Logistics Glossary

Specialist terminology

One of the preconditions for speedy and smooth processes is that all parties speak the same "language". We try to explain our processes as clearly as possible to our customers, although it is sometimes impossible to totally avoid branch-specific jargon.

If you do not fully understand information that you are given, refer to the list of key logistics terms adjacent. We would like to stress that this list is not exhaustive.

Glossary of key logistics terms

Available to promise (ATP)
This is a business function in the customer-oriented logistics system, allowing you to respond to order entries with confirmation of a fixed delivery date.

Batch size
A certain quantity of a product (series, colour), which is produced without conversions or interruption of the production process.

Break-bulk point
This is the logistics point at which a large delivery is broken up into several smaller consignments (opposite: consolidation point).

Calculation of logistics costs
Documentation and calculation of the costs incurred by the logistics activities.

Capital binding
Capital binding is the investment of capital in a company. Capital is understood to be "bound" if it is not immediately available, meaning that although it is listed in the corporate accounts of the company concerned, it is not accessible as cash funds. Capital binding is also as indication of how easily a company can fall into cash flow problems or, on a positive note, the extent to which it invests in its own infrastructure. Bound capital is calculated from the total value of assets, the time which materials, goods and products are kept and from the value of machinery, buildings and real estate.

This specifies the unit of loading used in transportation. In international logistics, this is a packaging unit for individually packed goods i.e. the smallest unit in a consignment of goods. The term Colli: 17 on a delivery note means that the consignment consists of 17 packaging units.

Consolidation point
This is the logistics point at which several individual consignments are consolidated to form a bulk consignment (opposite: break-bulk point).

Contract logistics
Contract logistics involves the execution and management of complex logistical business processes by a logistics company, regulated by a long-term contract.

Cycle time
The cycle time is the time needed to process a product, from the start of processing to the completion of the product. The cycle time consists of the set-up time, processing time and waiting time.

Decoupling point (or push/pull boundary)
The decoupling point or push/pull boundary is the point at which two logistics cycles meet: the stockpiling in advance (production with no customer relation) of mostly standard components (PUSH) produced in series and order production triggered by a customer order or other requirement signal (e.g. KANBAN) (PULL). Physically, this point is the last warehouse in the logistics chain in which components are stocked which are not linked to an order. After the decoupling point, all production materials are assigned to a customer order, in other words these are deemed to have been "sold".

Delivery condition
The delivery condition describes the quality and state of the materials, goods and products when they arrive at the customer end.

Delivery conditions
The delivery conditions regulate the distribution of the transportation and insurance costs plus the location at which the transfer of risk between the supplier and company takes place.

Delivery flexibility
The delivery flexibility describes the ability of a company to react and respond to customer requirements at short notice.

Delivery readiness
The extent to which the supplying company is able to deliver the goods required by the customer.

Delivery reliability
The delivery reliability covers the optimum availability of products for the customer in relation to type, quantity, time, place and quality.

Distribution logistics
Distribution logistics (also known as distribution, distribution of goods, sales logistics or outbound logistics) covers the planning, implementing and controlling or all distribution processes required to forward the goods (finished products or goods for resale) from the end of a production chain to the point required by the customer. Distribution logistics focuses on services relating to a delivery.
This therefore forms a link between the production point and the downstream business level for the requesting customer and is aligned towards external market supply. This direct connection to the sales market illustrates why the term "marketing logistics" is often used in place of the term "distribution logistics" (at the sales end). If the customer concerned is a company, their procurement unit will implement procurement logistics to forge the link at that end, which is why this part of logistics is often allocated to the marketing logistics division. Depending on the assignment of tasks along the distribution chain, individual logistics activities may either be the responsibility of the distribution or the procurement departments.

Distribution schedule
The distribution schedule determines the type and quantity of products to be sold and the time and place for the sale. The distribution schedule is based on sales forecasts or customer orders.

FIFO (First In First Out)
The products first produced are moved out first, to prevent outdated stock (opposite: LIFO).

Full Truck Load (FTL)
This describes a full goods vehicle i.e. a specific business unit of transportation (opposite: Less Than Truckload (LTL)).

