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Added-value processes/services
Complementary processes or services applied to a product or service to increase its value to internal or external customers

Activities completed after the sales process, such as the replacement and servicing of parts; particularly prevalent in the automotive industry

The transport of goods by air

Activity-Based Costing (ABC)
An accounting system that measures the cost and performance of specific activities performed in an organization.

Advanced Shipment Notice (ASN)
Detailed shipment information transmitted to a customer or consignee in advance of delivery, designating the contents and nature of the shipment. May also include expected time of arrival.

Average Inventory
The average inventory level over a period of time.

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Back Order
Product ordered but out of stock and promised to ship when the product becomes available.

The return movement of a vehicle from its original destination to its original point of origin, especially when carrying goods back over all or part of the same route.

Bar Code
A symbol consisting of a series of printed bars representing values. A system of optical character reading, scanning, and tracking of units by reading a series of printed bars for translation into a numeric or alphanumeric identification code.

The process of comparing performance against the practices of other leading companies for the purpose of improving performance. Companies also benchmark internally by tracking and comparing current performance with past performance.

Best Practice
State-of-industry performance or application.

Bill of Lading
A transportation document that is the contract of carriage containing the terms and conditions between the shipper and carrier.

Bill of material
Lists materials (components or ingredients) required to produce an item. Multilevel BOMs also show subassemblies and their components. Other information such as scrap factors may also be included in the BOM for use in materials planning and costing.

Bonded warehouse
A facility or consolidation centre that is authorised by customs to store goods. The payment of duties and taxes are only payable once the goods are removed

The separation of a single consolidated bulk load into smaller individual shipments for delivery to the ultimate consignees.

The classic use of the term bulk (bulk materials, bulk inventory, bulk storage) in inventory management and distribution refers to raw materials such as coal, iron ore, grains, etc. that are stored or transported in large quantities. This would include rail cars, tanker trucks, or silos full of a single material. However, this term can also have a variety of other definitions based upon the specific industry or facility. For example, a small-parts picking operation may refer to a case storage area as “bulk”, while a case-picking operation may refer to the full-pallet area as the “bulk area”.

Bulk container
A large container designed to carry bulk cargo

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A firm which transports goods or people.

Carrying cost
Also called holding cost, carrying cost is the cost associated with having inventory on hand. It is primarily made up of the costs associated with the inventory investment and storage cost. For the purpose of EOQ calculations, if the cost does not change based upon the quantity of inventory on hand it should not be included in carrying cost. Carrying cost is represented as the annual cost per average on-hand inventory unit. See article on EOQ for more detailed info on carrying cost.

Chargebacks are becoming more common these days as customers become more specific with their agreements with suppliers. A chargeback is basically a financial penalty placed against a supplier by a customer when a shipment to the customer does not meet the agreed upon terms and conditions. Examples of where suppliers may be charged back would include late shipments, lack of proper packaging and labeling (compliance labels), incorrect shipping terms (shipping collect instead of prepaid or not using the correct carrier or account.

In inventory management, the term Commodity has a couple of definitions. Standard products commonly available from various sources are often called “commodity items”. Specialized or custom products not widely available or proprietary products only available from a small number of sources would not be considered commodity items. The term Commodity is also used to describe classifications of inventory. In this case, “commodity codes” are used to distinguish groups of inventory items to be used for reporting and analysis. Note that commodity classifications can be used to describe any inventory item and are not limited to items that fall under the previous definition of commodity items.

Common Carrier
A for-hire carrier that holds itself out to transport goods and serve the general public at reasonable rates and without discrimination.

The party to whom goods are shipped and delivered. The receiver of a freight shipment.

The party who originates a shipment of goods (shipper). The sender of a freight shipment, usually the seller.

One or more items that a carrier has accepted for shipment at a given time

Combining two or more shipments in order to realize lower transportation rates. Inbound consolidation from vendors is called make-bulk consolidation; outbound consolidation to customers is called break-bulk consolidation.

Consolidation Centre
A warehouse in which goods are packaged into larger units for onward distribution

From the JIT movement in manufacturing, containerization refers to using standardized containers for the storage and transport of materials within a manufacturing facility as well as between vendors and manufacturers. Materials are ordered in multiples of the container quantity often using Kanban. The benefits of containerization include reduced product damage, reduced waste (by using reusable containers), less handling, and greater levels of inventory accuracy by simplifying counting processes

Continuous Replenishment Planning (CRP)
A program that triggers the manufacturing and movement of product through the supply chain when the identical product is purchased by an end user.

