The top shipping terms you need to know: A glossary from A to Z

4PL

Fourth-party logistics provider, which manages the entire supply chain on behalf of a company, including selecting and managing third-party logistics providers.

Bill of lading (BOL)

A legal document issued by a carrier to acknowledge receipt of goods for shipment and outline the terms of the transportation agreement.

Carriage and insurance paid to (CIP)

The seller delivers the goods to the carrier or another person nominated by the seller at an agreed-upon location. The seller must contract for and pay the costs of carriage necessary to bring the goods to the named destination.

Carriage paid to (CPT)

The seller delivers the goods to the carrier or another person nominated by the seller at an agreed-upon location. The risk of loss or damage is transferred to the buyer upon delivery to the carrier.

Carrier tracking number

A unique identifier assigned to a shipment by the shipping carrier, allowing customers to track the status and location of their package during transit.

Cartonization

The process of determining the most efficient way to pack products into shipping containers or cartons to minimize wasted space and reduce shipping costs.

Cost and freight (CFR)

The seller pays the costs and freight necessary to bring the goods to the named port of destination but the risk of loss or damage is transferred to the buyer once the goods pass the ship's rail.

Cost, insurance, and freight (CIF)

The seller delivers the goods on board the vessel or procures the goods already so delivered. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

Cross-docking

A logistics strategy where incoming goods are directly transferred from inbound to outbound transportation without being stored in a warehouse or fulfillment center.

Customs clearance

The process of preparing and submitting documentation to customs authorities to facilitate the import or export of goods.

Cycle time

The total time required to complete a process or task, from initiation to completion.

Delivery duty paid (DDP)

The seller is responsible for delivering the goods to the named place in the buyer's country, and for paying all costs, including duties, taxes, and customs clearance.

Demand forecasting

The process of estimating future customer demand for products or services based on historical data, market trends, and other factors.

Dimensional weight

A pricing technique used by shipping carriers to calculate the cost of shipping based on the size and weight of a package, whichever is greater.

Distribution center

A facility used for receiving, storing, and distributing goods to customers or other facilities.

Drop zone

A designated area within a warehouse or fulfillment center where incoming shipments are temporarily stored before being processed and put away.

Drop-off location

A designated location where customers can drop off their packages for shipping, such as a post office, shipping store, or designated carrier drop-off point.

Dropshipping

A retail fulfillment method where the seller does not keep products in stock but instead transfers customer orders and shipment details to a manufacturer or wholesaler.

Duty

A tax imposed by a government on imported or exported goods, typically based on the value or quantity of the goods.

E-commerce

Commercial transactions conducted electronically over the internet, typically involving the buying and selling of goods and services online.

E-commerce fulfillment

The process of receiving, processing, and delivering online orders to customers, often involving order picking, packing, and shipping from a fulfillment center.

E-commerce platform

A digital platform or website that facilitates online buying and selling of goods and services, often including features for product listings, shopping carts, and payments.

Expedited shipping

Shipping services that guarantee faster delivery times than standard shipping options, often at a higher cost.

Free on board (FOB)

The seller fulfills their obligation to deliver when the goods have passed over the ship's rail at the named port of shipment. The buyer bears all costs and risks from that point onwards.

Freight broker

An intermediary that connects shippers with carriers to arrange transportation services.

Freight class

A standardized classification system used to categorize goods based on their density, stowability, handling, and liability.

Freight forwarder

A company that specializes in arranging the transportation of goods from the manufacturer to the final destination, often handling customs clearance and documentation.

Fulfillment center

A warehouse facility used to store, pick, pack, and ship products for e-commerce businesses.

Full truckload (FTL)

A shipment that fills an entire truck, typically used for large quantities of goods going to a single destination.

Integrated logistics

A comprehensive approach to managing the entire supply chain as a unified process, integrating various functions such as transportation, warehousing, and inventory management.

Inventory forecasting

The process of predicting future demand for products based on historical data, market trends, and other factors.

Inventory management

The process of overseeing and controlling the flow of goods into and out of a warehouse or fulfillment center.

Inventory planning

The process of determining optimal inventory levels and replenishment strategies to meet customer demand while minimizing costs and stockouts.

Inventory turnover

A measure of how quickly a company sells its inventory within a specific period, calculated by dividing the cost of goods sold by the average inventory value.

Just in time (JIT)

An inventory management strategy that aims to minimize inventory holding costs by receiving and producing goods only as needed for production or customer orders.

Kitting

The process of assembling individual items or components into kits or packages to fulfill specific orders or customer requirements.

Landed cost

The total cost of importing goods into a country, including the purchase price, shipping costs, customs duties, taxes, and other fees.

