Essential Supply Chain and Logistics Terminology: A Comprehensive Glossary

Introduction

In the fast-paced world of global trade and logistics, having a solid grasp of industry terminology is crucial for success. Whether you’re new to the field or a seasoned professional, staying up-to-date with the latest supply chain and logistics terms can help you communicate more effectively, make informed decisions, and streamline your operations. In this comprehensive glossary, we’ll explore essential terminology used in the logistics industry, providing clear definitions and explanations to enhance your understanding.

As a digital logistics platform, FreightAmigo recognizes the importance of knowledge in optimizing supply chain processes. By familiarizing yourself with these key terms, you’ll be better equipped to navigate the complexities of international shipping, customs procedures, and freight management. Let’s dive into the world of logistics terminology and expand our industry vocabulary.

Air Freight Terminology

Air Waybill (AWB)

An Air Waybill (AWB) is a crucial document in air freight shipping. It serves as a contract between the shipper and the airline, detailing the terms and conditions of transportation. The AWB includes essential information such as the shipper’s and consignee’s details, description of goods, quantity, weight, and special handling instructions.

Unit Load Device (ULD)

A Unit Load Device (ULD) is a container or pallet used to load luggage, freight, and mail on wide-body aircraft. ULDs allow a large quantity of cargo to be bundled into a single unit, making it easier to load, transport, and unload goods efficiently.

Ocean Freight Terminology

Bill of Lading (BOL or B/L)

A Bill of Lading is a legal document issued by a carrier to a shipper, acknowledging receipt of cargo for shipment. It serves three main functions:

• A receipt for the goods shipped
• A contract of carriage
• A document of title to the goods

The Bill of Lading is essential for international trade, as it allows the consignee to take possession of the goods upon arrival at the destination port.

TEU (Twenty-foot Equivalent Unit)

TEU is a standard unit of measurement in container shipping. One TEU represents the capacity of a standard 20-foot shipping container. This measurement is used to describe the capacity of container ships, terminals, and ports. For example, a 40-foot container is equivalent to 2 TEUs.

FCL (Full Container Load) vs. LCL (Less than Container Load)

These terms refer to different shipping methods in ocean freight:

• FCL: The shipper books an entire container for their goods, even if it’s not completely full.
• LCL: Multiple shippers share space in a single container, with each paying for only the space their goods occupy.

Understanding the difference between FCL and LCL can help shippers choose the most cost-effective option for their shipments.

Customs and Regulatory Terminology

Customs Broker

A customs broker is a licensed professional who specializes in clearing goods through customs barriers for importers and exporters. They are experts in customs regulations, duties, and documentation requirements, helping to ensure smooth and compliant international shipments.

Harmonized System (HS) Codes

HS codes are standardized numerical codes used to classify traded products. They are recognized by customs authorities worldwide and play a crucial role in determining import duties, taxes, and regulatory requirements for international shipments.

Incoterms®

Incoterms®, or International Commercial Terms, are a set of standardized trade terms published by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers in international transactions, covering aspects such as:

• Delivery of goods
• Transfer of risks
• Allocation of costs
• Customs clearance responsibilities

Common Incoterms® include EXW (Ex Works), FOB (Free on Board), and CIF (Cost, Insurance, and Freight).

Warehousing and Distribution Terminology

Cross-docking

Cross-docking is a logistics practice where products from a supplier or manufacturing plant are distributed directly to a customer or retail chain with minimal to no handling or storage time. This strategy helps reduce inventory holding costs and accelerates the shipping process.

Pick and Pack

Pick and pack refers to the warehouse process of selecting items from inventory (picking) and packaging them for shipment (packing). This process is crucial for eCommerce fulfillment and efficient order processing.

SKU (Stock Keeping Unit)

An SKU is a unique identifier for each distinct product and service that can be purchased. SKUs are essential for inventory management, allowing businesses to track stock levels, sales, and reorder points accurately.

