Glossary of Inventory Management and Warehouse Operation Terms

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Allocation: allocation of available inventory to customer and production orders

Audit: The inspection and examination of a process or quality system to ensure compliance to requirements. An audit can apply to an entire organization or may be specific to a function, process or production step.

Audit Trail: Manual or computerized tracing of the transactions affecting the contents or origin of a record.

Auditing: Determining the correct transportation charges due the carrier: auditing involves checking the accuracy of the freight bill for errors, correct rate, and weight.

Available Inventory: The on-hand inventory balance minus allocations, reservations, backorders, and (usually) quantities held for quality problems. Often called “beginning available balance". Synonyms: Beginning Available Balance, Net Inventory

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Backhaul: The process of a transportation vehicle returning from the original destination point to the point of origin. The 1980 Motor Carrier Act deregulated interstate commercial trucking and thereby allowed carriers to contract for the return trip. The backhaul can be with a full, partial, or empty load. An empty backhaul is called deadheading. Also see: Deadhead

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. A popular example is the UPC code used on retail packaging.

Bar code scanner: A device to read bar codes and communicate data to computer systems.

Batch Number: A sequence number associated with a specific batch or production run of products and used for tracking purposes. Synonym: Lot Number

Batch Picking: A method of picking orders in which order requirements are aggregated by product across orders to reduce movement to and from product locations. The aggregated quantities of each product are then transported to a common area where the individual orders are constructed. Also See: Discrete Order Picking, Order Picking, Zone Picking

Batch Processing: A computer term which refers to the processing of computer information after it has been accumulated in one group, or batch. This is the opposite of “real-time” processing where transactions are processed in their entirety as they occur.

Bill of Lading (BOL): A transportation document that is the contract of carriage containing the terms and conditions between the shipper and carrier.

Bookings: The sum of the value of all orders received (but not necessarily shipped), net of all discounts, coupons, allowances, and rebates.

Broker: An intermediary between the shipper and the carrier. The broker arranges transportation for shippers and represents carriers.

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Carrier: A firm which transports goods or people via land, sea or air

Certificate of origin: An international business document that certifies the country of origin of the shipment.

Chock: A wedge, usually made of hard rubber or steel, that is firmly placed under the wheel of a trailer, truck, or boxcar to stop it from rolling.

Class I Carrier: A classification of regulated carriers based upon annual operating revenues—motor carriers of property: > or = $5 million; railroads: > or =$50 million; motor carriers of passengers: > or =$3 million.

Class II Carrier: A classification of regulated carriers based upon annual operating revenues—motor carriers of property: $1-$5 million; railroads: $10-$50 million; motor carriers of passengers: < or = $3 million.

Class III Carrier: A classification of regulated carriers based upon annual operating revenues—motor carriers of property: < or = $1 million; railroads: < or = $10 million.

Commercial Invoice: A document created by the seller. It is an official document which is used to indicate, among other things, the name and address of the buyer and seller, the product(s) being shipped, and their value for customs, insurance, or other purposes.

Confirmation: With regards to EDI, a formal notice (by message or code) from a electronic mailbox system or EDI server indicating that a message sent to a trading partner has reached its intended mailbox or been retrieved by the addressee.

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.

Container: 1) A “box,” typically 10 to 40 feet long, which is primarily used for ocean freight shipments. For travel to and from ports, containers are loaded onto truck chassis or on railroad flatcars. 2) The packaging, such as a carton, case, box, bucket, drum, bin, bottle, bundle, or bag, that an item is packed and shipped in.

Cross Docking: A distribution system in which merchandise received at the warehouse or distribution center is not put away, but instead is readied for shipment to retail stores. Cross docking requires close synchronization of all inbound and outbound shipment movements. By eliminating the put-away, storage and selection operations, it can significantly reduce distribution costs.

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Deadhead: The return of an empty transportation container to its point of origin. See: backhauling

Disaster Recovery Planning: Contingency planning specifically related to recovering hardware and software (e.g. data centers, application software, operations, personnel, telecommunications) in information system outages.

Discrete Order Picking: A method of picking orders in which the items on one order are picked before the next order is picked. Also see: Batch Picking, Order Picking, Zone Picking

Dispatching: The carrier activities involved with controlling equipment; involves arranging for fuel, drivers, crews, equipment, and terminal space.

