48 Logistics Acronyms You Need to Know
Online retail is one of the fastest growing industries in the world. At the end of 2018, Forrester, a leader in research and analytics firm stated that the B2B (Business-to-Business) e-commerce market reached $1.134 trillion – far above the expected $954 billion it forecasted at the end of 2017. The growth in this industry is still expected to rise with Forrester believing that this will climb even higher – about 17% by 2023.
Understanding this information and where the market’s trending means you need to understand the acronymic lingo that goes along with e-commerce and logistics; you’ll find some of the more important acronyms and their meanings below.
3PL – Third Party Logistics
Third Party Logistics in logistics and supply chain management is an organization’s use of third-party businesses to outsource elements of its distribution, warehousing and fulfillment services.
6S – Six Sigma
Six Sigma refers to the management practice of reducing manufacturing or process defects to less than six standard deviations from the mean – or 3.4 per million.
ATO – Assembled to Order
A business production strategy where products ordered by customers are produced quickly and are customizable to a certain extent. This strategy requires that the basic parts of the product are already manufactured but not yet assembled.
BOL – Bill of Lading
A bill of lading refers to a document issued by a carrier that grants a receipt of cargo for shipment. Originally the term was specific to carriage by sea, but now it is used for any type of carriage of goods.
BOM – Bill of Materials
Bill of materials is defined as product structure is a list of raw materials, sub assemblies, intermediate assemblies, sub-components, parts and the quantities of each needed to manufacture an end product.
CIF – Cost, Insurance, and Freight
An expense paid by the seller to cover the costs, insurance, and freight against the possibility of loss or damage to a buyer’s order while it is in transit to an export port named in the sales contract.
COGS – Costs of Goods Sold
This term makes a reference to the direct costs of producing the goods sold by a company. This will include the cost of materials and labor directly associated with creating the good or product.
The consignee is the organization who is financially responsible for the receipt of a shipment. Generally the consignee is the same as the receiver., but this is not always the case.
CPG – Consumer Packaged Goods
A term used to refer to merchandise that customers used and replaced on a frequent basis. In the logistical and retail sense, it refers to manufacturers and suppliers distribute specific CPG to a retail environment.
Logistical practice where materials are unloaded from a truck onto a dock and then directly loaded onto another truck.
CSV File – Comma Separated Values
A simple file format used to store tabular data, such as spreadsheets or databases.
DDP – Delivery Duty Paid
A delivery agreement whereby the seller assumes all responsibility, risk and costs associated with transporting goods until the buyer receives or transfers them at the destination port. This includes paying for shipping costs, export and import duties, insurance and any other expenses incurred during shipping to an agreed-upon location in the buyer’s country.
DFRL – Design for Reverse Logistics
Also known as Return Processing, Reverse Logistics is the ability to accept returned items from customers. A supply chain operation following DRFL principles is built with an easy and logical returns process in mind, and has both the capacity and the personnel to make that process smooth and intuitive.
ETA – Estimated Time of Arrival
Refers to estimated time of arrival of a ship, vehicle, aircraft, cargo, emergency service or person expected to arrive at a certain place.
FOB – Free on Board
A term in international commercial law specifying at what point respective obligations, costs, and risks involved in the delivery of goods shifts from the seller to the buyer under the Incoterms standard published by the International Chamber of Commerce (ICC).
FBA – FulfillMENT by Amazon
A service provided by Amazon that allows sellers more flexibility in their selling practices. The service provides storage, packaging, and shipping assistance, taking the burden off of the seller.
HTS – Harmonized Tariff Schedule
The primary resource for determining tariff classifications for goods imported into the United States. Classifies goods based on its name, use, and material used in its construction and/or assigns a ten digit classification code number. There are over 17,000 unique classification code numbers.
JIT – Just in Time
A management strategy that aligns raw material orders from suppliers directly with production schedules. Companies employ this inventory strategy to increase efficiency and decrease waste by receiving goods only as they need them for the production process, which reduces inventory costs. This method requires producers to forecast demand accurately.
MAPE – Mean Absolute Percentage Error
In statistics measure of how accurate a forecast system is. MAPE measures this accuracy as a percentage, and can be calculated as the average absolute percent error for each time period minus actual values divided by actual values.
MRP – Materials Requirements Planning / Manufacturing Resource Planning
Software that helps manufacturers in the production, planning, scheduling, and inventory control system.
ODM – Original Design Manufacturer
A company that takes the original specifications of another company or individual and builds the design to the product specifications.
OEM – Original Equipment Manufacturer
This term can be confusing, but describes a specific relationship among computer or IT producers; an OEM is any manufacturer that sells to a secondary company, which then markets that product under its own branding.
Denoting or relating to a type of retail that integrates the different methods of shopping available to consumers. Examples include online, physical store and phone.
PO – Purchase Order
A commercial document and initial official offer issued by a buyer to a seller indicating types, quantities, and agreed prices for products or services. This will be used to control purchase orders from external suppliers.
