Fulfillment Glossary

A 1PL is a manufacturer that transports its own goods. When a company handles its own warehousing and shipping, that’s first-party logistics or 1PL.

Second-party logistics or 2PL is transport and shipping, such as trucking, container freight, etc.

Third-party logistics (3PL) is order fulfillment provided by a company that specializes in warehousing and pick and pack services. 3PLs are also called fulfillment companies, fulfillment warehouses, or fulfillment centers.

Fourth-party logistics (4PL) is a fulfillment management service. A 4PL company doesn’t have physical assets to execute fulfillment but it can help you coordinate 3PL and transport services.

A 5PL (fifth-party logistics) company is a consultant that helps manage transport. By aggregating the transportation needs of many companies, 5PLs can negotiate lower prices and better shipping terms.

Sixth-party logistics (6PL) helps companies run greener supply chains. Brands that want to improve their ESG ratings can use a 6PL to improve renewability and equity in their value chains.

A 7PL (seventh-party logistics) is a company that combines 3PL and 4PL services, providing eCommerce fulfillment plus supply chain management services.

An advance shipping notification (ASN) is a form that an eCommerce company provides to a fulfillment warehouse to give advance notice of an incoming shipment. ASNs typically include the projected date of delivery and the SKUs and amounts contained in the shipment.

When a customer places an order for an item offered for sale online, but the company can’t ship immediately, that’s a backorder. Backorders can be caused by unexpected spikes in demand, supply chain issues, shrinkage, or lack of inventory visibility and management.

BigCommerce is an eCommerce platform geared toward mid-sized to large eCommerce companies with up to $100 million in annual sales. The platform also supports multi-channel selling.

An eCommerce customer’s billing address is the address connected to their electronic payment method. You need the billing address to process their payment. The billing address is often but not always the same as the shipping address.

Black Friday is the Friday after the U.S. Thanksgiving holiday, which always falls on the fourth Thursday of November. Black Friday was traditionally the start of the holiday shopping season and online deals didn’t start till Cyber Monday, but now Black Friday is a busy day for online shopping, too.

Bubble Wrap ™ or bubble wrapping is a plastic sheet covered in small air cushions that can be used as infill to protect products during shipping.

Since the onset of the pandemic in 2020, eCommerce has seen a steep rise and carriers such as FedEx, UPS, and USPS, have struggled to keep up. During peak periods, carriers may impose limitations on how much fulfillment centers may ship per day because of a shortage of capacity.

Certified mail is a service provided by USPS that requires a signature and can provide a return receipt. Certified mail is a way to provide proof of delivery.

A clearing agent completes customs paperwork on behalf of companies that need to move products across national borders.

A clearing and forwarding agent (CFA) helps companies move products across international borders. CFAs sometimes provide temporary warehousing but don’t provide fulfillment services. A clearing agent will complete customs paperwork and a forwarding agent manages transport logistics.

Cross-docking is the process of filling orders directly from the receiving dock. As products are unloaded, warehouse associates label them for shipping and move them directly to the outbound dock without placing them on the shelves first. Cross-docking can move orders quickly during peak times and it’s particularly useful for filling backorders,

Unlike typical fulfillment processes, crowdfunding fulfillment takes place all at once, at the end of the crowdfunding campaign once the product has launched. Fulfillment is a critical element of crowdfunded launches for physical products.

Cubic foot storage is a method of billing for storage space in a fulfillment warehouse that bills for the exact amount of cubic space used throughout the month, rather than how many pallets are in the warehouse at a set time in the month. Cubic storage is calculated using product dimensions and calculating the average daily amount of storage used.

Custom packaging can refer to branded shipping boxes, infill, or tape. Custom packaging for fulfillment can also refer to special packing instructions for particular products or orders.

Cyber Monday, which falls on the Monday after the U.S. Thanksgiving holiday, is one of the busiest sales days of the year for eCommerce companies, with many brands offering special deals.

Cycle time is the time it takes to complete a supply chain process. There are various ways to measure cycle time: the time it takes from purchasing raw materials to getting paid for the finished product or the amount of time it would take to fill an order if you had no inventory on hand and had to start the manufacturing cycle from the beginning.

Delivery time is the amount of time a package takes in transit from the fulfillment center to the customer. Delivery times are affected by the number of shipping zones between the warehouse and the customer’s address, the speed of service offered by the carrier, the type of shipping service (i.e., air, ground, etc.), and delays due to weather or other disruptions.

Demand forecasts are predictions of future demand based on internal and market data. Demand forecasting is critical because it creates a blueprint for manufacturing and inventory management.

Demand planning is a process of using data to project future demand. Demand planning is the basis for good inventory management.

