Free On Board (FOB), FIFO, Force Majeure, Forward Buying, Freight Forwarder


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Detailed terminology list , in pdf form, will soon be available


In cost reimbursement contracts , an agreed upon amount beyond the initial cost estimate , usually reflecting a variety of factors, including risk and services. The fee may be fixed initially (Cost-plus-fixed-fee arrangement) or it may vary (cost-plus-incentive-fee or cost-plus-award-fee arrangement)

First in - First out, describes the flow of inventory. It is average costing where rather than keeping track of the inventory value of individual units of the same item separately, they are averaged so that all units of the same items of inventory have the same value

Fill Rate
The percentage of requisitions filled from stock present on the shelf. The inverse of it is "Stock out rate"

Financial Lease
Financing for the full life of a piece of equipment

Finished Goods
Goods that have completed the manufacturing or assembly process and are ready for sale to external customers

Firm Bid
It's a legal offer to sell which can become a contract simply on acceptance by the buyer

Force Majeure
Major and  usually uncontrollable events, that excuse a party from the performance of its obligations. The contract provision is referred to as the "Act of God" and is kept in the contract to protect both the purchaser as well as the supplier

Projection of future business conditions and their impact on the organisation

Foreign Freight Forwarder
A party that acts to arrange for export and import movement of goods for shippers and consignees

Form, Fit & Function
An overall quality related term common in purchase agreements that encompasses the physical attributes of something (from), its desired outputs or performance (function) and fitness (appropriate for the application)

Forward Buying
Buying in excess of current requirements, as a strategy because of an anticipated shortages, strikes, price increase etc

Free Alongside Vessel
Under this arrangement, the supplier agrees to deliver the goods in proper condition along side the vessel. The buyer assumes all subsequent risks and expenses after delivery to the pier 

Free On Board
These are shipping terms under which title is transferred between the supplier and the purchaser at the FOB point. There are many arrangements under FOB such as:

FOB destination : Under it the seller bears risk until the goods are transported to the buyer's dock, after which the risk will pass to the buyer.

FOB destination, Freight collect : Title passes from the supplier to the buyer at the destination point and freight charges are the responsibility of the purchaser. The supplier owns the goods in transit and is responsible for filling loss and damage claims against the carrier, but the purchaser pays and bears the freight charges and files any overcharge claims.

FOB destination, Freight prepaid : Title passes from the supplier to the buyer at destination point and freight charges are paid by the supplier. The supplier pays and bears the freight charges, owns the goods in transit and may file claims for overcharges, loss and damage.

FOB destination, Freight prepaid and Invoiced : Title passes at the destination point, freight charges are paid by the supplier and added to the invoice. The supplier pays the freight charges, owns the goods in transit and  file claims for overcharges, loss and damage. The purchaser ultimately bears the freight charges.

FOB Origin : The seller bears the risk until it loads the goods onto an appropriate carrier after which the buyer assumes the risk of loss and must claim against the carrier for damage or loss in transit.

FOB Origin, Freight allowed : Purchaser obtains title where the shipment originates and is responsible for all claims against the carrier but the supplier pays the freight charges.

FOB Origin, Freight Collect : Title passes on to the buyer at the point of origin and the buyer must pay the freight charges. The buyer owns the goods in transit and files all claims against the carrier.

FOB Origin, Freight Prepaid and Invoiced : Title passes to the buyer at the point of origin , freight charges are paid by the supplier and then collected from the purchaser by adding them to the invoice. The supplier pays the freight charges and files claims for overcharges. The purchaser bears the freight charges , owns the goods in transit and files claims for loss and damage with the carrier.

Free Trade
The uninhibited flow of goods and services across national boundaries

Free Trade Zone
A site in which imported goods are exempted from custom duties. Countries establish it to encourage economic development such as manufacturing and distribution

Freight Bill
The carrier's invoice for transportation charges applicable to a shipment

Freight Claim
A claim against a carrier due to loss of , or damage to, goods transported by that carrier, also for erroneous rates and weights in assessment of freight charges

Freight Forwarder
A third party , licensed to make transportation arrangements

Functional Acknowledgement


A standardised EDI form that indicates the receipt of a shipment. It is automatically generated and sent back to the shipping organisation.

Futures Contracts
Contracts for the purchase or sale and delivery of commodities or currencies at a specified future date, primarily used as a hedging device against market price fluctuations or unforeseen supply shortages


In shipping, what is the difference between FCL and LCL?

An FCL (Full Container Load) is a shipping container filled only with the product of one consignee.

An LCL (Less than Container Load) is a container filled with the products of two or more consignees.

The transit time of an FCL to the receiver's warehouse is faster than an LCL, because an LCL requires an extra few days of unpacking time to separate the multiple consignees goods prior to delivery.

5 rights of purchasing

The '5 Rights of Purchasing' are to have the:

Right Quality, the
Right Quantity, at the
Right Price, at the
Right Place, at the
Right Time.

Of course, things don't always happen the right way! For instance, to get an item at the Right Time, you may have to lower the Quality and/or increase the Price you pay for it.

fmcg procurement

The market sector known as FMCG, stands for Fast Moving Consumer Goods. This sector is mainly concerned with the production of goods for the mass market eg: goods for supermarkets.


Do you know what incoterm FOB stands for? Its short for Free On Board and is a common shipping instruction that buyers give to suppliers, for land or sea transport. It means the seller is responsible for getting the goods on board the buyers requested transport. Once loaded, all risks pass to the buyer.

force majuere

What on earth is Force Majeure?

It's an exclusion of liability clause that relieves parties of their obligations under the contract in the case of unavoidable events such as floods, war, political unrest to name a few.

It is French for 'Superior Force'. You will find a clause of this kind in most contracts.

framework agreements

 A framework agreement is where the buyer and seller have set out the terms and conditions (pricing, delivery, time period) under which the buyer will purchase a specified amount of products/services.  Under a framework agreement, a contract only starts its formation when the buyer places an order (aka calls-off) against this



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