Fulfillment Center Terms

Typical Order Fulfillment Service Process

  • Receiving ProcessInventory is delivered to the Fulfillment center, assigned a Bin location, and stored in the warehouse. Inventory is then allocated to the appropriate account. Typically a notification is sent to the product owner via email, or fax.
  • Product InquiryInitial inquiry about products, visit to the website, catalog request, or telephone call. A customer shows interest in the products for sale.
  • Sales QuoteProduct / service availability price, including items, and shipping.
  • Order ConfigurationThe contents of the order and selection of options or order lines where multiple products are sold.
  • Order Purchase / BookingThe formal order placement (issuing by the customer of a Purchase Order) at this time payment arrangements are made / processed.
  • Order Acknowledgment / ConfirmationConfirmation that the order is booked and/or received, confirmation can be posted to the screen, received via email, via xml, or by data being posted back to order management system.
  • Order Sourcing / PlanningDetermining the source / location of item(s) to be shipped, in multi-warehouse systems, the closest warehouse is used to reduce transportation expenses. Inventory availability will also be a consideration of the source determination.
  • Order Entry Order is entered into the fulfillment providers system. This can be entered manually by the fulfillment client, by the fulfillment provider, entered via real-time xml, as a spreadsheet, or by data posting to the fulfillment system.
  • Order StatusInventory is allocated to the order that was entered, and deducted from the perpetual count. Depending on the fulfillment company, the status of the order is then set to either “backordered” (if there is not enough inventory to ship the order) or “pending” or “ready for fulfillment” meaning that the order will be picked and packed in the next “batch.”
  • Order ChangesChanges to orders are made by the client at this time. It is important that these changes are made before the order has started to be “picked and packed.” This prevents orders from being sent with incorrect contents, or incorrect address.
  • Shipment ReleaseProcess step where the warehouse / inventory stocking point starts the shipping process. May comprise of picking, packing and staging for shipment. It is also at this stage that the fulfillment companies will be able to safely modify the order if requested by the client. However the client should not be able to modify orders at this time. Typically the status at this time is referred to as “In Process.”
  • Pick and Pack The order contents are assembled using BIN references for SKU locations. The products are then packaged using a variety of packaging supplies, including cardboard boxes, styrofoam peanuts, jiffy-lite mailers, bubble wrap, dunnage, etc.
  • ShipmentA shipping label is produced and the package is given to the shipping carrier.
  • Shipment Notification Tracking information is provided to the client, or the customer for the shipped order.
  • Delivery The delivery of the goods to the consignee / customer.
  • Invoicing / Billing The presentment of the commercial invoice / bill to the fulfilment client.
  • Settlement The payment of the charges for goods / services / delivery .
  • Returns In case the goods are unacceptable / not required / undeliverable, do not meet expectations etc. If the items are “good” or “unused,” they are returned to inventory for use in future orders.

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Ecommerce Order Fulfillment Services Terminology

This term refers to the act of having a third party handle the warehousing, and order processing of products on behalf of the product owner. Services provided may include call centers, inventory control, shipping, kitting, and returns processing, however these services vary by provider.

This term refers to the act of having a third party handle the transportation of products on behalf of the product owner.


Charges for services beyond standard transportation pricing. These are fees in addition to the service / weight / zone rates. These fees include delivery area surcharge, and dimensional weights, amonst others. The majority are charges that are determined at the time the package is under the control of the carrier.


Often, customers enter the wrong zip code, leave out an apartment number, or incorrectly select their state from a drop down list. Sometimes they will have moved, or have ordered the product to be delivered to someone else as a gift. When this happens, the carrier is not able to locate the address that is on the shipping label. The carrier will make several attempts to contact the customer, to determine what portion of the address is incorrect. However, if they are unable to identify the location, the carrier will return the package to it’s origin.


These are fees usually associated with using a fulfillment service provider’s systems. They actual purpose of the fee is to help cover web development, accounting services, and other indirect costs that the fulfillment company would experience. This fee will often include a “minimum” that will help with cover expenses that a fulfillment company would have, regardless of whether a client ships orders or not. This fee is often included in the storage / warehousing fees.


