Distribution Center Dictionary

Distribution Center Terms and Explanations:

AGVS: Automated Guided Vehicle System. Systems of vehicles that can be programmed to automatically drive to designated points and perform pre-programmed functions. Guidance system may consist of a wire embedded in the floor, optical system or other types of guidance. Used frequently in AS/RS distribution centers.

Allocations: Actual demand created by sales orders or work orders against a specific item.

ASRS: Automated Storage and Retrieval System. A racking system in which each row has a retrieval unit that picks and puts away items.

Backflush: Method for issuing (reducing on-hand quantities) materials to a manufacturing order. With backflushing, the material is issued automatically when production is posted against an operation. The backflushing program will use the quantity completed to calculate through the bill of material the quantities of the components used, and reduce on-hand balances by this amount.

Backorder: Order for which the merchandise is not available and usually creates a list for re-order and ships when replenished.

Batch Picking: Order picking method where orders are grouped into small batches, an Order Picker will pick all orders within the batch in one pass. Batch picking is usually associated with Pickers with multi-tiered picking carts moving up and down aisles picking batches of usually 4 to 12 orders, however, batch picking is also very common when working with automated material handling equipment such as carousels.

Carousel: Automated equipment generally used for picking of small sized parts that have a high-volume parts. (Most popular items)

Carrying Cost: The cost associated with having inventory on hand. It is primarily made up of the costs associated with the inventory investment and storage; also called holding cost.

Case: Describes a unit of measure and the way multiple physical units are packaged. A case would typically be a sealed corrugated carton where a standardized quantity (greater than one) of a specific item is packed.

Compliance Labels: Standardized label formats used by trading partners. Compliance labels are used as shipping labels, container/pallet labels, carton labels, or piece labels, and usually contain bar codes. Many bar-code labeling software products now have the more common compliance label standards set up as templates.

Consignment Inventory: Inventory that is in the possession of the customer, but is still owned by the supplier. Consignment inventory is used as a marketing tool to make it easier for a customer to stock a specific supplier’s inventory.

Containerization: From the JIT movement in manufacturing, containerization refers to using standardized containers for the storage and transport of materials within a manufacturing facility as well as between vendors and manufacturers. The benefits of containerization include reduced product damage, reduced waste (by using reusable containers), less handling, and greater levels of inventory accuracy by simplifying counting processes.

Cross-Belt Sorter: Conveyor sorting system that uses a series of devices (carriers) mounted on a conveyor to sort materials. Each device has a small belt conveyor mounted on top of it that runs perpendicular to the direction of the main conveyor. When it arrives at a sort point, the conveyor on the carrier will spin, moving the materials to the side of the main conveyor (usually onto another conveyor, dropping down a chute, or into a container).

Cross-Docking: 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. Many “cross-docking” operations require large staging areas where inbound materials are sorted, consolidated, and stored until the outbound shipment is complete and ready to ship. This staging may take hours, days, or even weeks in which case the “staging area” is essentially a “warehouse”.

Cubed Out: A condition where all space in a trailer or container has been completely filled. The term “cubed out” is often used when you have completely filled the trailer or container but are still below the weight capacity. Also see Weighted out. Cycle Count: Process of regularly scheduled inventory counts (usually daily) that “cycle” through your inventory from one item to another.

DC: Distribution center

Demand: The quantity that is required/needed of a particular item. How much customers want of any one item.

Dimensional Weight: Formula used to determine freight charges when the minimum weight-to-volume ratio has not been met. Actual weight and dim weight are compared, and the larger weight is used for the freight calculation. Dim weight has historically been calculated by: Dim weight= (Length x Width x Height)/194 (All dimensional measurements are in inches). However, recently the carriers have been creating more complex dim weight policies. So depending on the carrier, destination, and service, you may using a different divisor. For example, as of 2011, UPS uses 166 (instead of 194) for air shipments, and 139 for exports. The purpose of dimensional weights is to allow the carriers to more effectively apply freight charges when very lightweight but bulky shipments occur. These lightweight but bulky packages can quickly fill up an airplane, yet not provide enough revenue (based on weight-based fees) to cover costs. a.k.a. Dim weight Distribution

Requirements Planning (DRP): Process for determining inventory requirements in a multiple plant/warehouse environment.