Goods, trade goods
Trade goods are finished products which are procured by a company and sold on unchanged. The term "goods" is used to described semi-finished products which are purchased and then further processed.

Handling costs
Handling costs cover all costs incurred during transfer of materials, goods or finished products between the warehouse and the means of transportation or between different means of transportation.

Handling processes
Procedures involving transfer of materials, goods or products between the warehouse and means of transportation or between different means of transportation.

Inventory reservation
Part of the materials, goods or products is reserved to allow a quick response tor expected demand.

JIS (just in sequence)
The Just-in-Sequence concept (JIS) has been further developed from the Just-in-Time approach. When goods are provided using the JIS method, the supplier not only ensures that the required modules are delivered on time in the requested quantities but also makes sure that the sequence (order) of delivery is correct.

JIT (just in time)
This describes production or delivery which is triggered at the moment of ordering. Products are no longer stored intermediately for long periods but are only supplied in the requested partial consignments.

KANBAN is a system for managing the production process according to the pull principle. Each processing location stocks a certain predefined quantity of the materials needed to produce the product or its components. If the minimum quantity of these materials in this buffer store is undershot, a purchase order will be issued to the upstream supplier. After the ordered amounts are received at the production site, production of the quantity defined on the Kanban card can begin. When using the Kanban method, central control is only informed about the required amounts for the last stage of the system. In this backwards-aligned flow of information, each upstream site organises its deliveries according to the requirements of the production site directly downstream to it.

Late differenciation (or postponement)
A variation at the latest possible moment.

The layout is the arrangement of production and warehouse space, plus the arrangement of machinery and workplaces. The target is to achieve uninterrupted flow of materials and goods.

Less Than Truckload (LTL)
A transported consignment which does not fill the goods vehicle and which is therefore not cost-effective.

LIFO (Last In First Out)
The last produced or stored products are used first (opposite: FIFO)

Logistics is the integrated planning, organisation, steering, processing and control of the entire flow of materials and goods, including the related flow of information, beginning at the supplier end and progressing through the (own) company value stages (e.g. production and/or distribution stages), up to the delivery of the products to the customer, the disposal of waste and recycling.

Manufacturing penetration
The manufacturing penetration or vertical range of production describes the extent to which a company produces the parts it requires for production itself or purchases them from external sources.

Marketing logistics
Logistical activities which cover the procurement of orders and marketing data, supply the market with information, handle and plan the organisation of sales channels.

Materials handling
The consolidation of individual goods to consignment units which are easier to process during transportation, handling and warehouse storage (e.g. packaging of individual goods, compilation of multi-packs or formation of loads on pallets or in containers). This permits the smooth processing of transport, handling and warehouse activities right from the supplier to the logistics company and the customer.

Materials management (also goods management)
Material management handles the administration of the material flow, plus the planning and control of these material movements in relation to time, quantities, qualities and space; within a company and between the company and its environment. It co-ordinates the flow of materials between suppliers, customer, consuming processes (e.g. production) and the warehouses. In producing companies, it manages the supply to the production areas with direct goods, such as raw, auxiliary and working materials, supplied parts, semi-finished goods and the general supply of indirect goods such as office materials, spare parts or services.

Order picking
The assembly of orders from existing stock, according to customer requirements.

Order processing
Order processing includes the recording of order data and the transfer of this data to the production or service scheduling team plus the issuing of a delivery note and the selection of the delivery type.

Pick face
This is a warehouse point from which the goods are picked for orders.

Postponement (oder Late differenciation)
A variation at the latest possible moment.

PPS (production planning and control systems)
The planning, steering, control and management in relation to operations, time, quantities and spatial factors of all processes required during the production of goods and products.

Procurement conditions
Procurement conditions include the delivery and payment conditions plus the price. From a logistics perspective, the delivery conditions are of primary importance. These regulate the distribution of the transportation and insurance costs plus the location at which the transfer of risk between the supplier and company takes place.

