GLOSSARY OF TERMS

Talk the talk—
Glossary of terms for third party logistics.

3PL (Third-Party Logistics)

A service provider that manages and executes logistics services on behalf of another company. These services can include warehousing, transportation, order fulfillment, inventory management, and more. 3PLs allow businesses to outsource their logistics operations to focus on core competencies.

Backorder

A situation where a product is temporarily out of stock but is expected to be available soon. Customers can still place orders, and the items will be shipped as soon as they are restocked.

Batch Picking

A warehouse picking method where multiple orders are picked simultaneously in a single pass through the warehouse. This increases efficiency, especially when dealing with high-volume orders that share common items.

BOL (Bill of Lading)

A legally binding document between a shipper and carrier that details the type, quantity, and destination of goods being shipped. It serves as a receipt for the shipper and proof of contract for the carrier.

Cross-Docking

A logistics practice where goods from incoming shipments are directly transferred to outbound trucks or distribution points with minimal or no storage time in the warehouse. Cross-docking reduces handling, storage time, and costs.

Cycle Counting

A periodic counting of inventory within a warehouse to maintain accurate stock levels without having to shut down operations for a full inventory count. Cycle counting helps identify and correct discrepancies promptly.

Dead Stock

Inventory that remains unsold or unused for an extended period. Dead stock ties up capital and takes up valuable warehouse space, making it essential to manage and reduce.

Dropshipping

A retail fulfillment method where the seller does not keep goods in stock. Instead, customer orders are passed directly to the supplier, who ships the products directly to the customer. Drop shipping reduces the need for inventory storage and handling.

EDI (Electronic Data Interchange)

A standardized electronic communication method that allows businesses to exchange documents such as purchase orders, invoices, and shipping notices electronically, reducing errors and speeding up the supply chain process.

FIFO (First-In, First-Out)

An inventory management method where the oldest inventory (first in) is sold or used first (first out). This method is commonly used for perishable goods to reduce the risk of obsolescence.

Freight Forwarder

A third-party agent that organizes and coordinates the transportation of goods on behalf of the shipper. Freight forwarders manage logistics, handle documentation, and ensure that goods are shipped efficiently and cost-effectively.

Fulfillment Center

A specialized warehouse facility where products are stored, orders are processed, and goods are packed and shipped to customers. Fulfillment centers are essential for e-commerce businesses that need fast and accurate order fulfillment.

Inventory Turnover

A metric that measures how often inventory is sold and replaced over a given period, typically a year. High inventory turnover indicates efficient inventory management, while low turnover may indicate overstocking or slow-moving products.

Just-In-Time (JIT)

An inventory management strategy that minimizes stock levels by scheduling the delivery of materials and products to arrive only when needed for production or sales. JIT reduces storage costs and inventory waste.

Kitting

The process of assembling individual items into ready-to-ship kits. Kitting is often used for promotional packages, subscription boxes, or product bundles and can add value by creating customized offerings for customers.

Lot Tracking

A method of tracking specific batches or lots of products throughout the supply chain. Lot tracking is crucial for quality control, traceability, and managing recalls if necessary.

Omni-Channel Fulfillment

A logistics strategy that enables customers to receive products through multiple channels, such as in-store pickup, home delivery, or shipping from store locations. Omni-channel fulfillment requires a seamless integration of inventory and order management systems.

Order Fulfillment

The complete process of receiving, processing, and delivering customer orders. This includes picking and packing products, arranging for shipping, and handling returns if necessary.

Order Management System (OMS)

A software system used to manage and track orders across multiple sales channels, including online stores, marketplaces, and physical locations. An OMS integrates with inventory, shipping, and customer service systems to ensure accurate and timely order fulfillment.

Pick and Pack

A warehousing process where individual items are picked from inventory and packed for shipping. This is a critical function in e-commerce and retail fulfillment operations.

Reverse Logistics

The process of managing the return of goods from customers back to the retailer or manufacturer. Reverse logistics includes returns, repairs, recycling, and proper disposal of products.

SKU (Stock Keeping Unit)

A unique identifier for each product or item in inventory. SKUs are used to track stock levels, sales, and replenishment needs.

Slotting

The process of organizing and assigning products to specific locations in a warehouse based on factors such as size, weight, sales volume, and pick frequency. Proper slotting improves picking efficiency and reduces labor costs.

Supply Chain Management (SCM)

The management of the entire flow of goods and services from raw materials to the end customer. SCM encompasses procurement, production, distribution, and logistics, ensuring that the right products reach the right places at the right time.

Transportation Management System (TMS)

A software platform designed to manage and optimize the transportation of goods. A TMS helps businesses plan, execute, and track shipments, negotiate freight rates, and ensure timely deliveries.

Value-Added Services (VAS)

Additional services offered by 3PL providers that go beyond basic logistics. VAS may include kitting, labeling, custom packaging, assembly, and quality inspections, adding extra value to the logistics process.

Warehouse Management System (WMS)

A software system used to manage and optimize warehouse operations, including inventory tracking, picking, packing, shipping, and receiving. A WMS helps increase efficiency and accuracy in warehouse management.

Zone Picking

A warehouse picking strategy where the warehouse is divided into zones, and each picker is assigned to a specific zone. Orders are filled by passing them through multiple zones, with each picker retrieving items from their designated area.