods
Articles or substances capable of posing a significant risk to health, safety, or property, and that ordinarily require special attention when transported. See also Hazardous Goods.
Dashboard
A performance measurement tool used to capture a summary of the key performance indicators/metrics of a company. Metrics dashboards/scorecards should be easy to read and usually have red, yellow, green indicators to flag when the company is not meeting its metrics targets. Ideally, a dashboard/scoreboard should be cross functional in nature and include both financial and non-financial measures.
Demurrage
Additional charges incurred when freight is unloading past its specified time.
Dispatch
The office in charge of allocating assets to haul shipments.
Distribution center
A facility where goods are sorted, packed, and processed for shipping to their final destination (the customers). Many warehouses are also distribution centers, meaning they not only store or warehouse goods but also offer picking, packing, and even delivery services.
Drop
A situation in which an equipment operator deposits a trailer or boxcar at a facility at which it is to be loaded or unloaded.
Drop tailer
A truck trailer that is dropped off for loading and then picked up at a later time. Sometimes couriers will have a driver drop off an empty trailer and pick up a full one to maximize efficiency.
E
Economy of Scale
A phenomenon whereby larger volumes of production reduce unit cost by distributing fixed costs over a larger quantity.
Electronic Commerce (EC)
Also written as e-commerce. Conducting business electronically via traditional EDI technologies, or online via the Internet. In the traditional sense of selling goods, it’s possible to do this electronically because of certain software programs that run the main functions of e-commerce support, such as product display, ordering, shipment, billing, and inventory management. The definition of e-commerce includes business activity that is business-to-business (B2B) and/or business-to-consumer (B2C).
Enroute
A term used for goods in transit or on the way to a destination.
Export
To send goods and services to another country.
F
Finished Goods Inventory (FG or FGI)
Products completely manufactured, packaged, stored, and ready for distribution
First In First Out (FIFO)
In inventory control and financial accounting, this refers to the practice of using stock from inventory on the basis of what was received first and is consumed first.
Forklift
A machine-powered device used to raise and lower freight and to move freight to different warehouse locations.
Freight Consolidation
The grouping of shipments to obtain reduced costs or improved utilization of the transportation function. Consolidation can occur by market area grouping, grouping according to scheduled deliveries, or using third party pooling services such as public warehouses and freight forwarders.
Fulfillment
The act of fulfilling a customer order. Fulfillment includes order management, picking, packaging, and shipping.
G
Gain Sharing
A method of incentive compensation where supply chain partners share collectively in savings from productivity improvements. The concept provides an incentive to both the buying and supplier organisations to focus on continually reevaluating, reenergising, and enhancing their business relationship. all aspects of value delivery are scrutinised, including specification design, order processing, inbound transportation, inventory management, obsolescence programs, material yield, forecasting and inventory planning, product performance, and reverse logistics. The focus is on driving out limited value cost while protecting profit margins.
Goods
A term associated with more than one definition: 1) Common term indicating movable property, merchandise, or wares. 2) All materials which are used to satisfy demands. 3) Whole or part of the cargo received from the shipper, including any equipment supplied by the shipper.
Gross Weight
The total weight of the vehicle and the payload of freight or passengers.
H
Handling Costs
The cost involved in moving, transferring, preparing, and otherwise handling inventory.
High Reach Forklift
They are designed to safely and efficiently lift and retrieve loads from extreme heights that traditional counterbalance forklifts or order pickers are unable to access.
Hub
a central warehouse that’s used to cater various destinations that may be customers, stores or other smaller warehouse
I
Import
Movement of products from one country into another. The import of automobiles from Germany into the US is an example.
Inbound Logistics
Refers to the transportation and storage of incoming goods into your supply chain.
Indirect Cost
A resource or activity cost that cannot be directly traced to a final cost object since no direct or repeatable cause-and-effect relationship exists. An indirect cost uses an assignment or allocation to transfer cost.
Insurance
A system of protection against loss under which a number of parties agree to pay certain sums (premiums) for a guarantee that they will be compensated under certain conditions for specified loss and damage.