Dock Leveler: Device that acts as a bridge between a truck or trailer and the loading ramp. Used for loading vans not flatbeds.

Dunnage: Package filling material. The wood, paper and cardboard wrapping that it takes to secure the items with banding and help protect them; i.e. loose fill (packing peanuts), paper, bubble wrap, foam, and air pillows.

Eaches: In most cases eaches implies you are using the smallest possible unit of measure (the individual pieces).

FIFO: First in first out, method of rotating inventory which allows the oldest products to be used first. Fill Rate: Sales order processing measurement that quantifies the ability to fill orders.

Flex Conveyor: Portable conveyor that can be expanded, contracted, and curved. It has wheels and rolls around to wherever needed.

Flow Rack: Racking system that incorporates sections of a conveyor so that cartons or pallets can flow to the front; i.e. carton flow, pallet flow, push back rack.

Food-Grade Warehouse: A Food-grade warehouse is a warehouse that meets specific requirements for the storage of edible products or materials that will make up edible products (ingredients or even packaging).

Forecast: Estimate of future demand needed to be produced to fill orders or inventory.

Fulfillment (Fulfill): The point at which an order is complete; produced, packaged and shipped.

GMA Pallet: 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 stringer.

Gravity Conveyor: Conveyor, usually with wheels or rollers, and uses gravity to move items.

Guidance Systems: Guidance systems are used to guide automated guided vehicles through plants, guide lift trucks in very-narrow-aisle storage areas. Wire-guided and Rail-guided tend to be the most common guidance systems, but others including laser, optical systems, and magnetic tape are also available.

High-Density Storage: Storage in which pallets or cartons are stored more than one unit deep or high. Examples include double-deep selective rack, drive-in, push back, carton flow, pallet flow, etc.

Honeycombing: The unused pallet positions in high-density storage that result when the number of unit-loads for an item does not completely fill the storage lane. Since mixingSKUs in high-density storage is normally not done, these unused pallet positions are not available to store other materials.

Inventory Turn: (Turn) Number of times inventory is replenished in a specific time period (usually a year for annual calculation); generally calculated by dividing the average inventory level (or current inventory level) into the annual inventory usage.

Just-In-Time

(JIT): Term that describes inventory arriving or being produced “just in time” for the shipment or next process; actually a process for optimizing manufacturing processes by eliminating wasted steps, wasted material, and excess inventory sitting in a warehouse.

Lead Time: Amount of time required for an item to ship or arrive onsite from the point that it is ordered. This will include purchase order processing time, vendor processing time, in-transit time, and receiving, inspection, and packaging times.

License Plate: License plates are often used with warehouse management systems. They are basically an ID number placed on a pallet, tote, carton or other container, and are used to track the contents of that container as it moves through the warehouse. The license plate will almost always have a bar code that contains this ID number. So by scanning a single bar code on the pallet you can initiate or complete movement transactions for all items and quantities on that pallet.

LIFO: Last-in-first-out, method of using the newest inventory first and leaving older inventory in the rack. This is not an option for food or perishable items, Examples of LIFO are Pushback and Drive-In Rack.

Lights-Out Warehouse: (Lights-out facility) A fully-automated facilities. The idea being that if the facility requires no human operators, you can run it with no lights. Requires the use of AS/RS units, AGVs, automated conveyors, and robots.

Locator system: Inventory-tracking systems that allow you to assign locations to your inventory to facilitate greater tracking and the ability to store product randomly. Prior to locator systems, warehouses needed to store product in some logical manner in order to be able to find it (stored in item number sequence, by vendor, by product description, etc.) By using locator systems you can increase space utilization by slotting your product by matching the physical characteristics of the product to a location whose physical characteristics match that of the product. You can also increase productivity by locating fast moving product to closer, more accessible locations, and increase accuracy by separating similar items. Location functionality in software can range from a simple text field attached to an item that notes a single location, to systems that allow multiple locations per item and track inventory quantities by location. Warehouse management systems (WMS) take locator systems to the next level by adding functionality to direct the movement between locations.

Min-Max: Inventory system for predicting when an item should be replenished. Once the inventory level reaches a predetermined minimum quantity an order for the difference between the minimum and the maximum is placed to replenish stock to the maximum level. Usually the order is placed automatically in the system once the minimum stock level is reached.