Contract logistics
The process of outsourcing product flow management, storage and related information transfer services, usually under long-term contract, with the objective of increasing efficiency and control

Contract warehouse
A contract warehouse is a business that handles shipping, receiving, and storage of products on a contract basis. Contract warehouses will generally require a client to commit to a specific period of time (generally in years) for the services. Contracts may or may not require clients to purchase or subsidize storage and material-handling equipment. Fees for contract warehouses may be transaction and storage based, fixed, cost plus, or any combination.

Core Competency
One of a company’s primary functions which is considered essential to its success.

Cost of Capital
The cost to borrow or invest capital.

Cost of goods sold
Accounting term used to describe the total value (cost) of products sold during a specific time period. Since inventory is an asset, it is not expensed when it is purchased or produced. It instead goes into an asset account (usually called Inventory). When product is sold, the value of the product (the cost, not the sell price) is moved form the asset account to an expense account called cost of goods sold or COGS. COGS appears on the profit-and-loss statement and is also used for calculating inventory turns.

The direct flow of merchandise from the receiving function to the shipping function, eliminating any additional steps in between, including the need for storage.

Customs broking
The handling of customs formalities around the import and export of goods on behalf of importers

Cycle Time
The amount of time it takes to complete a business process.

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Dedicated Contract Carriage
A third-party service that dedicates equipment (vehicles) and drivers to a single customer for its exclusive use on a contractual basis.

Demand Chain
Another name for the supply chain, with emphasis on customer or end-user demand pulling materials and product through the chain.

Dimensional weight
Formula used to determine freight charges when the minimum weight to volume ratio has not been met. Actual weight and dim weight are compared, and the larger weight is used for the freight calculation. Dim weight is calculated by: Dim weight= (Length x Width x Height)/194 . All dimensional measurements are in inches. a.k.a. Dim weight

Outbound logistics, from the end of the production line to the end user.
The party to whom goods are shipped and delivered. The receiver of a freight shipment.

Distribution Center
A post-production warehouse for finished goods.

Distribution Requirements Planning (DRP)
A system of determining demands for inventory at distribution centers and consolidating demand information in reverse as input to the production and materials system.

Direct ship
Direct shipping and drop shipping are two terms generally used interchangeably. They describe a process whereby three parties interact with the sales transaction (the buyer, the seller, and the supplier). The buyer initiates a purchase from the seller, who then arranges with the supplier to ship the product directly to the buyer. The seller does not carry inventory of the product and the supplier does not have any direct communication with the buyer. The buyer pays the seller and the seller pays the supplier. Though both terms (direct ship and drop ship) are generally used to describe the same process, I’ve always considered a small distinction between the two that relates to where you are in the supply chain. To the seller, direct shipping describes both the process and an inventory/sales strategy, however, the supplier will frequently just use the term “drop ship” to describe the process whereby he is shipping the product to an address other than that of his customer (the business that is paying him for the product). Sometimes the term drop ship also describes the process of shipping to any location that is different from the customer’s normal shipping location. This subtle distinction is sometimes evident in the terminology used in software documentation. Direct shipment, Drop shipment.

Dock leveler
Device that provides a bridge to the trailer as well as a ramp to facilitate the transition in height from dock to trailer. Dock levelers are rated by weight capacity and by the service range. The service range, also known as the height differential, rates the safe range above and below dock level you can use the leveler to transition to the trailer height.

Drop shipment
The direct shipment of goods from a manufacturer to a dealer or consumer, bypassing the wholesaler

Fill material. Types of dunnage include loose fill (packing peanuts), papar, bubble wrap, foam, and air pillows

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Economic Order Quantity (EOQ)
An inventory model that determines how much to order by determining the amount that will meet customer service levels while minimizing total ordering and holding costs.

Economic Value Added (EVA)
A measurement of shareholder value as a company’s operating profits after tax, less an appropriate charge for the capital used in creating the profits.

EDI (Electronic Data Interchange)
The paperless exchange of standard business transactions or information by electronic computer-to-computer transfer, generally requiring little or no human intervention.