Shipping containers belong to the shipping lines. After a container is discharged (unloaded) from a ship, it starts accruing demurrage charges. When the container leaves the port, detention charges apply. A quick turnaround to get containers to a distribution center or fulfillment warehouse, unloaded, and back to port can avoid or reduce detention and demurrage charges.

The DIM factor is the number that a shipping company uses to calculate dimensional weight charges. The higher the DIM factor, the lower the dimensional weight charges. See dimensional weight for a full explanation of this pricing method for oversized packages.

Dimensional weight, also called DIM weight, is an alternate way that carriers calculate shipping charges for some packages. The resulting number is the DIM weight and packages are charged the greater of dimensional or actual weight. DIM Weight = Length x Width x Height then dividing by a DIM factor.

A distribution center is a warehouse that’s used as a waystation for transferring goods from one mode of transport to another. For example, manufacturers might deliver wholesale orders to a distribution center for a retailer. The goods from many manufacturers are then divided up and put on trucks to stock individual stores. Distributions centers do not provide eCommerce fulfillment services.

Drop shipping (or dropshipping) is an eCommerce business model where the seller lists products in an online store but doesn’t purchase them until a customer makes a purchase. The drop shipping supplier or manufacturer stores the products and ships orders directly to the customer. With drop shipping, the seller isn’t responsible for order fulfillment or warehousing. Drop shipping offers lower risks to the seller but also lower profit margins.

ECommerce fulfillment includes these elements:

• Receiving of goods into the fulfillment warehouse.
• Storage or warehousing of products waiting to be shipped.
• Picking of products to fill orders.
• Packing of boxes to ship to customers.
• Shipping orders.

An eCommerce platform is a software platform that sellers can use to build online stores. Some of the most popular eCommerce platforms are Shopify, WooCommerce, BigCommerce, and Magento.

Economic order quantity (EOQ) is a formula that helps business predict the amount of inventory they need for the future based on past demand. The formula to calculate EOQ is:
EOQ = √2DS/H
Or
Economic order quantity = square root of (2 x Demand rate (annual sales) x Annual ordering cost) / (holding cost)

Expedited shipping is any shipping option that is faster than standard delivery. If standard delivery time to an address is five days, an option that gets an order there in 4 days could be considered expedited. Many eCommerce companies offer multiple levels of expedited shipping, including 2-day, overnight, and same-day delivery.

Fulfillment by Amazon (FBA) is a service provided by Amazon that lets sellers on the platform use Amazon as their 3PL. FBA will store and ship items sold on Amazon and on other eCommerce platforms. Sellers using FBA may qualify for Prime shipping.

FIFO, or first in first out, is a concept in inventory management that rotates inventory so the oldest products are the next pulled to fill orders. FIFO inventory management works well for products that have expiration dates or changing styles.

Flexible carrier selection is choosing the best carrier for each package, rather than being locked into using a single shipping company. This flexibility has the potential to reduce costs and delivery times.

Floor-loaded containers have inventory loaded directly into the container without the use of pallets. Also called floor stacking, this container packing method may be used for oversized or oddly shaped products that won’t fit on pallets. It can also be used to fit more boxes into a container to reduce the per-box shipping cost.

Forward logistics is outbound shipping. Fulfilling and shipping eCommerce orders is forward logistics.

Freight is a method for shipping products in bulk or shipping oversized merchandise. Freight shipments can be transported by truck, rail, or container ship.

Freight forwarding is a logistics service or set of services that arranges transport of wholesale shipments from factories or distribution centers to fulfillment warehouse. Freight forwarders are professionals that arrange transport by air or sea, usually for international shipments.

When one company fills or reserves all the cargo space on a freight truck, that’s FTL or full truckload freight. Dedicated FTL shipments may reach their destinations quicker than partial truckloads or LTL freight.

Fulfillment is a set of processes to warehouse, pick, and pack eCommerce orders.

A fulfillment center is a warehouse that stores products for many companies and processes eCommerce orders.

Fulfillment error rate is a measure of fulfillment accuracy. For example, Red Stag Fulfillment’s 2021 order accuracy rate was 99.976%, which means that 0.024% of packages had fulfillment errors.

A fulfillment guarantee is a contractual commitment to provide a particular level of service. Red Stag Fulfillment backs its fulfillment guarantees with a payment of $50 to a client anytime we fail to fulfill one.

KPIs are key performance indicators that businesses use to track the health of their operations. Fulfillment KPIs are quantifiable metrics that identify areas of excellence and where improvement is needed in fulfillment operations.

Fulfillment onboarding is the process of aligning 3PL operations with a new client. Onboarding includes receiving stock, system integrations, and creating fulfillment processes.

