Posted September 22, 2021

Key Terminology in the Logistics and Supply Chain Industry

Key Terminology in the Logistics and Supply Chain Industry
By Sarah Mehlert

If you work in the logistics industry or are looking to enter the field, you may notice that there is a lot of industry-specific jargon that, at first glance, can seem totally foreign. Terms like “LTL”, “FIFO” and “backhaul” might confuse an outsider, but are commonplace in the logistics and supply chain industry. It’s important to familiarize yourself with some of these key terms that are prevalent and will most likely come up in your everyday work life. There are hundreds of terms specific to the logistics industry and while this is not an exhaustive list, these are some of the most essential keywords to know.

ABC Model: Activity-based costing; a representation of resource costs that seeks to relate all relevant expenses to the value adding activities performed.

Agile: Refers to the ability of a supply chain to be flexible enough to allow for quick order fulfillment and short lead times, regardless of volume.

Actual time of arrival (ATA): The time that a mode of transportation is determined to have arrived at its destination.

Backhaul: Describes the process of a transportation vehicle returning from the original destination point back to the point of origin. The backhaul can be with a full, partial, or empty load. An empty backhaul is called “deadheading”.

Bale: A large bundle of a commodity, like cotton or hay, that is prepared for shipping by being compressed, bound and wrapped.

Blanket Purchase Agreement (BPA): A method of filling orders for supplies or services that are typically repetitive, done by establishing charge accounts and long-term commitments to a supplier. For example, medical supplies and automobile parts would typically be under BPAs.

BOL (Bill of Lading): A transportation document that contains the terms and conditions between the shipper and the carrier.

Broker: A broker can be either an individual or an enterprise that arranges the buying and selling of transportation for goods or services. Brokers are responsible for the sale and negotiation, as well as ensuring the route is carried out correctly and the goods or services arrive on time.

Commodity: Any item that is commercially exchanged, usually used to refer to raw materials and agricultural products.

Compliance: Refers to the regulations and requirements that have been set by retailers for delivery of goods into their supply chain being adhered to.

Dead on Arrival (DOA): Used to describe products that are not functional when delivered; defective.

Density: The measure of a commodity’s mass unit per volume or pounds per cubic foot. Density affects the utilization of a carrier’s vehicle, so it is crucial in determining rates.

Escrow: The use of a third party to hold assets or funds before they are transferred from one party to another. The third party will hold the funds until both parties have fulfilled their contractual duties.

Exception rate: Describes a situation where a rate deviates from the set class rate.

First In, First Out (FIFO): A practice used in inventory control where the stock consumed or used first is based on what was received first.

Full Truckload (FTL): A shipment that fills an entire trailer with product.

Gain Sharing: A method of incentive compensation where organizations seek to improve productivity and as performance improves, employees share financially in the gain. This method provides an incentive to the buying and supplier organizations to continually focus on reevaluating their business practices and thereby improve profit margins.

Globalization: Describes the process of a business or organization making something worldwide in scope or application, or to operate on an international scale.

Less-Than-Truckload (LTL): A shipment that consolidates several different small shipments on to one single truck.

Lumper Fee: The cost associated with a driver assisting in the loading or unloading of their trailer.

Manifest: A document that contains the description of individual orders that are in a shipment.

Must-Arrive by Date (MABD): The date set by a retailer that a vendor product must be received by.

Owner Operators: Drivers who own and drive their own tractor.

Per Diem: A payment rate that one railroad charges for another to use its cars.

Pick and Pack: The process of picking product and immediately packing it into a shipping container.

Proof of Delivery (POD): Information supplied by the carrier that contains who signed for the shipment, time and date of delivery and any other pertinent shipment or delivery information.

Procurement: Describes the function of sourcing and purchasing materials needed to manufacture products.

Real-Time: Refers to a shipper’s ability to track an order in real time as it travels from origin to destination.

Request for Quote (RFQ): A document that contains a solicitation for a price quotation from several different vendors when a desired product has been selected.

Scalability: Describes how quickly a supplier can increase their productivity in order to meet rising demand.

Spot Market: Trucking market that provides shipments with short lead time.

Supply Chain: Describes the sequence of processes involved in production and distribution of any commodity, all the way from the acquiring of raw materials to delivery of finished goods to the customer.

Trailer Drop: Describes a driver leaving a full trailer at a warehouse facility and picking up an empty one.

Transportation Management System (TMS): A computer system that is designed to optimize transportation management and all of the activities required to perform key logistics processes.

Velocity: The rate at which product moves through a warehouse.

Visibility: Refers to the ability to access key data within the supply chain.

Once you have a strong grasp on these key terms, head over to to find your next logistics and supply chain job!