Distribution: Outbound logistics, from the end of the production line to the end user. 1) The activities associated with the movement of material, usually finished goods or service parts, from the manufacturer to the customer. These activities encompass the functions of transportation, warehousing, inventory control, material handling, order administration, site and location analysis, industrial packaging, data processing, and the communications network necessary for effective management. It includes all activities related to physical distribution, as well as the return of goods to the manufacturer. In many cases, this movement is made through one or more levels of field warehouses. Synonym: Physical Distribution. 2) The systematic division of a whole into discrete parts having distinctive characteristics.

Distribution Center (DC): The warehouse facility which holds inventory from manufacturing pending distribution to the appropriate stores.

Drayage: Transportation of materials and freight on a local basis, but intermodal freight carriage may also be referred to as drayage.

Driving Time Regulations: Rules administered by the U.S. Department of Transportation that limit the maximum time a driver may drive in interstate commerce; both daily and weekly maximums are prescribed.

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EDI Standards: Criteria that define the data content and format requirements for specific business transactions (e.g. purchase orders). Using standard formats allows companies to exchange transactions with multiple trading partners easily. Also see: American National Standards Institute, GS1 Group

EDI Transmission: A functional group of one or more EDI transactions that are sent to the same location, in the same transmission, and are identified by a functional group header and trailer.

Electronic Data Interchange (EDI):Intercompany, computer-to-computer transmission of business information in a standard format. For EDI purists, "computer-to-computer" means direct transmission from the originating application program to the receiving, or processing, application program. An EDI transmission consists only of business data, not any accompanying verbiage or free-form messages. Purists might also contend that a standard format is one that is approved by a national or international standards organization, as opposed to formats developed by industry groups or companies.

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FIFO: First in first out

Forklift truck: A machine-powered device that is used to raise and lower freight and to move freight to different warehouse locations.

Freight Carriers: Companies that haul freight, also called "for-hire" carriers. Methods of transportation include trucking, railroads, airlines, and sea borne shipping.

Freight Charge: The rate established for transporting freight.

Freight Collect: The freight and charges to be paid by the consignee.

Freight Prepaid: The freight and charges to be paid by the consignor.

Fronthaul: The first leg of the truck trip that involves hauling a load or several loads to targeted destinations

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Global Positioning System (GPS): A system which uses satellites to precisely locate an object on earth. Used by trucking companies to locate over-the-road equipment.

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Interchange: In EDI, the exchange of electronic information between companies. Also, the group of transaction sets transmitted from one sender to one receiver at one time. Delineated by interchange control segments.

Inventory: Raw materials, work in process, finished goods and supplies required for creation of a company's goods and services; The number of units and/or value of the stock of goods held by a company.

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Last In, First Out (LIFO): Accounting method of valuing inventory that assumes latest goods purchased are first goods used during accounting period.

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.

Lift truck: Vehicles used to lift, move, stack, rack, or otherwise manipulate loads. Material handling people use a lot of terms to describe lift trucks, some terms describe specific types of vehicles, others are slang terms or trade names that people often mistakenly use to describe trucks. Terms include industrial truck, forklift, reach truck, motorized pallet trucks, turret trucks, counterbalanced forklift, walkie, rider, walkie rider, walkie stacker, straddle lift, side loader, order pickers, high lift, cherry picker, Jeep, Towmotor, Yale, Crown, Hyster, Raymond, Clark, Drexel.

Logbook: A daily record of the hours an interstate driver spends driving, off, duty, sleeping in the berth, or on duty but not driving.

Logistics: The process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. This definition includes inbound, outbound, internal, and external movements.

Lot Number: See batch number

Lumping: A term applied to a person who assists a motor carrier owner-operator in the loading and unloading of property: quite commonly used in the food industry.

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Material Safety Data Sheet (MSDS): A document that is part of the materials information system and accompanies the product. Prepared by the manufacturer, the MSDS provides information regarding the safety and chemical properties and (if necessary) the long-term storage, handling, and disposal of the product. Among other factors, the MSDS describes the hazardous components of a product; how to treat leaks, spills, and fires; and how to treat improper human contact with the product.

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Net Weight: The weight of the merchandise, unpacked, exclusive of any containers.

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Order Management: The planning, directing, monitoring, and controlling of the processes related to customer orders, manufacturing orders, and purchase orders. Regarding customer orders, order management includes order promising, order entry, order pick, pack and ship, billing, and reconciliation of the customer account. Regarding manufacturing orders, order management includes order release, routing, manufacture, monitoring, and receipt into stores or finished goods inventories. Regarding purchasing orders, order management includes order placement, monitoring, receiving, acceptance, and payment of supplier.