Integrated Logistics
A comprehensive, system-wide view of the entire supply chain as a single process, from raw materials supply through finished goods distribution. All functions that make up the supply chain are managed as a single entity rather than managing individual functions separately.
Inventory
Raw materials, work in process, finished goods, and supplies required for creation of a company’s goods and services. The number of units and/or value of the stock of goods held by a company.
Inventory Accuracy
When the on-hand quantity is equivalent to the perpetual balance (plus or minus the designated count tolerances).
J
Joint Cost
A common cost in cases where a company produces products in fixed proportions and the cost the company incurs to produce one product entails producing another; the backhaul is an example.
Joint Rate
A rate over a route that requires two or more carriers to transport the shipment.
Joint Supplier Agreement (JSA)
Indicative of Stage 3 Sourcing Practices, the JSA includes terms and conditions, objective, process flows, performance targets, flexibility, balancing, and incentives.
Just In Time (JIT)
An inventory control system that controls material flow into assembly and manufacturing plants by coordinating demand and supply to the point where desired materials arrive just in time for use. An inventory reduction strategy that feeds production lines with products delivered just in time. Developed by the auto industry, it refers to shipping goods in smaller, more frequent lots.
K
Key Performance Indicator (KPI)
A measure which is of strategic importance to a company or department. For example, a supply chain flexibility metric is Supplier On-Time Delivery Performance which indicates the percentage of orders that fulfilled on or before the original requested date
Kitting
Light assembly of components or parts into defined units, Kitting reduces the need to maintain an inventory of pre-build, completed products, but increases the time and labor consumed at shipment.
L
Last In First Out (LIFO)
In inventory control and financial accounting, this refers to the practice of using stock from inventory on the basis of what was received last is consumed first. This has limited use in stock keeping and is primarily a cost-accounting method.
Last mile delivery
The process of transporting goods from a warehouse or distribution center to their final destination (the customer). Last mile delivery refers exclusively to the final stage of the logistics supply chain (and happens after packing and vehicle loading).
Lead Time
The total time that elapses between an order’s placement and its receipt. It includes the time required for order transmittal, order processing, order preparation, and transit.
Leg
A leg has an origin, destination, and carrier and is composed of all consecutive segments of a route booked through the same carrier.
Logistics
The process of planning, implementing, and controlling procedures for the efficient and effective storage of goods, services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. This definition includes inbound, outbound, internal, and external movements.
Lot Control
A set of procedures (e.g., assigning unique batch numbers and tracing each batch) used to maintain lot integrity from raw materials, from the supplier through manufacturing to consumers.
M
Machine Downtimes
Time during which a machine cannot be utilized. Machine downtimes may occur during breakdowns, maintenance, changeovers, etc.
Macro Environment
The environment external to a business, including technological, economic, natural, and regulatory forces that marketing efforts cannot control.
Manifest
Utilizing an outsourcing service provider located in a country other than where the client is located.
Operation
the process of managing the activities associated with receiving, storing, packing and distributing goods in a warehouse. This can include: Warehouse management systems (WMS)
Optimization
The process of making something as good or as effective as possible with given resources and constraints.
Order Entry and Scheduling
The process of receiving orders from the customer and entering them into a company’s order processing system. Activities may include “technically” examining orders to ensure an orderable configuration and provide accurate price, checking the customer’s credit and accepting payment (optionally), identifying and reserving inventory (both on hand and scheduled), and committing and scheduling a delivery date.
Outbound Logistics
Moving product from your production facilities to the end-user.
P
Pallet
The platform which cartons are stacked on and then used for shipment or movement as a group. Pallets may be made of wood or composite materials.
Peak Demand
The time period during which customers demand the greatest quantity.
Permit
A grant of authority to operate as a contract carrier.
Pick List
A list of items to be picked from stock in order to fill an order; the pick list generation and the picking method can be quite sophisticated.
Pick to Light
A laser identifies the bin for the next item in the rack; when the picker completes the pick, the bar code is scanned and the system then points the laser at the next bin.