Procurement logistics
When used as part of the procurement and logistics processes, the business administration term "procurement logistics" specifies the procedures from purchase of the goods to the transport of material to the stock receipt warehouse or to the production unit. It therefore links up distribution logistics and production logistics at a company.

Procurement realisation
Realisation of the procurement schedule and orders at the supplier end.

Procurement schedule
The procurement schedule defines the type of material or goods and the time and place of the procurement. This information is taken over from the productions schedule.

Production logistics
The planning, steering and control of in-company transport, handling and warehouse processes. This is closely linked to the other logistics components. A key attribute of production logistics is layout planning.

Production realisation
Realisation of the production schedule in the correct type, quantity, at the right time and place.

Production schedule
The production schedule defines the type, quantity, time and place of production for the products to be produced. This forms the basis for the procurement schedule.

Production segmentation
This describes the segmentation of production areas into individual production segments. A production segment is an independent, product-oriented and self-regulating production island which covers several stages along the product value chain, up to the completion of processing in this production segment.

Production-synchronous procurement (see also JIT)
The ordering materials and goods is conducted in coordination with the production process so that the time between goods received and provision of materials for the production process is as short as possible. This significantly reduces the material and goods stocks, thereby minimising the capital commitment.

Pull principle
The pull principle means that each production site "pulls" materials or produced goods from the upstream production site or from a warehouse (opposite: push principle).

Push principle
The push principle within a flow of materials means that the production sites bring materials and produced goods to the downstream production sites (opposite: pull principle).

Quality control
The quality control can be aligned either to generally binding, customer-specific or self-defined standards.

Quality assurance
This covers all measures which aim to ensure certain standards, material or product attributes.

Requirement planning
Requirement planning determines the materials needed for a production process, plus the quality, quantity - related to a certain period (month, year), cost and conditions required. In consumption-driven requirement planning, the ascertainment of material and goods requirements is based directly on the quantities used in production. In order-driven requirements planning, customer orders form the basis for determining the material and goods requirements.

In logistics, scheduling covers the allocation of orders based on inventories, requirements and costs.

Shipping company
A shipping company is a firm operating in the logistics branch and responsible for the transportation of goods and products. As the organiser/mediating agent, the shipping company does not normally use its own means of transportation, in contrast to transport companies acting in their own name e.g. as freight forwarders. The latter has its own or rented transport vehicles, generally its own goods vehicles and is also known as a haulage company.

Shipping or logistics warehouse
This describes a warehouse belonging to the shipping or logistics company and used by both the supplier and the consumer company. The shipping company acts as a directly upstream collection point for the production process at which the deliveries form various suppliers can be combined. The development of shipping or logistics warehouses and the management of certain activities by the shipping company helps to prevent time-related discrepancies.

The shortage is that part of an order which, due to stock depletion, can not be immediately delivered to the recipient.

Shortage costs
Delivery-related discounts or costs of delayed deliveries, which are incurred for each shortage unit.

SKU, Stock-Keeping Unit
This is an item which can be clearly identified in the warehouse. The SKU is part of the stock management and planning process. The number of SKUs rises when a warehouse stocks not just one item but several different variants of this item or when the same item is stocked at several storage locations (central warehouse, regional warehouse, delivery warehouse etc.).

Transfer of risk
The transfer of risk is part of the contractual agreement between the supplier and the customer company. It regulates the transfer of risks from the supplier to the customer at a certain time and place. This becomes important in the event of loss or damage/impairment of the goods.

Unit load
This describes the compilation of a defined quantity of goods to a flexible unit. In an ideal case, the unit load is retained throughout the delivery chain without being broken down into smaller consignments or consolidated to form larger units (i.e. packaging unit = warehouse unit = order unit = load unit = transport unit = consumption unit). The formation of logistical units is part of the packaging logistics process.

Value analysis
This is a method of optimising the ratio of costs to benefits. The value analysis examines the key components or functions in the production of finished products or in operational processes. The aim is to realise the functions, products or operation processes with the lowest possible costs.

VMI, Vendor Managed Inventory
Stock management by the supplier.

Waiting time
The waiting time is the time which materials, goods or products wait in the production process without changes to their state.