Assembly can include combining multiple products into an individual sku, labeling products, pre-packaging items into lick – n – stick inventory, etc. One purpose of assembly, is to avoid higher costs when items are shipped out individually at a later date.


A backorder is a status designation used to refer to orders when there is insufficient inventory to ship the order in it’s entirety. Depending on the fulfillment service provider, orders may be split, so that the portion of the order with sufficient inventory is shipped, or the order may be held in it’s entirety once the backordered inventory is received.

A batch is a designation assigned to a group of orders that are being processed and prepared for shipping. Batches can be assigned based on the items being picked, by client, by the physical location of the product, or by the shipping methods.


A Bin is sometimes referred to as an “internal sku.” Fulfillment companies will use their own method to identify a product. Often fulfillment clients will use generic skus such as “1000” to identify their products. Because fulfillment companies use their own stock management system, they are able to keep inventory organized, regardless of the sku that the client uses. Bins can be a series of alphanumeric characters. Bins are sometimes individually labelled on products themselves, labelled on a shelving unit, or even an entire pallet. Another benefit of using bins, is that a client is free to modify the sku they use for selling purposes, but this does not force the fulfillment house to modify any previously labeled items.


Bills of lading are issued by freight companies as an acknowledgement that goods have been placed upon a certain transportation vehicle for delivery. They will include a weight, number of pallets, and the freight class.


Brokerage fees are charged by carriers when parcels entering international destinations are passed through customs by the carrier.

Call centers provide telephone support for Customer Service, order entry, and returns. Remote call centers are often utilized by companies that do not have the capacity to handle this on their own. Some fulfillment companies will provide call center services to their clients.

This term is used to describe the transportation company that delivers your product to your end customer. Carriers consist of USPS, DHL, FEDEX, and UPS.


This phrase refers to the transportation method selected for delivery. Varieties include Next Day, 3 Day, 2 Day, Ground Residential, Ground Commercial, Express Mail, Priority Mail, First Class Mail, Global Priority Mail, Global Express Mail, International Express, and International Priority.


For orders that are delivered to international destinations, duties, taxes, and brokerage fees may apply. When these fees are applicable, there are two methods for payment, DDU, and DDP. Respectively, DDU fees are paid by the end recipient of the package. DDP, fees are paid by the shipper (carriers may charge an additional fee to pay duties in advance).


This is the value associated with replacing your item. For international orders, this value is also used to determine fees associated with brokerage, taxes, and duties.


This is a service provided by the USPS where electronic notification is available when the parcel has been delivered. A number is provided at the time the parcel is shipped, and details are available on the USPS website. This is often confused with tracking.


This is a method to calculate the space a package occupies in relation to it’s physical weight. Carriers will charge whichever is greater, the actual weight, or the dimensional weight of a package. Dimensional weight is calculated by multiplying length x width x height divided by 194.


This terms describes the amount of time between the inventory arriving in the receiving department of a fulfillment operation and the shelving system, ready to be picked and packed.


Ecommerce fulfillment generally refers to the method by which orders are entered into an order management / inventory control system. Ecommerce fulfillment refers to electronically entering orders into the fulfillment provider’s systems. Recently, this term has been used in general, in reference to web based order taking systems, and the associated fulfillment services provided for orders that take place on a website. This term contrasts mail order fulfillment.


Fifo is a stock management technique used to prevent inventory spoilage. Typically fifo is used in regard to inventory that consists of goods with an expiration date.


Flat-rate shipping is where you pay a fixed cost based on some simple logic, as opposed to paying shipping rates that are very unpredictable. Sample flat-rate logic would be $12.00 for a Next Day delivery package upto two pounds, regardless of destination. Flat-rate shipping usually includes all accessorials, except the fuel surcharge.