Picking
The operations involved in pulling products from storage areas to complete a customer order.
Portal
A web site that serves as a starting point to other destinations or activities on the Internet. Initially thought of as a home base-type of web page, portals attempt to provide all Internet needs in one location. Portals commonly provide services such as e-mail, online chat forums, shopping, searching, content, and news feeds.
Proactive
The strategy of understanding issues before they become apparent and presenting the solution as a benefit to the customer, etc.
Process Improvement
A design or activity which improves quality or reduces costs, often through the elimination of waste on non-value-added tasks.
Proof of Delivery (POD)
Information supplied by the carrier containing the name of the person who signed for the shipment, the time and date of delivery and other shipment delivery-related information.
Purchase Order (PO)
The purchaser’s authorisation used to formalise a purchase transaction with a supplier. The physical form or electronic transaction a buyer uses when placing an order for merchandise
Put Away
Removing the material from the dock (or other location of receipt), transporting the material to a storage area, placing that material in a staging area, and then moving it to a specific location and recording the movement and identification of the location where the material has been place.
Q
Quality Control
The management function that attempts to ensure that the goods or services in a firm manufacturers or purchases meet the product or service specifications.
Quarantine
The setting aside of items from availability for use or sale until all required quality tests have been performed and conformance certified.
R
Radio Frequency Identification (RFID)
The use of radio frequency technology such as RFID tags and tag readers to identify objects. Objects may include virtually anything physical, such as equipment, pallets of stock, or even individual units of product.
Real Time
The processing of data in a business application as it happens, as contrasted with storing data for input at a later time (batch processing).
Receiving
The function encompassing the physical receipt of material, the inspection of the shipment for conformance with the purchase order (quantity and damage), the identification and delivery to destination, and the preparation of receiving reports.
Receiving Dock
Distribution center location where the actual physical receipt of the purchased material from the carrier occurs.
Replenishment
The process of moving or resupplying inventory from a reserve (or upstream) storage location or facility to a primary (or downstream) storage or picking location, or to another mode of storage in which picking is performed.
Request for Information (RFI)
A document used to solicit information about vendors, products, and services prior to a formal RFQ/RFP process.
Request for Proposal (RFP)
A document which provides information concerning needs and requirements for a manufacturer. This document is created in order to solicit proposals from potential suppliers. For example, a computer manufacturer may use an RFP to solicit proposals from suppliers of third party logistics services.
Request for Quote (RFQ)
A document used to solicit vendor responses when a product has been selected and price quotations are needed from several vendors.
Reverse Logistics
A specialized segment of logistics focusing on the movement and management of products and resources after the sale and after delivery to the customer. Includes product returns for repair and/or credit.
S
Safety Stock
The inventory a company holds above normal needs as a buffer against delays in receipt of supply or changes in customer demand.
Salable Goods
A part of assembly authorised for sale to final customers through the marketing function.
Serial Number
A unique number assigned for identification to a single piece that will never be repeated for similar pieces. Serial numbers are usually applied by the manufacturer but can be applied at other points by the distributor or wholesaler. Serial numbers can be used to support traceability and warranty programs.
Service Level
A measure (usually expressed as a percentage) of satisfying demand through inventory or by the current production schedule in time to satisfy the customer’s requested delivery dates and quantities.
Shelf Life
The amount of time an item may be held in inventory before it becomes unusable. Shelf life is a consideration for food and drugs which deteriorate over time, and for high-tech products which become obsolete quickly.
Shrinkage
Reductions of actual quantities of items in stock, in process, or in transit. The loss may be caused by scrap, theft, deterioration, evaporation, etc.
Skills Matrix
A visible means of displaying people’s skill levels in various tasks. Used in a team environment to identify the skills required by the team and which team members possess those skills.
Slotting
Warehouse slotting is defined as the placement of products within a warehouse facility. Its objective is to increase picking efficiency and reduce warehouse handling costs through optimizing product location and balancing the workload.
Staging
Pulling material for an order from inventory before the material is required. This action is often taken to identify shortages, but it can lead to increased problems in availability and inventory accuracy.