A fulfillment warehouse stores products for many companies and provides pick, pack, and ship services for eCommerce orders.

Hazardous material, or hazmat, shipping is sending items considered hazardous by the FTC. Any item that is potential combustible may be considered hazmat, including lithium batteries included in many electronics and motorized bikes and scooters. Hazmat shipping requires specialized knowledge to stay in compliance with FTC regulations and avoid extra charges.

Infill is the packing inside the box that provides padding and keeps products from moving during shipping. Infill can be kraft paper packing peanuts, shredded paper or cardboard, or other materials.

A fulfillment integration is a connection between a company’s shopping cart, eCommerce platform, or order management system and a fulfillment company’s warehouse management system. Integrations allow incoming orders to flow automatically to the 3PL and data about order status, inventory, and more to flow back to the eCommerce company. An integration can be achieved through a direct plugin, middleware, a custom API, or an EDI link.

Inventory is all the products that a company has in stock. Items are added to inventory in a fulfillment warehouse when they arrive from the manufacturer and they leave inventory when they are packed to fill an order.

Inventory forecasts are predictions of future demand based on historical data and market trends. Regular inventory forecasting establishes a foundation for creating purchase orders and managing inventory.

Inventory management is the process of monitoring stock on hand, tracking sales trends and lead times, and setting reorder and safety stock levels. The goal of inventory management is to have enough of a SKU to fill all orders until the next shipment comes from the manufacturer but not so much that too much of a company’s working capital is tied up in stock.

Inventory management software is an application that automates inventory management functions, including inventory planning and forecasting.

Inventory planning is projecting stock needs into the future and planning backward through the supply chain to ensure that products are manufactured and ready to pick when they are needed. Good inventory planning is an excellent way to prevent backorders and stockouts.

Kitting is the process of pre-packing a set of items so they can be picked together. Kitted items may be stored under a new SKU and marketed as a set. The kitting process is also an asset to fulfillment and can be used to facilitate package consolidation to reduce shipping costs. Kitting saves money and prevents errors because it’s a methodical process completed before the pick and pack fulfillment that helps pickers work more efficiently.

Kitting logistics is the process of assembling two or more products into a kit to send to a customer.

Kraft paper is brown paper, often made from recycled paper, that comes in large rolls. Fulfillment warehouses use wadded up kraft paper to fill empty spaces when packing boxes, to ensure the items inside don’t move during shipping.

Lead time is the time it takes to complete a supply chain process. In fulfillment, customer order lead time is the time it takes from when a customer places an order to when the package arrives at the customer’s home.

LIFO or last in first out is an inventory management strategy that ships the newest items in stock first. LIFO may be preferred for items such as electronics, where manufacturers want customers to get the latest version of the product. However, LIFO inventory management runs the risk of leaving outdated and unsalable inventory on the shelf.

Logistics are all the elements of your supply chain from the factory to the end customer. Fulfillment logistics includes transport from the factory to the fulfillment warehouse, warehousing and order fulfillment, and shipping and delivery to customers.

Long-term storage is a classification for inventory storage that sits on warehouse shelves without selling for an extended period. Long-term storage in a fulfillment warehouse refers to inventory held in the warehouse for more than six months or more than 12 months. Long term storage may incur extra storage fees, so savvy inventory management should ensure that stock turns over at least once every six months or year.

Less than truckload or LTL freight is a freight shipment that shares space with other cargo. LTL provides an economical option when a business needs to ship freight but doesn’t have enough for a full-truckload (FTL) shipment. LTL shipments are commonly palletized.

Multi-carrier parcel management chooses the optimal carrier for each package, rather than being locked into a single shipping company. This can reduce costs and delivery times.

Multi-channel fulfillment uses a different fulfillment stream to ship orders for each sales channel, with a separate inventory for each.

Multi-channel sales is selling through more than one online sales channel. For example, you might sell products on Amazon, through a branded website, and also dropship orders from the website of a retailer such as Target or Walmart.

Next-day shipping is a service level that guarantees an order will be sdelivered on the next business day after the customer places it. 3PLs also offer next-day order processing which means that orders will be packed and shipped on the next business day after the order enters their system, ensuring consistent fulfillment processes and accurate inventory counts.

Omnichannel fulfillment unifies your inventory management and order processing across all sales channels. You maintain one inventory and use the same fulfillment process for processing orders from different eCommerce platforms. Omnichannel fulfillment gives customers the same experience no matter how they place an order.

Order fulfillment is the supply chain process of picking SKUs from a pick list, packing the order, and handing it off to a delivery service for shipping to the end customer.

An order management system (OMS) is a software application that helps eCommerce companies manage sales across multiple platforms and may connect with more than one fulfillment provider.

