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Understanding These Warehousing and Fulfillment Definitions Will Help You Manage Your Product Supply
If you’re new to running an online business or working in the logistics or supply chain industry, there are many important concepts to grasp. It’s easy to become lost in all the technical jargon and acronyms. Yet, understanding industry-specific terminology will guide you to better decisions as you manage warehouse operations and third-party fulfillment.
In this article, we provide definitions for commonly used 3PL, warehouse, and fulfillment terms to introduce you to the industry or refresh your memory when you take on new responsibilities.
Comprehensive 3PL, Warehouse, and Fulfillment Definitions and Terms
3PL (Third-Party Logistics)
3PL, or Third Party Logistics, refers to outsourcing logistics and supply chain management functions to a specialized external provider. Companies leverage 3PL services to enhance efficiency, reduce costs, and focus on their core business activities.
Anniversary Billing
Anniversary Billing is a billing cycle that starts on the anniversary date of a service or contract rather than following a traditional monthly calendar cycle. This approach is often used in long-term agreements and provides flexibility in aligning billing cycles with specific contract milestones.
Backorder
A backorder occurs when a product is temporarily out of stock but still available for purchase. Backorders may require delayed shipping until products are restocked.
Cross-Docking
Cross-docking is a logistics strategy where products from inbound shipments are directly transferred to outbound transportation with little to no time spent in storage. This technique minimizes handling and storage costs, allowing faster order fulfillment and distribution.
Dropshipping
Dropshipping is a fulfillment method in which a seller does not keep products in stock but instead transfers orders to a supplier or manufacturer. That third-party company then ships the products to the customers.
Dock Scheduling
Dock Scheduling is the organized planning and scheduling of loading and unloading activities at warehouse docks. It ensures efficient use of resources, minimizes congestion, and streamlines the flow of goods in and out of the facility.
E-commerce Fulfillment
E-commerce fulfillment involves receiving, processing, and shipping online customer orders. It encompasses inventory management, order picking, packing, and shipping, tailored to meet the unique requirements of e-commerce businesses focused on direct-to-consumer sales.
Freight Forwarding
Freight forwarding is a service that facilitates the movement of goods from one location to another, managing shipping services, customs clearance, and documentation. Freight forwarders act as intermediaries between shippers and carriers to ensure smooth transportation.
Goods Handling
Goods handling involves physically managing products within a warehouse or logistics facility. This encompasses loading, unloading, sorting, and organizing goods to facilitate efficient storage and movement.
Last-Mile Delivery
Last-mile delivery is the final stage of the delivery process, involving transporting goods from a distribution center to the end consumer’s doorstep. It is a critical phase in supply chain logistics, impacting customer satisfaction and delivery speed.
Lead Time
Lead time is the amount of time it takes from when a customer places an order to when it’s delivered to the customer. Lead time helps manage customers’ delivery expectations.
Inventory Management
Inventory management systematically controls and tracks a company’s stock, ensuring optimal levels to meet demand while minimizing excess. It involves ordering, storing, and tracking inventory to balance supply and demand.
Just-in-Time (JIT)
Just-in-time (JIT) is a production and inventory management approach where goods are produced or ordered precisely when needed in the production process. JIT aims to reduce excess inventory, minimize carrying costs, and enhance overall efficiency by synchronizing production with demand.
Key Performance Indicator (KPI)
Key performance indicator (KPI) is a measurable metric used to evaluate the performance and effectiveness of specific processes within a business. In logistics, KPIs provide insights into key areas such as order accuracy, delivery times, and overall operational efficiency.
Logistics
Logistics involves the management of the flow of goods, services, and information between the point of origin and the point of consumption. It encompasses various activities, including transportation, warehousing, inventory management, and distribution.
Multi-Channel Fulfillment
Multi-channel fulfillment is a logistics strategy that involves fulfilling customer orders through various sales channels, such as online marketplaces, brick-and-mortar stores, and direct-to-consumer platforms. It requires seamless coordination to meet diverse customer demands.
Non-Stock Item
A non-stock Item refers to a product or item that a company does not usually keep in its inventory but procures or produces on a case-by-case basis. These items are typically not part of regular stock levels.
Order Fulfillment
Order fulfillment is the complete process from receiving a customer order to delivering the requested products. It includes picking, packing, and shipping, ensuring accurate and timely delivery to meet customer expectations.
Pick and Pack
Pick and pack is a warehouse fulfillment operation that involves selecting items from inventory (picking) and then packing them into individual shipments based on customer orders. This streamlines order processing and enhances efficiency.
Quality Control
Quality control is the systematic process of ensuring that products or services meet specified standards and requirements. In logistics, quality control involves inspecting and verifying the condition and accuracy of goods during various stages of handling and transportation.
Returns Management
Returns management is the process of handling product returns from customers. It includes procedures for assessing the condition of returned items, determining whether they can be restocked, and managing customer refunds or replacements.
Stock Keeping Unit (SKU)
A stock-keeping unit (SKU) is a unique identifier that describes each product or product variation. SKUs are used in warehousing and fulfillment to track inventory and orders.
Stockout
Stockout occurs when a business runs out of a particular product or item, leading to temporary customer unavailability. It highlights the importance of effective inventory management to prevent supply disruptions.
Transportation Management System (TMS)
A transportation management system (TMS) is a software solution that facilitates the planning, execution, and optimization of transportation operations. It helps companies manage the movement of goods efficiently, optimize routes, and reduce transportation costs.
Understock
Understock refers to a situation where the quantity of a particular product in inventory is below the desired or necessary level. It can lead to stockouts and impact customer satisfaction, highlighting the importance of effective inventory management to avoid understock situations.
Value-Added Services (VAS)
Value-added services (VAS) involve additional activities or enhancements beyond standard storage and transportation. These services can include product customization, labeling, packaging, or assembly, adding value to the product during fulfillment.
Warehouse
A warehouse is a facility for storing goods, inventory management, and order fulfillment. Warehouses play a crucial role in the supply chain by providing a centralized location for storing and distributing products efficiently.
Warehouse Management System (WMS)
A Warehouse Management System (WMS) is a software system that manages warehouse operations. A WMS can organize your inventory tracking, picking routes, and stock placement operations.
X-Docking
X-docking is a logistics strategy where incoming goods are quickly transferred from the receiving dock to the outbound shipping dock without being stored in the warehouse. This minimizes storage time and enhances the speed of order fulfillment.
Yard Management
Yard management involves efficiently organizing and tracking trailers, containers, and vehicles in a facility’s yard. It optimizes the movement of goods between the yard and the warehouse, enhancing overall logistics efficiency.
Zone Picking
Zone picking is an order fulfillment method where a warehouse is divided into zones, and each picker is responsible for specific zones. This approach streamlines the picking process by assigning designated areas to individual workers, improving efficiency in large warehouse environments.