Standard operating procedures (SOP)
provide an ability to define the steps and processes required to undertake a given activity. This can be critical in setting team expectations and to identify the requirements – such as training or coaching – needed to complete the SOP
Stickering
Placing customer-specific stickers on boxes of product. An example would be where Wal-Mart has a request for their own product codes to be applied to retail boxes prior to shipment.
Stock-Keeping Unit (SKU)
A category of unit with a unique combination of form, fit, and function (i.e., unique components held in stock). To illustrate: If two items are indistinguishable to the customer, or if any distinguishing characteristics visible to the customer are not important to the customer so that the customer believes the two items to be the same, these two items are part of the same SKU.
T
Third Party Logistics Provider (3PL)
A firm which provides multiple logistics services for use by customers. Preferably, these services are integrated or bundled together, by the provider. These firms facilitate the movement of parts and materials from suppliers to manufacturers, and finished products from manufacturers, and finished products from manufacturers to distributors and retailers. Among the services they provide are transportation, warehousing, cross docking, inventory management, packaging, and freight forwarding.
Third Party Warehousing
The outsourcing of the warehousing function by the seller of the goods.
Throughput
A measure of warehousing output volume (weight, number of units). Also, the total amount of units received, plus the total amount of units shipped divided by two.
Tracking and Tracing
Monitoring and recording shipment movements from origin to destination.
Trailer Drops
When a driver drops off a full truck at a warehouse and picks up an empty one.
Transit Time
The total time that elapses between a shipment’s pickup and delivery.
U
Unit Cost
The cost associated with a single unit of product.
Unit of Measure (UOM)
The unit in which the quantity of an item is managed, e.g., pounds, each, box of 12, package of 20, or case of 144. Various UOMs may exist for a single item. For example, a product may be purchased in cases, stocked in boxes, and issued in single units.
Unplanned Order
Orders which are received that do not fit into the volumes prescribed by the plans developed from forecasts.
V
Value Added
Increased or improved value, worth, functionality, or usefulness.
Variable Cost
A cost that fluctuates with the volume or activity level of business.
Vendor
The manufacturer or distributor of an item or product line.
Vendor-Managed Inventory (VMI)
The practice of retailers making suppliers responsible for determining order size and timing, usually based on receipt of retail POS and inventory data. Its goal is to increase retail inventory turns and reduce stock outs.
Visibility
The ability to access or view pertinent data or information as it relates to logistics and the supply chain, regardless of the point in the chain where the data exists.
W
Wall-to-Wall Inventory
An inventory management technique in which material enters a plant and is processed through the plant into finished goods without ever having entered a formal stock area.
Warehouse
Storage place for products. Principal warehouse activities include receipt of product, storage, shipment, and order picking.
Warehouse Management System (WMS)
The systems used in effectively managing warehouse business processes and direct warehouse activities, including receiving, putaway, picking, shipping, and inventory cycle counts. Also includes support of radio frequency communications, allowing real-time data transfer between the system and warehouse personnel. they also maximize space and minimize material handling by automati
Wave Picking
A method of selecting and sequencing picking lists to minimize the waiting time of the delivered material. Shipping orders may be picked in waves combined by a common product, common carrier, or destination, and manufacturing orders in waves related to work centers.
X
Xerography
The xerographic process, which was invented by Chester Carlson in 1938 and developed and commercialized by the Xerox Corporation, is widely used to produce high-quality text and graphic images on paper. A dry copying process in which black or coloured powder adheres to parts of a surface remaining electrically charged after being exposed to light from an image of the document to be copied
Y
Yard Management
Facilitating and monitoring compliance with defined processes and rules (traffic flow, use of parking areas, preserving the security chain, etc.) by all vehicles and persons entering the boundaries of the logistics facility.
Yield
The ratio of usable output from a process to its input.
Z
Zone Picking
A method of subdividing a picking list by arrears within a storeroom for more efficient and rapid order picking. A zone-picked order must be grouped to a single location and the separate pieces combined before delivery or must be delivered to different locations such as a work centre.