3PL Dictionary

March 15, 2021

The 3PL industry is full of interchangeable and often confusing jargon.  The terms and definitions below will help you better understand what you’re hearing and reading as you work to understand the 3PL industry and how a 3PL may help your business.

Third Party Logistics (3PL) – An independent company that offers warehouse services including product distribution, warehousing, and order fulfillment for its customers.

ABC Analysis – A classification methodology sometimes used to help manage inventory flow, with “A” items being the most important and “C” items being the least important.

Accessorial Charges – Fees from a carrier for certain logistics services such as loading/unloading, pickup, delivery, peak time deliveries and fuel.

Active Stock – Goods in active pick locations of the warehouse that are ready for order fulfillment.

Advanced Shipping Notification (ASN) – A document that’s sent to a warehouse management system (WMS) from a supplier that provides detailed information about an incoming shipment.

Application Programming Interface (API) – A programming methodology that allows systems to effectively communicate order, inventory and other relevant information.  It is often used to connect systems between businesses and 3PLs.

B2B – An acronym standing for “business-to-business” and refers to dealings between two businesses.

B2C – An acronym standing for “business-to-customer” and refers to dealings between a business and end consumer.

Back Order – An incomplete order due to product not being available to complete the order.

Barcode– A series of alternating bars and spaces printed or stamped on products, labels, or other media, representing encoded information which can be read by electronic scanners.

Batch Picking – Order picking from a warehouse in which all the items for multiple orders are picked by a single person.

Bill of Lading (BOL) – A document that details items in a shipment that acts as a receipt.

Carrier – The company that is used for delivery of goods or cargo.  These companies include USPS, UPS, FedEx, DHL and many other national, regional and local trucking companies.

Case Picking – A picking methodology in which items are picked by full cartons, common in B2B order fulfillment.

Change Order – A formal notification that a purchase order must be modified in some way. This change can result from a revised date, quantity order, or specification by the customer.

Channel Partners – Members of a supply chain (i.e., manufacturers, suppliers, distributors, etc.) who work in conjunction with one another to manufacture, distribute, and sell a specific product.

Claim– A charge made against a carrier for loss, damage to goods, delay of delivery, or overcharge.

Conveyor– A materials handling device that moves products or consumables from one area of the warehouse to another. Roller conveyors utilize gravity, whereas belt conveyors use motors.

Cross Docking – Refers to the practice of moving products directly from the receiving area to the shipping area for distribution rather than being put away and stored for a period of time. 

Delivery Appointment – The time scheduled by a carrier to deliver products to a distribution center.

Distribution Center (DC) – A warehouse facility that stores and distributes products, often to retailers or directly to consumers.

Distribution Channel – One or more companies or individuals who participate in the flow of goods and services from the manufacturer to the end user.

Dunnage– The packing material used to protect a product from damage during transport often bubble wrap or Styrofoam peanuts.

Each– A single unit of inventory.

Electronic Data Interchange (EDI) – A data formatting standard to help businesses electronically share data between computer systems, often between retailers and the companies they order product from.

Enterprise Resource Planning (ERP) System – Software systems used to help manage the supply chain, from production to product delivery.

First In First Out (FIFO) – In inventory control and financial accounting, this refers to the practice of using stock from inventory on the basis of what was received first and is consumed first.

Fork Lift – A piece of equipment used to move pallets off of containers and trailers, and throughout a warehouse.

Forward Picking – A storage area designed for efficient unit picking, often for B2C orders.

Fulfillment – The act of fulfilling a customer order, often referring to ecommerce. 

Full Truckload (FTL) – A term used to describe a full truckload of product.

GLOBAL TRACKING IDENTIFICATION NUMBER (GTIN) – Globally-unique identification number used for identifying items sold, delivered, warehoused, and billed throughout distribution channels.

Hazardous Materials – According to the Department of Transportation, hazardous materials are products or articles or substances that are capable of posing a significant risk to health, safety or property when transported by air, rail, ground, or sea.

Inventory – The products and their quantity that are stored on-hand in a warehouse, able to be sold to customers.

Item – A sellable unit of inventory, usually as received from a supplier, but can be a completed “kit” comprised of many items.

Item Number – The identification number assigned to a sellable item. Also called the part number, SKU number, or SKU.

Just in Time (JIT) – An inventory reduction strategy that feeds production lines with products delivered just in time. Developed by the auto industry, it refers to shipping goods in smaller, more frequent lots.

Last in First Out (LIFO) – In inventory control and financial accounting, this refers to the practice of using stock from inventory on the basis of what was received last is consumed first. 

Last Mile – The final leg of a commercial delivery for which the carrier completes delivery to the recipient.

Lead Time – The total time that elapses between an order’s placement and its receipt. It includes the time required for order transmittal, order processing, order preparation, and transit.

Less Than Truckload (LTL) – A term referring to trucking companies that transport smaller (less than truckload) shipments of freight.

Line – The products in an order that share the same SKU or UPC number.

Lot – A production run or batch that can be isolated.

Manifest– A document that contains information about every order that’s transported within a shipment.

Packing – The process of preparing a container for shipment.

Packing List – A document confirming the actual shipment of goods on a line-item basis.

Pallet – The platform on which goods are placed for storage in a warehouse and for transportation.

Pallet In Pallet Out (PIPO) – The receiving, storing, and shipping of complete pallets without altering them.

Parcel Shipment – Small packages that are usually low weight and delivered to the final recipient.  These are often ecommerce D2C orders.

Physical Inventory – The process of counting all product in a warehouse, often referred to as “wall-to-wall” or “4-wall” inventory.

Pick Ticket– An instruction used in the warehouse that lists which products and their quantities need to be picked when processing a single order.  In most warehouses pick tickets are electronic and displayed as part of the picking software used.

Picking – The operations involved in pulling products from storage areas to complete an order.

Pick List – A list of items to be picked to fill an order.

Product List – A method of identifying a product without using a full description and are often called a SKU or Item Number.

Purchase Order (PO) – A purchase order is a document that is sent from a buyer to a supplier requesting an order for merchandise. 

Put-away – The process of storing product that has been received.

Quality Assurance (QA) – Inspection system used to ensure products meet certain customer requirements and/or government and industry regulations.

Random Location Storage – A storage technique in which received material is put away in any available space rather than a predetermined location.

Rate Shopping – The process by which shipping rates are shopped around to multiple carriers in order to find the optimal shipping solution.

Receiving – The process involving the physical receipt of goods.

Return Order – The handling of product returns by wholesale or consumers that determines if the product is resalable and if so, placing back into saleable inventory.

Replenishment – The process that involves moving stock from a secondary storage area to a fixed storage location.

Shipping – The delivery of goods or materials from one destination to another.

Stock Keeping Unit (SKU) – A category of unit with a unique combination of form, fit, and function.

Storage Location – An identifiable location in a warehouse assigned a unique address and used to store inventory.

Turret Truck – Also known as a Very Narrow Aisle (VNA) truck, these specialized pieces of equipment are used by warehouse to store and retrieve pallets of product several levels high in pallet racking.

Uniform Product Code (UPC) – UPC codes are administered by the Uniform Code Council. They identify the manufacturer as well as the item, and are included on virtually all retail packaging.

Warehouse Management System (WMS) – The software solution that keeps track of all warehouse operations including receiving, putaway, picking, packing, shipping, and inventory. 

Zone Picking – A process of order picking in which different pickers pick items for multiple orders from specific assigned storage areas.

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