Order Picking: Selecting or “picking” the required quantity of specific products for movement to a packaging area (usually in response to one or more shipping orders) and documenting that the material was moved from one location to shipping.

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Picking: The operations involved in pulling products from storage areas to complete a customer order.

Pro Number: Any progressive or serialized number applied for identification of freight bills, bills of lading, etc.

Public Warehouse: A business that provides short or long-term storage to a variety of businesses usually on a month-to-month basis. A public warehouse will generally use their own equipment and staff however agreements may be made where the client either buys or subsidizes equipment. Public warehouse fees are usually a combination of storage fees (per pallet or actual square footage) and transaction fees (inbound and outbound). Public warehouses are most often used to supplement space requirements of a private warehouse.

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Rack: A storage device for handling material in pallets. A rack usually provides storage for pallets arranged in vertical sections with one or more pallets to a tier. Some racks accommodate more than one-pallet-deep storage. Some racks are static, meaning that the rack contents remain in a fixed position until physically moved. Some racks are designed with a sloped shelf to allow products to “flow” down as product in the front is removed. Replenishment of product on a flow rack may be from the rear, or the front in a “push back” manner.

Receiving: The function encompassing the physical receipt of material, the inspection of the incoming shipment for conformance with the purchase order (quantity and damage), the identification and delivery to destination, and the preparation of receiving reports.

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Shipping: The function that performs tasks for the outgoing shipment of parts, components, and products. It includes packaging, marking, weighing, and loading for shipment.

Staging: 1) Pulling material for an order from inventory before the material is required. Staging is a means to ensure that all required materials are and will be available for use at time of assembly. The downside to staging is that it creates additional WIP inventory and reduces flexibility. 2) Placing trailers.

Standard Carrier Alpha Code (SCAC/SCAC Code): A unique 2 to 4-letter code assigned to transportation companies for identification purposes. SCAC codes are required for EDI, and are printed on bills of lading and other transportation documents.

Stock Keeping Unit (SKU): A category of unit with unique combination of form, fit, and function (i.e. unique components held in stock). To illustrate: If two items are indistinguishable to the customer, or if any distinguishing characteristics visible to the customer are not important to the customer, so that the customer believes the two items to be the same, these two items are part of the same SKU. As a further illustration consider a computer company that allows customers to configure a product from a standard catalogue components, choosing from three keyboards, three monitors, and three CPUs. Customers may also individually buy keyboards, monitors, and CPUs. If the stock were held at the configuration component level, the company would have nine SKUs. If the company stocks at the component level, as well as at the configured product level, the company would have 36 SKUs. (9 component SKUs + 3*3*3 configured product SKUs. If as part of a promotional campaign the company also specially packaged the products, the company would have a total of 72 SKUs.

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Tare Weight: The weight of a substance, obtained by deducting the weight of the empty container from the gross weight of the full container.

Third-Party Logistics (3PL): Outsourcing all or much of a company’s logistics operations to a specialized company. The term "3PL" was first used in the early 1970s to identify intermodal marketing companies (IMCs) in transportation contracts. Up to that point, contracts for transportation had featured only two parties, the shipper and the carrier. When IMCs entered the picture—as intermediaries that accepted shipments from the shippers and tendered them to the rail carriers—they became the third party to the contract, the 3PL. But over the years, that definition has broadened to the point where these days, every company that offers some kind of logistics service for hire calls itself a 3PL

Third Party Logistics Provider: A firm which provides multiple logistics services for use by customers. Preferably, these services are integrated, or "bundled" together by the provider. These firms facilitate the movement of parts and materials from suppliers to manufacturers, and finished products from manufacturers to distributors and retailers. Among the services which they provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding.

Third-Party Warehousing: The outsourcing of the warehousing function by the seller of the goods.

Traceability: 1) The attribute allowing the ongoing location of a shipment to be determined. 2) The registering and tracking of parts, processes, and materials used in production, by lot or serial number.

Truckload Carriers (TL): Trucking companies, which move full truckloads of freight directly from the point of origin to destination.

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Warehouse: Storage place for products. Principal warehouse activities include receipt of product, storage, shipment, and order picking.

Warehousing: The storing (holding) of goods.

Warehouse Management System (WMS):The systems used in effectively manageing wareahouse business processes and diret warehouse activities, including receeving, putaway, picking, shipping, and inventroy cycle counts. Also includes support of radio-frequency communications, allowing realtime data transfer between the system and warehouse personnel. They also maximize space and minimize material handling by automating putaway prrocesses