Efficient Consumer Response (ECR)
A demand driven replenishment system designed to link all parties in the logistics channel to create a massive flow-through distribution network. Replenishment is based upon consumer demand and point of sale information.

The complete cycle of logistics activity. End-to-end supply chain management comprises the sourcing and transport of goods from point of origin to final customer destination

Enterprise resource planning
Describes software systems designed to manage most or all aspects of a manufacturing or distribution enterprise (an expanded version of MRP systems). ERP systems are usually broken down into modules such as Financials, Sales, Purchasing, Inventory Management, Manufacturing, MRP, DRP. The modules are designed to work seamlessly with the rest of the system and should provide a consistent user interface between them. These systems usually have extensive set-up options that allow you to customize their functionality to your specific business needs. Unfortunately, in the real world, ERP systems rarely are sufficient to meet all business needs and a myriad of other software packages such as Customer Relationship Management (CRM), Manufacturing Execution Systems (MES), Advanced Planning and Scheduling (APS), Warehouse Management Systems (WMS) and Transportation Management Systems (TMS) are being sold to make up for these deficiencies

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Fill Rate
The percentage of order items that the picking operation actually fills within a given period of time.

Finished Goods Inventory (FGI)
Products completely manufactured, packaged, stored, and ready for distribution.

Fixed Costs
Costs which do not fluctuate with business volume in the short run.

FOB (Free on Board)
Contractual terms between a buyer and a seller which define where title transfer takes place.

FOB Destination
Title passes at destination, and seller has total responsibility until shipment is delivered.

FOB Origin
Title passes at origin, and buyer has total responsibility over the goods while in shipment.

Foreign Trade Zone (FTZ)
An area or zone set aside at or near a port or airport, under the control of the U.S. Customs Service, for holding goods duty-free pending customs clearance.

Fourth-party logistics provider (4PL)
A supplier of supply chain co-ordination and management services that generally does not own or operate the underlying assets and resources. When acting as a lead logistics provider (LLP), it may also co-ordinate and integrate the services of others with complementary or supporting capabilities

Free Trade Zone (FTZ)
A commercial or industrial area near a port of entry where merchandise and raw material imports are not subject to customs charges or duties

Freight forwarder
A company involved in the collection, consolidation, shipping and distribution of goods from overseas countries. Typically, freight forwarders clear freight through customs, prepare documents and arrange shipping, warehousing and delivery

Freight management
The management of third-party carriers to ensure the swift, safe and cost-efficient delivery of shipments, often involving the integration of a range of services

The activity of processing customer shipments. Though most manufacturig and warehouse operations will process customer shipments, this term usually refers to operations that ship many small orders (usually parcels) to end users as opposed to operations that process larger shipments to other manufacturers, wholesalers, or resellers. Examples of fulfillment operations would include operations that process shipments for mail-order catalogs, internet stores, or repair parts.

Full-Service Leasing
An equipment-leasing arrangement that includes a variety of services to support leased equipment (i.e., motor carrier tractors).

Full-truck-load (FTL)
Where the goods being shipped occupy a complete truck

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Garments on hangers (GOH)
Standard containers fitted with bars and ropes to keep the clothes neatly so they can be put straight onto shop shelves

The process of making something worldwide in scope or application.

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Handling Costs
The cost involved in moving, transferring, preparing, and otherwise handling inventory.

Hazardous Material
A substance or material which the Department of Transportation has determined to be capable of posing a risk to health, safety, and property when stored or transported in commerce.

Home delivery
The transportation of goods to customers locations of choice (including workplaces) can also refer to order fulfilment. Most e-commerce sales involve home delivery I

Hundredweight (cwt)
A pricing unit used in transportation (equal to 100 pounds).

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International Air Transport Association (IATA)
Trade association serving airlines, governments, passengers, shippers and travel agents

Inbound Logistics
The movement of materials from suppliers and vendors into production processes or storage facilities.

International terms of sale developed by the International Chamber of Commerce to define sellers’ and buyers’ responsibilities.

In-store logistics
The provision of pre-retailing services within shops, often in backstage areas. Services can include stock replenishment, storage and packaging

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.

Intermodal Transportation
Transporting freight by using two or more transportation modes.

Raw materials, work in process, finished goods and supplies required for creation of a company’s goods and services.