Transportation and Delivery Terminology

Intermodal Transportation

Intermodal transportation refers to the movement of cargo using multiple modes of transportation (e.g., truck, rail, ship) without handling the freight itself when changing modes. This approach can offer cost savings and increased efficiency for long-distance freight transportation.

Last Mile Delivery

Last mile delivery is the final step of the delivery process from a distribution center or facility to the end user. It’s often the most expensive and time-consuming part of the shipping process, especially in urban areas with traffic congestion and limited parking.

Detention and Demurrage

These are charges applied in shipping when cargo or equipment is not moved within the agreed-upon time frame:

• Detention: Charges for holding a container or trailer beyond the allowed free time at a location outside the port or terminal.
• Demurrage: Charges for keeping cargo in a terminal or port beyond the allowed free time.

Supply Chain Management Terminology

Just-in-Time (JIT) Inventory

JIT is an inventory management strategy where materials, goods, and labor are scheduled to arrive or be replenished exactly when needed in the production process. This approach aims to reduce inventory costs and improve efficiency.

Reverse Logistics

Reverse logistics refers to the process of moving goods from their typical final destination back to the originator for the purpose of capturing value or proper disposal. This includes handling product returns, recycling, and refurbishment.

Supply Chain Visibility

Supply chain visibility refers to the ability to track parts, components, or products in transit from manufacturer to final destination. It provides insights into supply chain operations, helping businesses make informed decisions and respond quickly to disruptions.

Technology and Digital Solutions in Logistics

Digital Platform

A digital platform in logistics refers to an integrated system that connects various stakeholders in the supply chain, enabling seamless communication, data sharing, and process automation. FreightAmigo’s Digital Logistics Platform exemplifies this concept, offering a comprehensive suite of tools for freight management, customs clearance, and supply chain optimization.

Internet of Things (IoT) in Logistics

IoT in logistics involves the use of connected devices and sensors to collect and transmit data about shipments, inventory, and equipment. This technology enables real-time tracking, condition monitoring, and predictive maintenance in supply chain operations.

Blockchain in Supply Chain

Blockchain technology is being explored in supply chain management to enhance transparency, traceability, and security. It can provide an immutable record of transactions and movements throughout the supply chain, potentially reducing fraud and improving efficiency.

Financial and Insurance Terminology in Logistics

Cargo Insurance

Cargo insurance provides protection against physical loss or damage to freight during shipping. It’s an essential consideration for businesses engaged in international trade, as it helps mitigate the risks associated with transporting goods across long distances and multiple modes of transportation.

Letter of Credit

A letter of credit is a document from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. In international trade, letters of credit are often used to ensure that payment will be made as long as the terms and conditions stated in the document have been met.

Freight Forwarder

A freight forwarder is an intermediary who arranges the shipment of goods on behalf of shippers. They handle various aspects of the logistics process, including:

• Booking cargo space
• Negotiating freight charges
• Preparing shipping documents
• Tracking shipments
• Arranging insurance and customs clearance

Conclusion

As we’ve explored in this comprehensive glossary, the world of supply chain and logistics is rich with specialized terminology. Understanding these key concepts is crucial for anyone involved in international trade, freight management, or supply chain operations. By familiarizing yourself with this industry vocabulary, you’ll be better equipped to navigate the complexities of global logistics and make informed decisions for your business.

At FreightAmigo, we’re committed to not only providing cutting-edge digital logistics solutions but also empowering our clients with knowledge and insights. Our Digital Logistics Platform is designed to streamline your freight operations, offering tools for quote comparison, shipment tracking, customs clearance, and more – all while leveraging the latest industry best practices and terminologies we’ve discussed.

As the logistics landscape continues to evolve, staying informed about industry terms and concepts will remain crucial. We encourage you to bookmark this glossary as a reference and continue expanding your knowledge of supply chain management. Remember, in the world of global trade, knowledge truly is power – and the key to optimizing your logistics operations.

If you have any questions about the terms we’ve covered or how FreightAmigo’s Digital Logistics Platform can help streamline your supply chain processes, don’t hesitate to reach out to our team of experts. We’re here to support your logistics journey every step of the way.