A shipping term which indicates that the supplier pays the shipping costs (and usually also the insurance costs) from the point of manufacture to a specified destination, at which point the buyer takes responsibility. This has become a trend for ecommerce merchants, who will allow their customers to qualify for “FOB” when they purchase in certain quantities, or reach sales limits.


The National Motor Freight Traffic Association (NMFTA) establishes product classifications once a quarter. It is best to have the NMFC number on the Bill of Lading in order to avoid re-classification and accurately identify each pallet shipped. Freight rates vary by classification, so it is important to accurately classify shipments.


The fuel surcharge is rated based on the current fuel prices. The fuel surcharges vary by month to month, by carrier, and by service. The fuel surcharge is typically calculated based on the service / weight / zone + accessorial fees.


A fulfillment center provides inventory and order management for the owners of the inventory. Fulfillment services include but are not limited to:
Pick and pack services
Returns Processing

An inventory adjustment is made automatically when items are received, and when orders are entered. Manual inventory adjustments can be made when a shelf count is requested, and inventory is being improperly allocated, or if there are mathmetical calculation errors. These adjustments are made to accurately present the perpetual inventory counts.

Inventory under care and control of another party. Specifically the management of this inventory and the process required to keep a steady supply of this inventory to allow accurate and efficient processing of orders. There may be multiple locations that a given sku will be help. Overflow, pick shelves, and working stations. Inventory may also be moved on a regular basis between Hot and Cold areas. Different methods of Inventory control exist, depending on the warehouse setup, and the clients preference of inventory purchasing. These include “Just In Time” (JIT) and “Kanban” methods.


JiffyLite mailers are a product of Sealed Air. They are small pouches lined with bubblewrap. These small packages are ideal for products with a smaller footprint, that are not easily broken. The mailers are available in a number of different sizes.


This term refers to products that are already packaged and ready for distribution. A shipping label is simply applied to the outside of the package, and it is ready for delivery.


This term refers to deliveries made via Freight.


This is another term used to describe a fulfillment operation. Specifically when a fulfillment service company will accept mail based orders on behalf of the client and will typically enter these orders on behalf of the client. Often mail order fulfillment companies will also process checks on behalf of their clients. Similar to ecommerce fulfillment, but differing in respect to how orders are received and then entered into order processing systems.


A merchant account is an account that is setup with a bank in order to process credit card transactions. A merchant account is linked to a bank account, typically a business checking account, to which merchant funds are deposited or withdrawn. When a merchant makes a sale and puts the transaction through their merchant account, the funds from the transaction are directly deposited into the attached bank account. When a merchant processes a return or refund transaction, the funds are directly withdrawn from the attached bank account. Merchant transactions typically do not post to a merchant account as they occur. They are usually posted in a batch at some point during the day when the merchant settlement process is performed. Sometimes the settlement process must be manually initiated and other times it occurs at a set time of day. When using a Payment Gateway, this is usually dependent upon the particular gateway.


The act of entering an order into an inventory / order management system. There are numerous ways to enter orders into this system. Manual entry of orders is a simple way to enter individual orders at a time. File upload, is a more efficient method for entering orders. Real-time XML is an automated method, although requires some tech savy. If you are interested in a file or xml method, please contact us, and we will help.


The act of physically managing inventory, and shipping that inventory to the end customer. Typically used in reference to a third party fulfillment provider.


Invoices that are shipped with orders. Similar to packing lists, although these include payment details.


These systems in relation to order fulfillment, or neutral points of reference, are typically web-based, which enables a fulfillment center to coordinate orders with a fulfillment client, from anywhere in the world. This allows the client to instruct the fulfillment center to ship an order with specific contents, and with a chosen shipping method. Clients are also able to use the Order Management System to modify order details, and check inventory levels.


There is a broad variety of packaging. Including carrier provided packaging, (typically provided for Express services only) cardboard boxes, jiffy-lite mailers, bubble wrap, dunnage, foam, etc. Check with your fulfillment provider to determine if there is an additional fee for packaging, and whether they have “stock cartons” included in the fees that you pay.