Inventory Carrying Costs
A financial measurement that calculates all the costs associated with holding goods in storage, usually expressed as a percentage of the inventory value. It includes inventory-in-storage, warehousing, obsolescence, deterioration or spoilage, insurance, taxes, depreciation, and handling costs.

Inventory Deployment
A technique for strategically positioning inventory to meet customer service levels while minimizing inventory and storage levels. Excess inventory is replaced with information derived through monitoring supply, demand and inventory at rest as well as in motion.

Inventory Management
The process of ensuring the availability of products through inventory administration.

Inventory Turns
The cost of goods sold divided by the average level of inventory on hand. This ratio measures how many times a company’s inventory has been sold during a period of time. Operationally, inventory turns are measured as total throughput divided by average level of inventory for a given period.

Inventory Velocity
The speed with which inventory moves through a defined cycle (i.e., from receiving to shipping).

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Just-In-Time (JIT)
In 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.

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Light assembly of components or parts into defined units.

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Lead logistics provider/partner (LLP)

Lead time
Amount of time required for an item to be available for use from the time it is ordered. Lead time should include purchase order processing time, vendor processing time, in transit time, receiving, inspection, and any prepack times. However, based on the way many inventory systems work, there may be problems incorporating internal factors such as post-receipt processing in Lead-time, so in many systems, the lead time just represents the period of time from which the item is ordered to the time it arrives at your dock.

Less-Than-Truckload (LTL) Carriers
Trucking companies that consolidate and transport smaller (less than truckload) shipments of freight by utilizing a network of terminals and relay points.

Overland transportation, by road or by rail, and applying particularly to transportation from origin depot to port of shipment or from port of arrival to destination depot

According to the Council of Logistics Management (CLM), logistics is the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.

Logistics re-engineering
The study and re-design of logistics processes to achieve a significant improvement in performance

Logistics service provider (LSP)
An organisation that offers 3PL or 4PL services

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Marginal Cost
The cost to produce one additional unit of output. The change in total variable cost resulting from a one-unit change in output.

Materials Handling
The physical handling of products and materials between procurement and shipping.

Materials Management
Inbound logistics from suppliers through the production process. The movement and management of materials and products from procurement through production.

Materials Requirements Planning (MRP)
A decision-making methodology used to determine the timing and quantities of materials to purchase.

Merge in transit
A logistics structure without warehouses for distribution of consolidated deliveries of goods to customers from more than one producer/supply source

Manufacturing resource planning—process for determining material, labor and machine requirements in a manufacturing environment. MRPII is the consolidation of Material Requirements Planning (MRP), Capacity Requirements Planning (CRP), and Master Production Scheduling (MPS). MRP was originally designed for materials planning only. When labor and machine (resources) planning were incorporated it became known as MRPII. Today the definition of MRPII is generally associated with MRP systems.

Shipping that includes at least two modes of transport

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N.M.F.C. (National Motor Freight Classification)
A tariff which contains descriptions and classifications of commodities and rules for domestic movement by motor carriers in the U.S.

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The process of making something as good or as effective as possible with given resources and constraints.

Order Cycle
The time and process involved from the placement of an order to the receipt of the shipment.

Order Processing
Activities associated with filling customer orders.

Origin services
Support/added-value functions offered at the point of origin of merchandise or materials. Can include buying, purchase order management, vendor compliance, quality inspection, document management, container optimisation, pick-and-pack, pallet loading, customs processing and consolidation

Outbound Consolidation (Break-Bulk)
Consolidation of a number of small shipments for various customers into a larger load. Shipped to a location near the customers; then the small shipments are distributed to the customers.

The sub-contracting to external companies of tasks considered to be outside an organisation’s core competence. Logistics outsourcing is one of the most popular forms

Outward Processing Relief (OPR)
Transport and customs management of materials and product following a procedure that avoids customs payment

Outbound Logistics
The process related to the movement and storage of products from the end of the production line to the end user.

To utilize a third-party provider to provide services previously performed in-house.

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A flat wooden tray that is loaded by a fork-lift truck, used for transporting goods

Picking of product from inventory and packing into shipment containers.

Point of Sale Information
Price and quantity data from retail locations as sales transactions occur.

The delay of final activities (i.e., assembly, production, packaging, etc.) until the latest possible time.

A freight term which indicates that charges are to be paid by the shipper.

Present Value
Today’s value of future cash flows, discounted at an appropriate rate.

