Glossary: Supply Chain & Logistics
Supply chain & logistics glossary.
Terms used in warehousing, fulfilment, shipping, and end-to-end supply chain operations, as they function in real logistics environments.
12 terms in this category
3PL (Third-Party Logistics)
- Definition
- External provider handling warehousing, fulfilment, and shipping on behalf of a seller.
- Operator context
- 3PLs vary from basic pick-and-pack to full inventory management. Evaluate on accuracy, speed, tech integration, and scalability, not just price. Hidden fees are common.
FBA (Fulfilment by Amazon)
- Definition
- Amazon stores, picks, packs, and ships your products. Handles returns and customer service.
- Operator context
- FBA unlocks Prime badge and Buy Box advantages but adds significant fees. Inventory limits, long-term storage fees, and commingling risks require active management.
FBM (Fulfilled by Merchant)
- Definition
- Seller handles all fulfilment directly or through a 3PL, not Amazon.
- Operator context
- FBM offers more control and often lower fees for slow-moving or oversized items. Requires Seller Fulfilled Prime or strong delivery metrics to compete for Buy Box.
SKU (Stock Keeping Unit)
- Definition
- Unique identifier for a specific product variant.
- Operator context
- One product may have multiple SKUs (size, colour, bundle). Consistent SKU naming conventions prevent inventory chaos. Platform SKUs may differ from internal SKUs.
Pick and Pack
- Definition
- The process of selecting items from inventory (picking) and preparing them for shipment (packing).
- Operator context
- Pick-and-pack efficiency drives fulfilment cost. Errors here cause returns, negative reviews, and customer service load. Measure pick accuracy, not just speed.
Inbound Shipment
- Definition
- Movement of goods from suppliers or manufacturers to your warehouse or fulfilment centre.
- Operator context
- Inbound logistics costs are often underestimated. Include freight, customs, drayage, unloading, and receiving labour in landed cost calculations.
Outbound Shipment
- Definition
- Movement of goods from your fulfilment location to end customers.
- Operator context
- Outbound cost is visible and customer-facing. Late delivery and damaged goods have direct impact on reviews and repeat purchase rates.
Safety Stock
- Definition
- Extra inventory held to prevent stockouts from demand variability or supply delays.
- Operator context
- Safety stock = buffer against uncertainty. Too little risks stockouts; too much ties up capital. Calculate based on lead time variability and demand volatility, not gut feel.
Reorder Point (ROP)
- Definition
- Inventory level that triggers a new purchase order.
- Operator context
- ROP = (average daily sales × lead time) + safety stock. Set ROP too high and you overstock; too low and you stockout. Revisit quarterly or when demand patterns shift.
Inventory Velocity
- Definition
- Rate at which a product sells. High velocity = fast-moving inventory.
- Operator context
- Velocity affects storage fees, cash flow, and reorder frequency. Slow-moving SKUs tie up capital and warehouse space. Regular velocity analysis informs discontinuation decisions.
Drayage
- Definition
- Short-distance transport of shipping containers, typically from port to warehouse.
- Operator context
- Drayage costs are often overlooked in freight quotes. Port congestion and chassis shortages can cause delays and demurrage charges.
Demurrage
- Definition
- Charges for leaving a container at the port beyond the free time allowed.
- Operator context
- Demurrage accrues daily and can exceed the freight cost. Coordinate port pickup with warehouse receiving capacity to avoid surprises.