OTIF (on time and in full) is a fulfillment KPI that measures the percentage of packages that shipped to customers on time and with the correct SKUs and quantities for the order. This KPI measures fulfillment accuracy.

Outsourced fulfillment is pick and pack fulfillment services from a 3PL, rather than in-house fulfillment, where an eCommerce company rents a warehouse, hires staff, and manages its order processing internally.

Overboxing is placing an item packaged in a box inside a second box for shipping. The overbox shouldn’t be much bigger than the product box and should be packed with infill to keep the item from shifting during shipping.

Shipping oversized eCommerce products requires specialized fulfillment. Oversized products may need to be shipped via LTL freight and can incur dimensional weight charges.

In fulfillment, packaging most commonly includes shipping bags or cardboard boxes. Manufacturer’s packaging is the box or other wrapper the product gets at the factory. The packaging for an eCommerce order should be appropriate to protect the items during shipping. Heavier products need stronger packaging.

A packer is a warehouse worker who receives orders from the picker, checks the SKUs against the pick list, boxes the orders, and adds a shipping label.

A packing peanut is a type of infill. Packing peanuts were originally made from Styrofoam but today are more likely to be made from environmentally friendly and biodegradable materials such as cornstarch.

A packing station is the area of a fulfillment warehouse where picked orders are boxes and labeled for shipping.

A pallet is a strong, rigid frame, usually made of wood but sometimes plastic, that inventory is loaded onto for freight shipping. The standard pallet size in North America is 48″ x 40″.

Palletized shipping is freight shipping of products strapped or shrink wrapped onto pallets. Palletized shipping protects products from damage in transit and makes it easy for warehouse workers to load and unload products using a forklift.

Pick and pack is a term for the services provided by fulfillment centers: picking items for orders off the shelf and packing them into boxes for shipping to customers.

A pick list is a printout or electronic document that lists the SKUs in an eCommerce order. It may also be called a picking list or pick ticket. Fulfillment warehouses use pick lists to guide pickers on their routes to pull SKUs as part of pick and pack fulfillment.

A picker is a warehouse worker who picks items from the shelves to fill orders and hands them off to a packer.

Putaway is the warehouse process of transferring inbound shipments to storage in the warehouse. The putaway process includes checking stock quantities and SKUs against the ASN and logging the inventory into the WMS.

Reverse logistics is also known as returns. It’s the process by which eCommerce companies ship customer returns back to the warehouse for refund processing.

Same-day delivery is an expedited shipping option that allows customers to place an order and get delivery on the same day.

Same-day fulfillment means that orders placed before a specific cut-off time will be picked, packed, and shipped on the same day the customer places the order. Not to be confused with same-day shipping or same-day delivery, which place orders in customers’ hands in less than 24 hours. The earliest delivery date for same-day fulfillment is the day after the order was placed.

Same-day shipping delivers packages to customers on the same day they placed the order.

An eCommerce customer’s shipping address is the address that will go on the shipping label for their order. It may be different from their billing address.

A shipping container is a large metal box used to transport freight. Container ships typically carry shipping containers in international commerce. Shipping containers are used in multi-modal transport and often loaded onto semi trucks or rail cars after arriving at port. The standard width of a shipping container is 8 feet; common lengths are 20 or 40 feet and they may be 8’6″ or 9’6″ high.

Delivery services like FedEx and UPS set shipping zones based on the distance from the point of origin to the delivery address of a package. Shipping zones determine the shipping cost of a package and also the number of days expected in transit. There are generally 7 shipping zones in the continental U.S. and the zone map is different for each carrier.

Shrinkage is loss of inventory in a fulfillment warehouse due to damage, theft, or misplaced stock. You may be responsible for covering at least some of the costs of warehouse shrinkage, even if you outsource your fulfillment to a 3PL.

Many 3PL contracts include a shrinkage allowance. That is a percentage of your inventory that can be lost or damaged before the 3PL has to reimburse you for the loss. Shrinkage allowances range from zero (the warehouse pays for all lost inventory) to several percent of your stock.

A stock out happens when a company no longer has any availble units of a specific SKU in its inventory but continues to try and sell these items.

A supply chain is all the elements needed to produce a product and deliver it to customers. Supply chains include raw materials, manufacturing, transport between facilities, fulfillment or distribution and delivery to the end customer (eCommerce) or to a store (brick-and-mortar retail).

Third-party logistics are fulfillment services provided by a company dedicated to offering warehousing and order fulfillment for other businesses.

A warehouse management system (WMS) is the software that powers a fulfillment warehouse. The WMS records inventory for multiple clients, creates pick lists for orders, and tracks the status of orders, among other functions.