3PL and logistics glossary

Ranking SKUs by how much they contribute to sales or usage: A items are the few that matter most, C items the many that matter least. It shows which products to count, forecast and place most carefully.

See also Cycle count, Slotting

A fee a carrier adds to the base rate for extra service, such as residential delivery, liftgate service, inside delivery or another delivery attempt.

See also Liftgate, Residential surcharge

A notice sent before an inbound shipment arrives, listing what is coming, in which cartons or on which pallets, and when. The warehouse checks the delivery against it at receiving.

See also Receiving

The transport document for air freight, issued by the airline or its agent. It is the receipt for the goods and the contract of carriage, but unlike an ocean bill of lading it is not a document of title.

See also Bill of lading

Shipping wholesale orders to retailers, distributors or other businesses, usually in cartons or on pallets and often to the buyer’s own labeling and routing rules.

Pallet calculator

An order, or part of one, that can’t ship because the item is out of stock. It ships once new inventory has been received.

See also Stockout

The document a carrier issues for a freight shipment: a receipt for the goods and the contract of carriage. In ocean freight, a negotiable bill of lading is also a document of title.

See also Less than truckload, Air waybill

The weight a carrier charges for: the greater of the actual weight and the dimensional weight, each rounded up to the next pound.

Dimensional weight calculator

Choosing the right box for each order from the sizes of the items in it, so parcels carry less empty space and less dimensional weight.

Dimensional weight calculator

The seller’s invoice for an international shipment, listing the goods, their value, their country of origin and the parties. Customs uses it to assess duty.

See also Duty, Country of origin

The country where a product was made, or where it was last substantially transformed into a new product. It decides which duty rate applies and how the goods must be marked.

See also Duty, HTS code

Moving inbound goods straight from the receiving dock to outbound trucks, with little or no time in storage.

The volume unit used to price ocean and air freight: length × width × height in meters. One cubic meter is about 35.3 cubic feet.

CBM calculator

A licensed person or firm that handles customs business for importers, such as classifying goods and filing entries with U.S. Customs and Border Protection.

See also HTS code

Counting a slice of the inventory on a rolling schedule instead of shutting down for one full physical count, so errors are found and fixed while orders keep shipping.

See also Shrinkage

How many days your current inventory lasts at the current rate of sales. With turnover measured over a year, it is 365 ÷ inventory turnover.

Inventory turnover calculator

The Incoterms rule where the seller delivers to the buyer’s named place and pays for import clearance, duties and taxes. It puts the most obligations on the seller.

Incoterms chart See also Ex Works

A charge for leaving a container at the port or terminal beyond the free time allowed. A detention charge is the matching fee for keeping the carrier’s container outside the terminal too long.

See also Drayage

A billing weight based on a package’s size: length × width × height divided by the carrier’s divisor. Carriers charge it when it is greater than the actual weight.

Dimensional weight calculator See also Billable weight, Volumetric weight

Short-distance trucking of shipping containers, usually between a port or rail ramp and a nearby warehouse.

See also Demurrage

A tax on imported goods, usually a percentage of their customs value. The rate depends on the product’s tariff classification and its country of origin.

Landed cost calculator See also HTS code

The order size that keeps the combined cost of placing orders and holding stock lowest: the square root of 2 × annual demand × cost per order ÷ yearly holding cost per unit.

EOQ calculator See also Inventory carrying cost

Exchanging business documents such as purchase orders, advance ship notices and invoices between companies’ systems in a standard format, without paper or email.

See also Advance ship notice

The Incoterms rule where the seller makes the goods available at its own premises and the buyer handles everything after that, including loading and export clearance.

Incoterms chart See also Delivered Duty Paid

Getting inventory ready for Amazon’s Fulfillment by Amazon program, such as labeling, bagging, bundling and boxing units to Amazon’s requirements, before it ships to Amazon.

Fulfillment services See also Fulfilled by Merchant

Shipping the oldest stock first so inventory doesn’t age on the shelf. First expired, first out (FEFO) ships by expiration date instead.

See also Lot number

The Incoterms rule for sea freight where the seller delivers once the goods are on board the vessel at the named port of shipment, and risk passes to the buyer. U.S. domestic contracts also use FOB origin and FOB destination, which are not Incoterms rules.

Incoterms chart

A class from 50 to 500 under the National Motor Freight Classification that LTL carriers use to price freight. Dense, easy-to-handle freight gets a lower class and usually a lower rate per pound.