POD – Proof of Delivery
This method establishes that the recipient received the contents sent by the sender.
POE – Port of Entry
The location where a product may lawfully enter a country.
QA – Quality Assurance
The maintenance of a desired level of quality in a service or products, chiefly by the means of attention to every stage of the process of delivery or production.
QC – Quality Control
A practice of maintaining standards in manufactured products by testing a sample of the output against the specification.
SKU – Stock Keeping Unit
A series of letters and numbers used as unique identifier or code to refer to a specific stock unit.
UPC – Universal Product Code
Barcode symbol that is widely used in the United States, Canada, United Kingdom, Australia, New Zealand, Europe, and other countries for tracking trade items in stores.
VAT – Value-added Tax
Also known as goods and services tax (GST) — is a fee retailers are charged on every cross-border sale. Like sales tax, VAT is also added onto the ultimate retail price of a good or service, but is tabulated incrementally at various stages of the supply chain as value is added.
WMS – Warehouse Management System
Software or other tools that help warehouse administrators control warehouse operations. Can include inventory management, fulfillment/returns, cross-docking, item location, etc.
Organizations and Agreements
ISO – International Standards Organization
An international standard-setting body composed of representatives from various national standards organizations. Founded on February 23rd, 1947. This organization promotes worldwide proprietary, industrial and commercial standards.
WRAP – Worldwide Responsible Accredited Production
A not-for-profit 501(c)(6) organization dedicated to “promoting safe, lawful, humane, and ethical manufacturing around the world through certification and education.” The WRAP certification program generally focuses on apparel, industrial, and commercial standards.
CBP – U.S. Customs and Border Protection
The largest federal law enforcement agency of the United States Department of Homeland Security. It is charged with regulating and facilitating international trade, collecting import duties, and enforcing U.S. regulations, including trade, customs, and immigration.
FDA – U.S. Food & Drug Administration
Federal Agency of the United States Department of Health and Human Services. The FDA is responsible for protecting and promoting public health through the control and supervision of food safety, tobacco products, dietary supplements, prescription and over-the-counter pharmaceutical drugs (medications), vaccines, biopharmaceuticals, blood transfusions, medical devices, electromagnetic radiation emitting devices (ERED), cosmetics, animal foods & feed and veterinary products.
AOV – Average Order Value
E-commerce metric that measures the average total of every order placed with a merchant over a defined period of time. AOV is an essential KPI for e-commerce websites.
CAC – Customer Acquisition Cost
The cost of convincing a potential customer to buy a product or service. CAC can be calculated by simply dividing all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the period the money was spent. Another term for this is CPA (cost per acquisition), which is more ad-specific and refers to the average ad expense incurred to get to one purchase.
CLV – Customer Lifetime Value
The amount of money a customer is expected to spend with your company. Up-selling a one-time purchaser to a monthly subscription is an easy and reliable way to increase and stabilize CLV for better forecasting.
CMS – Content Management System
A software application or set of related programs that are used to create and manage digital content.
CPC – COST PER CLICK
An online advertising bidding method where the purchaser of an ad unit pays a fee to the publisher each time an ad is clicked. Other common bidding options include CPV (cost per view), CPA (cost per acquisition/conversion), or CPM (cost per thousand ad impressions).
CRM – Customer Relationship Management
Customer relationship management software is a platform e-commerce merchants use to organize customer information into a single database. This includes basic customer details such as contact information, demographics, and purchase history.
CTR – Click-through Rate
A metric that measures how well your marketing campaigns are performing. It’s calculated by dividing the number of shoppers who clicked an ad by the number of impressions the ad received. A lower CTR can be an indicator that your ads need a refresh with regards to copy or creative. If your CTR is high, concentrate on derivative metrics, like conversion rate, which speaks to how your ad and landing page work together to influence an ultimate purchase decision or other form of conversion. Acceptable CTR ranges vary per industry, so research and benchmark as needed.
DSP – Demand-Side Platform
As opposed to the way we used to buy ads, in which an advertiser would seek the help of a media buyer or agency to negotiate the price of an ad with its publisher, DSPs provide online platforms for advertisers to buy and publish ad units themselves. Ad prices are dynamic and change according to real-time bids by other advertisers competing for the same inventory; price ranges are themselves often the function of how much time users spend on the associated digital properties and how much attention they pay to similar ads.
KPI – Key Performance Indicator
Key performance indicators are measurements of how a business is progressing towards achieving a specific business goal. Sample KPIs in e-commerce could be cost per acquisition (CPA), cost per ad click (CPC), click-through rate (CTR), website session time, customer lifetime value (CLV), etc.
Other Common Business Terms
API – Application Programming Interface
A set of functions and procedures allowing the creation of applications that access the features or data of an operating system, application, or other service.
B2B – Business-to-Business
Company that sells to other businesses.
B2C – Business-to-Consumer
Company that sells directly to consumers.