Warehouse Terms


Some of the major Warehousing terms in use are :

a) Stock Keeping Unit (SKU) :
SKU is a unique identifier for each distinct product and service that can be ordered from a supplier.


i.e, an imaginary product, called a widget, has a part number of 1234. It is packed 20 to a box, and the box is marked with the same part number 1234. The box is then placed in the warehouse. The box of widgets is the stock keeping unit (SKU), because it is the stocked item. Even though the part numbers are interchangeable to mean either a widget or a box of widgets, the box of widgets is the stocked unit. There may be three different colors of widgets; each of these colors will be a separate SKU. When the product is shipped, there may be 50 boxes

of the blue widgets, 100 boxes of the red widgets, and 70 boxes of the yellow widgets shipped. That shipment would be said to have been a shipment of 220 boxes, across three SKUs.


b) Letter of Credit :
A letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking to a beneficiary against complying documents as stated in the Letter of Credit. Once the beneficiary or a presenting bank acting on its behalf, presents to the issuing bank or confirming bank, if any, on or before the expiry date of the LC, documents complying with the terms and conditions of the LC, the applicable UCP and international standard banking practice, the issuing bank or confirming bank, if any, is obliged to honour irrespective of any instructions from the applicant to the contrary.
c) Bank Guarantee :
A bank guarantee enables the customer (debtor) to acquire goods, buy equipment, or draw down loans, and thereby expand business activity. A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will cover it.
d) Advance Shipment Notice (ASN) :
Advance Shipment Notice is an EDI formatted electronic notification of pending deliveries; an electronic packing list. The ASN can be used to list the contents of a shipment of goods as well as additional information relating to the shipment, such as order information, product description, physical characteristics, type of packaging, marking, carrier information, and configuration of goods within the transportation equipment. The ASN enables the sender to describe the contents and configuration of a shipment in various levels of detail and provides an ordered flexibility to convey information. 
e) Point of sale or point of service (POS or PoS) :
Point of sale can mean a retail shop, a checkout counter in a shop, or the location where a transaction occurs. By synecdoche point of sale often refers to a POS terminal or more generally to the hardware and software used for checkouts – the equivalent of an electronic cash register. Point of sale systems are used in supermarkets, restaurants, hotels, stadiums, and casinos, as well as almost any type of retail establishment. 
f) Third Party Logistics ( 3PL) :
It is a business arrangement whereby logistics services, such as transportation and warehousing, are outsourced to a third party.


 g) Warehouse : A place for the reception, delivery, consolidation, distribution and storage of goods / cargo.
h) Supply Chain Management : The optimization of the entire fulfillment process from consumer purchase back through retail store, retail DC, wholesaler, manufacturer DC, factory, raw material/component supplier, etc. for greater responsiveness, speed and efficiency.
i) Just In Time :
Just-in-time (JIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated carrying costs. In order to achieve JIT the process must have signals of what is going on elsewhere within the process.
j) Economic order quantity (EOQ) :
EOQ is that level of inventory that minimizes the total of inventory holding cost and ordering cost. The framework used to determine this order quantity is also known as Wilson EOQ Model. The model was developed by F. W. Harris in 1913. But still R. H. Wilson is given credit for his early in-depth analysis of the model.

k) Safety stock :
It is a term used to describe a level of stock that is maintained below the cycle stock to buffer against stock-outs. Safety Stock or Buffer Stock, exists to counter uncertainties in supply and demand. Safety stock is defined as extra units of inventory carried as protection against possible stock outs. It is held when an organization cannot accurately predict demand and/or lead time for the product.

l) Lead time :
It is the period of time between the initiation of any process of production and the completion of that process. Thus the lead time for ordering a new car from a manufacturer may be anywhere from 2 weeks to 6 months. In industry, lead time reduction is an important part of lean manufacturing.


J) Invoice / Bill :
An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms. From the point of view of a seller, an invoice is a sales invoice. From the point of view of a buyer, an invoice is a purchase invoice. The document indicates the buyer and seller, but the term invoice indicates money is owed or owing.

K) Safety refers to individual safety. Meaning that devices must be present to prevent ACCIDENTS, such as fire alarms etc. Similarly, Security refers to the security/safety of the institution., meaning measures to prevent CRIME, e.g. CCTV cameras etc.

