E-Store and Fulfillment Services Terminology

16 Sep

Last week we looked at the types of terminology one might see on a sales quote for e-store and fulfillment services. Here are some other terms you may run into as you move forward with a fulfillment services provider.

Assembly
Assembly can include combining multiple products into an individual sku, labeling products, pre-packaging items into inventory, etc. One purpose of assembly is to avoid higher costs experienced when items ship out individually.

Backorder
A backorder is a status designation used to refer to orders when there is insufficient inventory to ship the order in its entirety. Depending on the fulfillment service provider, orders may be split so that the portion of the order with sufficient inventory is shipped, or the order may be held in its entirety until the backordered inventory is received.

Batch/Pick Batch
A batch is a designation assigned to a group of orders that are being processed and prepared for shipping. Batches can be assigned based on the items being picked, by client, by the physical location of the product, or by the shipping methods.

Bin
A bin is sometimes referred to as an “internal sku.” Fulfillment companies will use their own method to identify a product. Often fulfillment clients will use generic skus such as “1000” to identify their products. Because fulfillment companies use their own stock management system, they are able to keep inventory organized, regardless of the sku that the client uses.

BOL (Bill Of Lading)
Freight companies issue bills of lading as an acknowledgement that goods have been placed upon a transportation vehicle for delivery. They will include a weight, number of pallets, and the freight class.

Brokerage Fees
Carriers charge brokerage fees when parcels entering international destinations pass through customs.

Call Center
Call centers provide telephone support for customer service, order entry, and returns. Remote call centers are often utilized by companies that do not have the capacity to handle this on their own. Some fulfillment companies will provide call center services to their clients.

Carrier/Shipping Carrier
This term describes the transportation company that delivers your product to the end customer.

Carrier Service
This phrase refers to the transportation method selected for delivery. Varieties include Next Day, 3 Day, 2 Day, Ground Residential, Ground Commercial, and several others.

Declared Value/Customs Value
This is the value associated with replacing your item. For international orders, this value is also used to determine fees associated with brokerage, taxes, and duties.

Dock to Shelf
This terms describes the amount of time between the inventory arriving in the receiving department of a fulfillment operation and placed on the shelving system ready to be picked and packed.

FIFO (First In, First Out)
FIFO is a stock management technique used to prevent inventory spoilage. Typically, FIFO is used in regard to inventory that consists of goods with an expiration date.

Flat-rate Shipping
Flat-rate shipping is where you pay a fixed cost based on some simple logic, as opposed to paying shipping rates that are very unpredictable. Sample flat-rate logic would be $12.00 for a Next Day delivery package up to two pounds, regardless of destination.

FOB – Freight On Board/Free On Board
A shipping term which indicates that the supplier pays the shipping costs (and usually also the insurance costs) from the point of manufacture to a specified destination, at which point the buyer takes responsibility.

Inventory Adjustment
An inventory adjustment is made automatically when items are received, and when orders are entered. Manual inventory adjustments can be made when a shelf count is requested. These adjustments are made to accurately present the perpetual inventory counts.

LTL (Less Than Truck Load)
This term refers to deliveries made via Freight.

Merchant Account
A merchant account is an account that is set up with a bank in order to process credit card transactions. A merchant account links to a bank account, typically a business checking account, to which merchant funds are deposited or withdrawn.

Order Entry
The act of entering an order into an inventory/order management system. There are numerous ways to enter orders into this system. Manual entry of orders is a simple way to enter individual orders at a time. File upload is a more efficient method for entering orders.

Order Fulfillment Services
The act of physically managing inventory, and shipping that inventory to the end customer. Typically used in reference to a third party fulfillment provider.

Order Invoice
Invoices that are shipped with orders. Similar to packing lists, although these include payment details.

