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Business Terminology

Activity-Based Costing (ABC) An accounting term for measuring 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.Back Order Product ordered but out of stock and promised to ship when the product becomes available.Backhaul 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.Benchmarking 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.Break-Bulk The separation of a single consolidated bulk load into smaller individual shipments for delivery to the ultimate consignees.Carrier A firm which transports goods or people.Case Cube The cubic size (usually in cubic feet) of a case computed by multiplying the length times the width times the height of the case (L x W x H).Claim A document that provides evidence needed to prove loss due to damage, shortage, or overcharge.Code-Dated Merchandise bearing a date code indicating when a product was pack-aged, placed on display, or should be sold. Code dates facilitate rotation and help prevent the sale of off-quality items.Collaborative Planning Forecasting and Replenishment (CPFR) Data and process model standards developed for collaboration between suppliers and an enterprise with proscribed methods for planning (agreement between the trading partners to conduct business in a certain way); forecasting (agreed-to methods, technology and timing for sales, promotions, and order forecasting); and replenishment (order generation and order fulfillment). The Voluntary Inter-Industry Commerce Standards (VICS) committee, a group dedicated to the adoption of bar-coding and EDI in the department store/mass merchandise industries, has established CPFR standards for the consumer goods industry that are published by the Uniform Code Council (UCC).Common Carrier A for-hire carrier that holds itself out to transport goods and serve the general public at reasonable rates and without discrimination.Compartmentalized Trailer A trailer divided into three sections to accommodate combination loads. There is one section for frozen foods, another for refrigerated perishables, and a third for non-refrigerated products (e.g., dry groceries).Consignee The party to whom goods are shipped and delivered. The receiver of a freight shipment.Consignor The party who originates a shipment of goods (shipper). The sender of a freight shipment, usually the seller.Consolidation 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.Continuous Moves Normally used in conjunction with private truck fleets in process industries to keep the trucks moving with different loads and driver crews on regular routes with just-in-time materials. This concept is being adopted by public fleets to utilize their assets more effectively.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.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.Cross-Docking The direct flow of merchandise from the receiving function to the shipping function, eliminating any additional steps in between, including the need for storage.Cube (Business) The total capacity of a warehouse, truck, back room, re-pack room, pal-let, shelf, or product, including vertical and horizontal dimensions.Cycle Time (Business) The amount of time it takes to complete a business process.Date Code A code attached to merchandise to show when it was packaged, placed on display, should be removed from display, or should be used. Codes facilitate rotation and help prevent the sale of off-quality items. See Code-Dated.Dead-Pile Loading Manual stacking of cases on the floor of trucks or rail cars.Deadhead A truck returning empty to the distribution center or proceeding empty to its next pick up location.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.Detention Charge A penalty charge against shippers or receivers for delaying trucks beyond an allotted time.Distribution Outbound logistics, from the end of the production line to the end user.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.Documentary Credit Many types of documents used between buyers and sellers and their respective banks to support payment and transfer title for goods shipped. May be in the form of letters of credit (LOC or L/C), bank guarantees, or forwarder cargo receipts (FCR).Dry Grocery Non-perishable, un-refrigerated packaged products found in food stores.Dry Grocery Nonfoods Nonfood products that are bought by the grocery buyer, handled in the main grocery warehouse, ordered by stores in full cases, and displayed in stores on standard shelving. Examples include household cleaning products, paper napkins, laundry detergents, and insect repellents.Dunnage Loose material used around cargo to prevent damage.Duty Drawback The process of obtaining refunds of duty from customs when exporting an article in the same condition as imported, or when imported parts are included in a manufactured article. Similar to European outward processing and inward processing regimes.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.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.First-In, First-Out (FIFO) Using the first-in, first-out (FIFO) method to stock and sell merchandise; the oldest is sold first to ensure quality and freshness. Rotation is often guided by code-dating.Fixed Costs Costs which do not fluctuate with business volume in the short run.Flow Thru Generates shipping instructions at the point of receipt, which eliminates the need for product to be put-away in the warehouse. Instead, the product can be directly transferred from an inbound trailer directly to an outbound trailer.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.Full-Service Leasing An equipment-leasing arrangement that includes a variety of services to support leased equipment (i.e., motor carrier tractors).Globalization The process of making something worldwide in scope or application.Handling Costs The cost involved in moving, transferring, preparing, and otherwise handling inventory.Harmonized Tariff Code A code to numerically describe all articles in international trade managed by the World Customs Organization.Hazardous Class/Indicator Indicates whether the product is a hazard or source of danger. This prevents non-hazardous product from being mixed with hazardous products. The class indicates the category of hazardous material.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.Hundredweight (cwt) A pricing unit used in transportation (equal to 100 pounds).Inbound Logistics The movement of materials from suppliers and vendors into production processes or storage facilities.Incoterms International terms of sale developed by the International Chamber of Commerce to define sellers' and buyers' responsibilities.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.Inventory 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).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.Kitting Light assembly of components or parts into defined units.Lead Time Total time from receipt of store order to the scheduled delivery time of the product at the store.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.Logistics 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.Manufacturing Planning Definition of the weekly or daily production and machine schedules across multiple plants or lines to meet orders and forecast demand. Some manufacturing planning modules also incorporate materials planning.