Freight class calculator See also National Motor Freight Classification

A company that arranges international shipments, booking carriers, preparing documents and coordinating customs, usually without owning the ships or planes.

See also Customs broker

Amazon orders that the seller, or the seller’s 3PL, picks, packs and ships itself instead of using Amazon’s fulfillment network.

Fulfillment services See also FBA prep

A warehouse set up to pick, pack and ship individual orders, rather than to hold goods in bulk for long periods.

What a 3PL warehouse does See also Third-party logistics

An ocean shipment that books a whole container for one shipper’s goods, whether or not they fill it.

Container loading calculator See also Less than container load, Twenty-foot equivalent unit

A shipment that books a whole trailer and moves from pickup to delivery without being transferred between trucks.

See also Less than truckload

The distance around a package at its thickest part: 2 × width + 2 × height. Carriers add it to the length to set size limits and oversize charges.

Package size limits See also Oversize charge

The GS1 product number carried in retail barcodes. A 12-digit GTIN is the UPC used mainly in North America; a 13-digit GTIN is the EAN used mainly elsewhere.

See also Stock keeping unit

A U.S. fee on commercial cargo unloaded from ships at U.S. ports, charged as a percentage of the cargo’s value. Air shipments don’t pay it.

Landed cost calculator See also Merchandise processing fee

Hazardous materials, also called dangerous goods: products such as lithium batteries, aerosols and flammable liquids that need special packaging, labels and carrier approval to ship.

The number that classifies an imported product in the Harmonized Tariff Schedule of the United States. The first six digits follow the international Harmonized System, duty rates are set at eight digits, and all ten digits are used for trade statistics.

Landed cost calculator See also Duty

Trade terms published by the International Chamber of Commerce that set which tasks, costs and risks the seller and the buyer each take on in an international sale. The current edition is Incoterms 2020.

Incoterms chart See also Ex Works, Free On Board, Delivered Duty Paid

What it costs to hold inventory for a period: storage, the money tied up in stock, insurance, shrinkage and obsolescence. It is often stated per unit per year or as a percentage of inventory value.

EOQ calculator See also Storage fee

How many times you sell through your average inventory in a period: cost of goods sold ÷ average inventory value.

Inventory turnover calculator See also Days on hand

Ordering stock to arrive close to when it is needed. It keeps inventory low but leaves less of a buffer when demand jumps or a supplier is late.

Safety stock calculator See also Safety stock

Assembling separate items into one ready-to-ship set, such as a gift box, bundle or subscription box, before orders come in or as they do.

Fulfillment services See also Value-added services

The full cost of getting a product into your warehouse: the purchase price plus freight, insurance, duties, customs fees and handling, usually stated per unit.

Landed cost calculator See also Duty

The final leg of a delivery, from the carrier’s local facility to the customer’s door.

The time from placing a purchase order to having the units received and ready to sell, including production, transit, customs and receiving.

Reorder point calculator See also Reorder point

An ocean shipment too small to fill a container, consolidated with other shippers’ cargo and usually priced by volume in cubic meters or by weight.

CBM calculator See also Full container load

A freight shipment that shares a trailer with other shippers’ freight, usually on pallets, and is priced partly by freight class, weight and distance.

Freight class calculator See also Full truckload, Freight class

A powered platform on the back of a truck that lowers freight to the ground where there is no loading dock. Carriers charge liftgate service as an accessorial.

See also Accessorial charge

A code for a batch of units made together, recorded so that a quality problem or recall can be traced to the exact orders that shipped them.

See also First in, first out

A U.S. Customs and Border Protection fee on imports, charged on formal entries as a percentage of the goods’ value with a minimum and a maximum per entry.

Landed cost calculator See also Harbor maintenance fee

Shipping orders from several sales channels, such as your own store, marketplaces and wholesale accounts, out of one shared pool of inventory.

See also Order management system

The standard maintained by the National Motor Freight Traffic Association that assigns freight classes, based on density, handling, stowability and liability.

Freight class calculator See also Freight class

The time of day after which new orders ship on the next business day instead of the same day. Each warehouse and carrier pickup schedule sets its own.

Holiday shipping deadlines

Software that collects orders from every sales channel, tracks their status and sends each one to the warehouse that will ship it.

See also Warehouse management system

A surcharge for parcels over a carrier’s size threshold, measured by the longest side or by length plus girth. Above the largest limits, a carrier can refuse the parcel.

Package size limits See also Girth

The document inside a parcel listing what was ordered and what was shipped. Brands often leave prices off so it doubles as a gift receipt.