Process Improvement
Designs or activities which improve quality or reduce costs, often through the elimination of waste or non-value-added tasks.

Proof of Delivery (P.O.D.)
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.

Pull replenishment
The customer-driven flow of materials and merchandise through the supply chain. See also demand chain

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Quick Response
A business strategy for reducing inventory in the pipeline and shortening the cycle time for a product to be made, distributed and sold. Point of sale information is electronically transmitted back to the store supplier, who is responsible for adequate supply at the store.

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The transport of goods by rail

A fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in performance.

The process of moving or re-supplying inventory from a reserve storage location to a primary picking location, or to another mode of storage in which picking is performed.

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.

RFID/smart labels
RFID is radio frequency identification, a system that uses radio signals to locate and identify merchandise, batched products or transportation assets fitted with special electronic tags. The tags also known as smart labels or intelligent tags enable the automatic track- and-trace of merchandise/assets throughout the supply chain. RFID can help to reduce administration, improve productivity, optimise the use of warehousing space and increase accuracy and control

The transport of goods by road

The process for arranging the course of direction of goods for transport

The Repacking of goods for a specific customer can include repalletisation. Reworking is the modification of products to suit a local market.

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Safety Stock
The inventory a company holds above normal needs as a buffer against delays in receipt of supply or changes in customer demand.

The transport of goods by sea

Service logistics
Logistics activities relating to the management of parts to and from customers

The party which tenders goods for transportation.

SKU, Stock keeping unit
Referring to a specific item in a specific unit of measure. For xample, if you distributed thirty-weight motor oil in both quarts and gallons you would maintain the inventory as two SKUs even though they are both thirty-weight motor oil. Also refers to the identification# assigned to each SKU.

The practice of locating and procuring goods and products

Decisions or activities in a part made at the expense of the whole.

Supply Chain
The physical, financial, and information networks that involve the movement of materials, funds, and related information through the full logistics process, from the acquisition of raw materials to delivery of finished products to the end user. The supply chain includes all vendors, service providers, customers, and intermediaries.

Supply Chain Management (SCM)
The management and control of all materials, funds, and related information in the logistics process from the acquisition of raw materials to the delivery of finished products to the end user.

Supply Warehouse
A warehouse that stores raw materials or components. Goods from different suppliers are picked, sorted, staged, or sequenced at the warehouse to assemble plant orders.

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A tax assessed by a government on goods entering or leaving a country. The term is also used in transportation in reference to the fees and rules applied by a carrier for its services.

20-foot equivalent container; the standard size of a seafreight container

The storage of goods within a certain temperature range as required by the product type, eg, chilled and frozen

Third Party Logistics
Transportation, warehousing and other logistics related services provided by companies employed to assume tasks that were previously performed in-house by the client.

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.

Time-Definite Services
Delivery is guaranteed on a specific day or at a certain time of the day.

Trailer-on-flat car (piggyback).

Total Average Inventory
Average normal use stock, plus average lead stock, plus safety stock.

Total Cost Analysis
A decision-making approach that considers minimization of total costs and recognizes the interrelationship among system variables such as transportation, warehousing, inventory, and customer service.

Tracking and Tracing
Monitoring and recording shipment movements from origin to destination.

Traffic Management
The management and controlling of transportation modes, carriers and services.

Transit Time
The total time that elapses between a shipment’s pickup and delivery.

The transfer of 40ft container loads into truck-driven 53ft containers to reduce costs per unit and achieve faster and more accurate deliveries

Truckload Carriers (TL)
Trucking companies which move full truckloads of freight directly from the point of origin to destination.

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Unit Cost
The cost associated with a single unit of product. The total cost of producing a product or service divided by the total number of units.

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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 consolidation
The process for managing various vendors in order to consolidate multiple LTL shipments within a consignment to reduce costs and improve delivery efficiency

The sellers of products and services

Very narrow aisle (VNA)
Lift trucks that operate in aisles less than six feet and often use guidance systems (wire, rail, or optical) to travel within the aisles. Types of VNA trucks include order selectors, swing mast, pivot, mast, and turret trucks.

The ability to access or view pertinent data or information as it relates to logistics and the supply chain.

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The storage (holding) of goods.

Work-in-Process (WIP)
Parts and subassemblies in the process of becoming completed finished goods.

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