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.Mixed Load A trailer load that includes more than one product line (i.e., dry grocer-ies, produce, meat, and dairy products).Network Planning Used to determine the overall physical channel (e.g., plants, distribution centers and warehouses) by which materials are turned into finished goods and delivered to customers. More recently, network planning tools have been enhanced for use in strategic business planning scenarios (e.g., to answer such questions as what should the company's channel strategies be or what is the impact of switching suppliers). These tools are usually used for long-term decisions, although enterprises in more-dynamic environments are employing them on a more-frequent basis.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.Optimization 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.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.Outbound Logistics The process related to the movement and storage of products from the end of the production line to the end user.Outsource To utilize a third-party provider to provide services previously performed in-house.Pallet A wooden platform used for stacking unit loads of merchandise. Standard size is 40" x 48"Pallet Cube The amount of cubic feet of product that is allowed to be shipped or stored on a pallet.Pallet Facings The side of the pallet facing the aisle from which the stock is picked or the pallet is handled by a forklift.Palletizing The loading and securing of products in pallet loads.Physical Inventory An actual count of all items on-hand at given time in a facility.Pick/Pack 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.Postponement The delay of final activities (i.e., assembly, production, packaging, etc.) until the latest possible time.PrepaidA 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.Product Line A group of products with similar uses and characteristics.Productivity The rate of production, often measured in cases per labor hour. Whole-salers measure productivity to assess labor and operating expenses.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" Order System Allows stores (usually grocery) to order what they want."Push" Order System The stores (usually retail) are notified as to what items they are getting, instead of allowing them to order what they want (as in the "Pull" Order System described above).Put-Away Determines the best reserve or select location to store each pallet received. Put-away takes into account the stackability of the item, the height from the floor of a reserve location, whether the product is code-dated, etc.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.Receiving One of the basic operating functions of the food distribution center where incoming merchandise is unloaded from trucks or rail cars and checked for condition and completeness.Reefer (Transportation) Refrigeration equipment for transporting frozen or perishable products.RF Unit A radio frequency communications device that is mounted on a forklift, carried, or worn on a selector.Reengineering A fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in performance.Replenishment 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.Safety Stock The inventory a company holds above normal needs as a buffer against delays in receipt of supply or changes in customer demand.Satellite Facility A facility that is used to store merchandise which is not accommodated in the base facility due to lack of space or equipment.Seal (Transportation) Small metal or plastic strip and lead fastener used for locking totes, freight car, or truck doors. Seals are numbered for record purposes.Shipper The party which tenders goods for transportation.Shrink Wrap A layer of plastic film encasing a palletized load of merchandise. The film is subjected to heat, causing it to shrink and conform to the shape of the load.Staging Area A space on which the receiving and shipping docks used to gather and check inbound and outbound loads.Straight Load Merchandise delivered to retail stores in trucks carrying only one product group, or a whole trailer carrying different products for one customer.Stretch Pallet Wrap Bands of plastic film applied by an associate used to encase palletized loads prior to shipment. Depending on fragility or shape of the mer-chandise, the number of bands can be varied to protect against product damage.Stock Keeping Unit (SKU) Numbering system which makes a product or item distinguishable from all others.Sub-Optimization 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 Chain Planning (SCP) The process of coordinating assets to optimize the delivery of goods, services and information from supplier to customer, balancing supply and demand. Typical components include network planning, capacity planning, demand planning, manufacturing planning and scheduling, distribution and deployment planning, and transportation planning and scheduling.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.TI x HI The number of cases on a single tier (layer), and the number of tiers high on a pallet.Tier (TI) A single layer of units forming part of a unit load.Tariff 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.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.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.Time-Definite Services Delivery is guaranteed on a specific day or at a certain time of the day.TOFC 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.Transportation Management System (TMS) System used to plan freight movements, do freight rating and shopping across all modes, select the appropriate route and carrier, and manage freight bills and payments.Transportation Planning and Scheduling Specifies how, when and where to transport goods. Transportation planning and scheduling applications may provide weight/size restrictions, merge-in-transit, continuous move, mode or carrier selection, and less than truckload (LTL)/full truckload (FTL) planning functionality.Turnover (Turns) The rate at which products must be restocked due to customer sales. Turnover may also refer to the number of employees hired to replace those who have left an establishment.Truckload Carriers (TL) Trucking companies which move full truckloads of freight directly from the point of origin to destination.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.Universal Product Code (UPC) A computer code identifying a product. An electronic scanner reads the code and sends the information to a central computer. Also known as bar code.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-Managed Inventory (VMI) In the VMI process, the vendor assumes responsibility for managing the replenishment of stock. Rather than a customer submitting orders, the vendor will replenish stock as needed. This is sometimes referred to as supplier-managed inventory (SMI) or co-managed inventory.Visibility The ability to access or view pertinent data or information as it relates to logistics and the supply chain.Warehouse A physical facility in which the primary purpose is storage of merchandise.Warehouse Management System (WMS) A software application that manages the operations of a warehouse or distribution center. Application functionality includes receiving, putaway, inventory management, cycle counting, task interleaving, wave planning, order allocation, order picking, replenishment, packing, shipping, labor management and automated material-handling equipment interfaces. The use of radio frequency technology in conjunction with bar codes provides the foundation of a WMS, delivering accurate information in real time.Warehousing The storage (holding) of goods.Work-in-Process (WIP) Parts and sub-assemblies in the process of becoming completed finished goods.

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