L) Delivery Note :
It is document accompanying a shipment of goods that lists the description, grade, and quantity of the goods delivered. A copy of the delivery note, signed by the buyer or consignee, is returned to the seller or consignor as a proof of delivery.

M) Actual cost :
It is a inventory costing method used in manufacturing environments that uses the actual materials costs, machine costs, and labor costs reported against a specific work order to calculate the cost of the finished item.

N) Allocations :
Allocations in inventory management refer to actual demand created by sales orders or work orders against a specific item. The terminology and the actual processing that controls allocations will vary from one software system to another. 

O) Bill of material  (BOM) :
BOM lists materials (components or ingredients) required to produce an item. Multilevel BOMs also show subassemblies and their components. Other information such as scrap factors may also be included in the BOM for use in materials planning and costing.

P) Carrying cost :
Also called holding cost, carrying cost is the cost associated with having inventory on hand. It is primarily made up of the costs associated with the inventory investment and storage cost. For the purpose of EOQ calculations, if the cost does not change based upon the quantity of inventory on hand it should not be included in carrying cost. Carrying cost is represented as the annual cost per average on-hand inventory unit.

Q) Cycle Count :
It refers to process of regularly scheduled inventory counts (usually daily) that "cycles" through your inventory. User determines how often certain items/locations are counted. 

R) Fill rate :
It refers to  Sales order processing measurement that quantifies the ability to fill orders. There are various ways of measuring fill rate. Line fill compares the number of line items shipped complete to the total number of lines ordered ( 95 line items shipped complete out of 100 lines ordered would result in a 95% line fill rate). Order fill compares the number of orders shipped complete to the total number of orders shipped.

S) GMA pallet :
Also known as a Grocery Pallet, a GMA pallet is made to the specifications of the Grocery Manufacturer's Association. It is basically a 4-way pallet that is 40 inches wide, by 48 inches deep, by 5 inches in height and has the deck boards and bottom boards mounted flush with the outside stringers.


T) Cross-docking :
In its purest form cross-docking is the action of unloading materials from an incoming trailer or rail car and immediately loading these materials in outbound trailers or rail cars, thus eliminating the need for warehousing (storage). In reality, pure cross-docking is rare outside of transportation hubs and hub-and-spoke type distribution networks.

U) Pallet :
Pallet is a portable platform designed to allow a forklift or pallet jack to lift, move, and store various loads. Most pallets are made from wood , but pallets are also made from plastic, steel, and even paper-based materials. Spacing a wood pallet involves identifying wood type (hardwood or softwood), over all pallet size, number and size and spacing of stringers, whether stringers are to be notched for 4-way use, number and size and spacing of deck boards, number and size and spacing of bottom boards, whether deck boards and bottom boards are attached flush with outside stringers or overhang outside stringers. Other options include using a solid deck (rather than separate deck boards), chamfering the deck boards, using treated wood (for international shipments). 2-way pallets allow entry by a forklift from the front or back of the pallet, 4-way pallets have the stringers notched (or use a blocking system instead of stringers) so a forklift can also enter the pallet from either side.

Radio frequency identification refers to devices attached to an object that transmit data to an RFID receiver. These devices can be large pieces of hardware the size of a small book, like those attached to ocean containers, or very small devices inserted into a label on a package. RFID has advantages over barcodes, such as the ability to hold more data, the ability to change the stored data as processing occurs, does not require line-of-site to transfer data and is very effective in harsh environments where bar code labels won't work.

W) Unit of measure :
Abbreviated U/M, it describes how the quantity of an item is tracked in your inventory system. The most common unit of measure is "eaches" (EA), which simply means that each individual item is considered one unit. An item that uses "cases" (CA or CS) as the unit of measure would be tracked by the number of cases rather than by the actual piece quantity. Other examples of units of measure would include pallets (PL), pounds (LB), ounces (OZ), linear feet (LF), square feet (SF), cubic feet (CF), gallons , thousands, hundreds, pairs, dozens. Also see Unit-of-measure Conversion.

X) Drive-In Rack :
A structural framework open at the front and blocked at the back by cross bracing. The shelves consist of rails connected to the uprights. Warehousing units may be placed two or more rows deep by entering the rack from the front and driving the fork lift truck between the rails. Careful consideration should be given unit clearance requirements, both vertical and horizontal.



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