Last in, first out (LIFO)

An inventory valuation method where the most recently acquired inventory is assumed to be sold first, often used for tax purposes and in industries with perishable goods.

Last-mile delivery

The final stage of the delivery process, involving the transportation of goods from a distribution center or hub to the customer's doorstep.

Lead time

The amount of time it takes for a product to be delivered from the supplier to the customer, including order processing, production, and transportation.

Less than truckload (LTL)

A shipment that does not require a full truck and is combined with other shipments to fill the truck, typically used for smaller quantities of goods.

Logistics service provider

A company that offers logistics services such as transportation, warehousing, inventory management, and order fulfillment to other businesses.

Multi-channel fulfillment

The capability to fulfill orders from multiple sales channels, such as online marketplaces, retail stores, and direct-to-consumer sales.

Omnichannel fulfillment

A fulfillment strategy that integrates multiple sales channels (e.g., online, brick-and-mortar stores) to provide customers with a seamless shopping experience.

On-time delivery (OTD)

A performance metric that measures the percentage of shipments delivered within the agreed-upon timeframe.

Order fulfillment

The process of receiving, processing, and delivering customer orders, including picking, packing, and shipping.

Order processing

The steps involved in receiving, validating, and fulfilling customer orders, including order entry, inventory allocation, and shipment preparation.

Order tracking

The ability for customers to monitor the status and location of their orders in real-time from placement to delivery.

Outbound logistics

The process of managing and executing the movement of goods from a warehouse or distribution center to the end customer, including transportation and delivery.

Packing slip or packing list

A document included with a shipment that itemizes the contents of the package and may also include order details, such as the customer's name and address.

Palletization

The process of stacking and securing goods onto pallets for efficient handling and transportation.

Pick and pack

The process of selecting items from inventory (picking) and packing them into containers or boxes for shipment (packing), often done in a fulfillment center.

Proof of delivery (POD)

A document or electronic record that confirms delivery of a shipment to its intended recipient.

Purchase order (PO)

A commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer.

Quality control (QC)

The process of ensuring that products or services meet specified quality standards and requirements through inspection, testing, and corrective actions.

Return merchandise authorization (RMA)

A process used to manage product returns, where customers request authorization to return an item and receive instructions on how to do so.

Reverse auction

A procurement method where multiple suppliers compete to win business by bidding downward on the price of goods or services.

Reverse logistics

The process of managing product returns, exchanges, refurbishment, and disposal, often involving the movement of goods from the end customer back to the manufacturer or retailer.

Section 321

A provision in the U.S. customs regulations that exempts low-value shipments (under $800) from certain duties and taxes, facilitating faster clearance through customs.

Self-fulfillment/in-house fulfillment

The process of a company managing its own order fulfillment operations internally, without outsourcing to third-party providers.

Shipment consolidation

The practice of combining multiple smaller shipments into a single larger shipment to reduce transportation costs.

Shipping carrier

Companies that transport goods from one location to another, such as UPS, FedEx, DHL, and USPS.

Shipping label

A label affixed to a package that includes information such as the recipient's address, sender's address, tracking number, and shipping service used.

Stock keeping unit (SKU)

A unique identifier assigned to each distinct product or item in inventory for tracking purposes.

Supply chain management (SCM)

The strategic coordination of all activities involved in the sourcing, production, and distribution of goods to meet customer demand.

Supply chain visibility

The ability to track and monitor the movement of goods throughout the entire supply chain, providing real-time information on inventory levels, order status, and shipment tracking.

Tariff

A tax or duty imposed on imported goods by a government, often used to protect domestic industries or generate revenue.

Third party warehouse

A warehouse operated by a third-party logistics provider (3PL) that offers storage, distribution, and other logistics services to businesses on a contractual basis.

Third-party logistics (3PL)

Companies that provide outsourced logistics services, including transportation, warehousing, fulfillment, and distribution.

Total average inventory

The total quantity of inventory on hand, including both on-hand inventory and safety stock, averaged over a specific period.

Transit time

The amount of time it takes for a shipment to travel from the point of origin to the final destination.

Unit cost

The cost incurred to produce or acquire one unit of a product, calculated by dividing the total cost of production by the number of units produced.

Value added services

Additional services provided beyond basic warehousing and transportation, such as kitting, labeling, packaging, assembly, and customization.

Warehouse management system (WMS)

Software used to manage and control warehouse operations, including inventory management, order processing, and shipping.

White-glove delivery

A premium delivery service that includes extra care, attention to detail, and specialized handling, often used for high-value or delicate items.

White-label shipping

A shipping service offered by a logistics provider under the branding of another company, allowing the company to offer shipping services without developing its own infrastructure.