Package Processing
Package processing is a term used to describe the steps involved in picking an order, packing the order, and creating the shipping label. There are a number of methods for producing the shipping label. Traditional pick and pack involves picking the order from a packing list, and then sending it to have the package weighed, and the label then being printed. This is opposed to the batch process method, in which the shipping label is printed first, and the order is assembled based on the information printed on the label itself.

Packing List/Pick List/Pick Ticket
Certain fulfillment clients will require packing lists to be delivered with the products. The packing list shows the contents of the order, the company that sold the product, and often, return instructions, and coupons towards future purchases. Packing lists do not include any pricing details of the product, nor purchase information. Packing lists are often confused with Order Invoices.

Pallet
Pallets are used for LTL and freight shipments. The industry standard for a pallet is 4’x4’x4′. Pallets are sometimes used as a way to estimate storage fees.

Payment Gateway
A payment gateway is an online system for processing credit card or other payment transactions in real time. A payment gateway is typically linked to a merchant account. The payment gateway facilitates the coordination of communicating a payment transaction between the various back end payment networks or banks.

Per Item Fee
Per item fees are charged by order fulfillment houses to cover the labor involved in traveling between different product locations, and the additional labor required to pack those multiple items.

Per Order Fee
Per order fees are generally charged by fulfillment service providers. This fee will often include a packaging fee. This covers the expense of the set up of the order, and the time it takes to pick, pack, and ship the order. This is often coupled with a per item fee.

Perpetual Inventory Counts
Perpetual inventory is the number that represents the count of inventory, considering orders that have been shipped, are in process, and backorders. This can be thought of as the “available inventory.” This number will only match actual inventory count if there are no pending or in process orders.

Pick and Pack
The process by which a fulfillment company will locate the contents of an order, and assemble them into packaging for shipment.

Receiving
When a fulfillment client issues a purchase order to stock a warehouse, the products must be inventoried, labeled if needed, assigned a bin location, and the system updated to reflect the change in inventory. It is highly preferred to have packing lists for these inventory deliveries, as a packing list will make the receiving process more efficient.

Returns Processing
When an end customer elects to return a product, or when a package is undeliverable, it is returned to the shipper. This package is then opened, and contents inspected to determine if the inventory has been used, or is salvageable. The information is entered back into an inventory control system.

RMA
Returned Merchandise Authorization. This is a unique number that is provided by manufacturers that indicates an end customer has been authorized by a company representative to return a product to the manufacturer for repair or refund. An RMA is similar to a tracking number in that it identifies a transaction, and both parties can get information on the progress of the transaction by using the RMA.

Shelf Count/Physical Count
This is requested when a client or a fulfillment center suspects that inventory counts are incorrect. The fulfillment company will then physically count all of the inventory for a given sku.

SKU
Stock Keeping Unit. This is used to identify an individual product. Often a unique SKU is used for each color and/or size.

Storage Fees
Fulfillment companies charge fees associated with the receiving, inventory and warehousing of a client’s goods. These fees will vary greatly by fulfillment company, and range from calculations based on actual dimensional storage requirements, to per-item fees, to per-pallet fees. Many fulfillment companies will also include their administrative fees within the storage fee.

Storage Insurance
This is the insurance that covers a client’s inventory when it is under the care and custody of another party. At a minimum, this insurance should cover theft, fire damage, and natural disasters. Storage insurance policies vary by fulfillment company. Often fulfillment companies will require you to carry your own policy to cover your inventory. Other times, fulfillment companies may hold an umbrella policy to partially insure your items.

Mediascope can answer your questions about fulfillment and e-store services. Give us a call today at 1-888-644-0844. We specialize in the special touches that will set your company apart from everyone else!

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One Response to “E-Store and Fulfillment Services Terminology”

  1. John Krech September 17, 2010 at 1:25 pm #

    Great list – I would also add Order Quantity and Reorder Point as they are key to keeping the right amount of inventory in any e-store. Without the proper inventory order management tools, an e-store could suffer shortages that prevent fullfillment as well as suffering from excess inventory that could go obsolete, get damaged, or just plain drain company performance.

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