A flat platform that goods are stacked on so a forklift or pallet jack can move them. The most common U.S. size is 48 × 40 inches.

Pallet calculator See also Pallet position

The space one pallet takes in a rack or on the floor. Warehouses often price storage per pallet position per month; Fulfillment Hub USA publishes $34.50 for a standard pallet and $41.40 for a large one at its first storage tier.

Pallet calculatorPublished pricing See also Storage fee

An extra per-package charge carriers add during their busiest weeks, most often in the run-up to the winter holidays.

Holiday shipping deadlines

Picking each order’s items from storage and packing them into a box or mailer with packing material, a packing slip and a shipping label.

Pick and pack services See also Pick fee

What a 3PL charges to pick an order, usually a fee for the first item plus a smaller fee for each extra one. Fulfillment Hub USA publishes $2.85 for the first item and $0.70 for each extra item at its first volume tier.

Published pricing See also Pick and pack

Moving received goods from the dock to their storage locations and recording where each one went.

See also Receiving, Slotting

Holding units apart from sellable stock until they have been checked, such as damaged receipts or returns waiting to be graded.

See also Reverse logistics

Unloading inbound shipments, checking them against the advance ship notice or purchase order and recording them into inventory.

See also Advance ship notice, Put-away

The stock level that triggers the next purchase order: daily demand × lead time in days, plus safety stock.

Reorder point calculator See also Safety stock, Lead time

A fee carriers add for delivering to a home instead of a business address.

See also Accessorial charge

An approval number issued before a customer sends something back, linking the return to its order and the reason for it.

See also Reverse logistics

The share of orders, or of units, that customers send back: returns ÷ orders shipped in the same period × 100.

Return rate calculator See also Reverse logistics

Everything that happens after a customer sends a product back: return shipping, receiving, inspection, restocking, refurbishing, recycling or disposal.

Return rate calculatorReturns processing See also Return rate

Extra inventory held to cover demand spikes and late deliveries, so you don’t run out while the next order is on its way.

Safety stock calculator See also Reorder point

A distance band between where a parcel ships from and where it is going. Zone 1 is the closest, and carriers price ground parcels partly by zone.

Shipping zone calculatorShipping zone map See also Zone skipping

Inventory lost to damage, theft or recording errors: the gap between what your records say you have and what is on the shelf.

See also Cycle count

Deciding where each SKU is stored in the warehouse, so fast sellers sit closest to packing and heavy items sit low.

See also ABC analysis

Your own code for each distinct product variant, so every size and color of a shirt has its own SKU.

See also Global Trade Item Number

When a SKU has no available inventory, so new orders for it can’t ship until stock is received.

Reorder point calculator See also Backorder, Safety stock

What a warehouse charges to hold your inventory, usually per pallet, bin, shelf or cubic foot per month.

Pallet calculator See also Pallet position

A company that runs warehousing and fulfillment for other businesses: receiving, storage, pick and pack, shipping and returns.

What a 3PL warehouse does See also Fulfillment center

The ID a carrier assigns to a parcel or shipment so the sender and the customer can follow it. Its format usually shows which carrier issued it.

Tracking number lookup

How long a carrier takes to move a shipment from pickup to delivery, usually counted in business days. Published transit times are estimates unless the service is guaranteed.

Shipping zone calculator See also Shipping zone

The standard measure of container capacity. A 20-foot container is one TEU and a 40-foot container is two.

Container loading calculator See also Full container load

The level at which a product is counted, such as each, inner pack, case or pallet. Your system and the warehouse’s must use the same one for each SKU.

See also Stock keeping unit

Work beyond pick, pack and ship, such as kitting, custom packaging, inserts, labeling and FBA prep, usually priced per unit or per hour.

Fulfillment services See also Kitting, FBA prep

Another name for dimensional weight, used mainly in air and international freight. Air carriers charge the greater of the volumetric weight and the actual weight, called the chargeable weight.

CBM calculator See also Dimensional weight

Software that tracks inventory by location and directs the warehouse’s receiving, put-away, picking, packing and counting.

See also Order management system

Running the trucks and trailers in a warehouse’s yard: dock appointments, check-in and moving trailers to and from the doors.

Dividing the warehouse into zones, each with its own pickers, so an order collects its items zone by zone.

See also Slotting

Trucking many parcels together to a carrier facility near their destination and handing them over there, so each parcel travels fewer zones.

Shipping zone calculator See also Shipping zone