Narrow Aisle: Lift trucks that operate in aisles of 8′ to 10′. Narrow-aisle trucks are generally stand-up vehicles such as reach trucks.

Open Order: Order that has not yet shipped.

Order Cycle: The time between orders being placed of a particular item. This can also be called replenishment cycle.

Order Management System: Software that receives customer order information and inventory availability from the warehouse management system and then groups orders by customer and priority, allocates inventory, and determines delivery dates; also called order processing system.

Pallet Inverter: Stationary equipment used to transfer product between different types of pallets such as transferring from wood to plastic pallets, or from pallets to slipsheets. A load on a pallet is placed in the pallet inverter and the entire load is rotated 180 degrees allowing you to remove the original pallet and replace it with another.

Paperless: The direction of tasks and execution of transactions are conducted electronically without the use of paper documents. This is usually accomplished through the use of fixed or portable computers, bar code scanners, RFID readers, light-signaling technology (pick-to-light), or voice technology.

Pick-to-Light: System in which each pick location is connected to lights and LED displays. Software turns on the light to alert the Order Picker the location of the next pick and the quantity needed.

Pop-up Sorter: Equipment integrated into a conveyor and racking to move products off the conveyor belt at fixed points.

Pro-Forma Invoice: A fake invoice created to show a buyer what the details of the actual invoice will look like. You can think of it as a draft invoice. Pro forma invoices are commonly used with international transactions to provide the buyer with the information they will need to pay for the goods (prepayment is common with international transactions) and arrange for import.

Push Sorter: A fixed-position sorting device used with conveyor systems. A push sorter may use a swinging arm or a simple piston-type pushing device to push materials across the conveyor.

Queue Time: The amount of time a job waits at an operation prior to set up or processing; Part of manufacturing lead time.

Reach Truck: (Stand-up reach, Straddle reach , Double-deep reach) The reach truck is a narrow-aisle (8′-10′) lift truck designed specifically for racked pallet storage. It consists of outriggers in front and telescoping forks that use a hydraulic scissors-type mechanism that allow you to pick up the load and retract it over the outriggers reducing the overall truck and load length, allowing you to turn in a narrower aisle. Double-deep reach trucks use an extended reach mechanism that allows you to store pallets two-deep in specially designed double-deep rack. Reach trucks are designed for racking areas only and do not work for loading trucks or quickly moving loads over long distances.

RF Devices: Radio Frequency devices: Portable data collection devices that use radio frequency to transmit data from scannable tags to the host system.

RTLS: Real-Time Locator System that uses RFID technology to track the location of tagged objects. Pallets or items have an RFID sensor attached and their location can be tracked anywhere in the distribution center.

Reverse Logistics: Processing of returned items customers have sent back. (Returns)

RFID: Radio Frequency Identification. Systems that use transponders to transmit data to a receiver; often used as part of a real-time locator system. Tag attached to item which sends a signal.

Safety Stock: Quantity of inventory used in inventory management systems to allow for deviations in demand or supply. Typically the most popular items or those that take longer to produce will need a safety stock for peak customer demand times.

SKU: Stock-Keeping Unit. One item with an identification number specific to that particular part.

Slotting: Determining the optimal placement of inventory for picking efficiency.

Third-Party Logistics: 3PL Businesses that provide one or many of a variety of logistics-related services. Types of services would include public warehousing, contract warehousing, transportation management, distribution management, freight consolidation.

Tilt-Tray Sorter: Conveyor system that uses a series of tilting devices to sort items.

Vehicle Restraint Systems: Devices that prevent trailers from moving away from the loading dock. One of the most popular is the ICC bar type restraint system.

Wave Picking: Method of order picking in which items are picked first in mass and then sorted into individual orders.

Warehouse Management System (WMS): Computer software designed to manage the storage and movement of items throughout the warehouse and keep track of inventory levels and locations.

Work In Progress (WIP): Work in progress indicates any good that is not considered to be a final product, but must still be accounted for because funds have been invested toward its production.

Zone Picking: Method of picking orders in which the warehouse is divided into several zones. Pickers are assigned a specific zone and pick only items in that zone before moving the order (usually via a conveyor system) to the next zone; also called Pick-and-Pass.