Package processing is a term used to describe the steps involved in picking an order, packing the order, and creating the shipping label. There are a number of different methods for producing the shipping label. Traditional pick and pack, involves picking the order from a packing list, and then sending it to have the package weighed, and the label then being printed. This is opposed to the batch process method, in which the shipping label is printed first, and the order is assembled based on the information printed on the label itself.


Certain fulfillment clients will require Packing lists to be delivered with the products. The packing list shows the contents of the order, the company that sold the product, and often, return instructions, and coupons towards future purchases. Packing lists do not include any pricing details of the product, nor purchase information. Packing lists are often confused with Order Invoices.


Pallets are used for LTL and freight shipments. The industry standard for a “pallet” is 4’x4’x4′. Pallets are sometimes used as a way to estimate storage fees.


A payment gateway is an online system for processing credit card or other payment transactions in real-time. A payment gateway is typically linked to a merchant account. The payment gateway facilitates the coordination of communicating a payment transaction between the various backend payment networks or banks.


Per order fees are generally charged by fulfillment service providers. This fee will often include a packaging fee. This covers the expense of the setup of the order, the time it takes to pick, pack, and ship the order. This is often coupled with an associated per item fee.


Per item fees are charged by order fulfillment houses to cover the labor involved in traveling between different product locations, and the additional labor required to pack those multiple items.


Perpetual inventory is the number that represents the count of inventory, considering orders that have been shipped, are In Process, and backorders. This can be thought of as the “available inventory.” This number will only match actual inventory count, if there are no pending or in process orders.


The process by which a fulfillment company will locate the contents of an order, and assemble them into packaging for shipment.


Purchase orders are details that show the contents of an order. These can be used instead of, or in combination with packing lists. Often, purchase orders are included with wholesale orders.


When a fulfillment client issues a purchase order to stock a warehouse, the products must be inventoried, labeled if needed, assigned a Bin location, and the system updated to reflect the change in inventory. It is highly preferred to have packing lists for these inventory deliveries, as a packing list will make the receiving process more efficient.


When an end customer elects to return a product, or when a package is undeliverable, it is returned to the shipper. This package is then opened, and contents inspected to determine if the inventory has been used, or is salvageable. The information is entered back into an inventory control system to reflect the fact that the package was returned, and the system is updated with reasons, good contents, etc. This allows the client to determine whether a refund is applicable etc.


R.eturned M.erchandise A.uthorization. This is a unique number that is provided by manufacturers that indicates an end customer has been authorized by a company representative to return a product to the manufacturer for repair or refund. An RMA is similar to a tracking number in that it identifies a transaction, and both parties can get information on the progress of the transaction by using the RMA. It is not uncommon for a company to refuse a returned item if it is not accompanied by an RMA identifier. A practical reason for using an RMA system is that manufacturers want the customer to contact them before simply returning a product for repair or refund because the problem may be remedied during the live interaction with the company’s representative. The issuance of an RMA often is the last resort when the problem with the product cannot be rectified.


The term “service” is generally used in reference to a carrier specific delivery method. For example Next Day Air, Second Day Air, and Ground Delivery.


This is requested when a client or a fulfillment center suspects that inventory counts are incorrect. The fulfillment company wil then physically count all of the inventory for a given sku.


Packages shipped via FedEx, UPS, and DHL, are provided with $100 of free insurance. This insurance covers damage to the product, or loss of the product. Additional insurance is available for a small fee, typically $0.70 per $100 of additional insurance.


When an order is shipped and billed, the Shipcost Re-imbursement is the fee that a client pays to their fulfillment provider to cover the expense of the shipping portion of the fulfillment process. The rate that the client will pay, depends on their negotiated discounts. This amount can vary by selected service, carrier, and the accessorial fees.


The Shipping rates vary dramatically by carrier. Some carriers have multiple levels of “retail.” For example UPS has “counter rates” (the amount usually charged in UPS stores), daily pick rates (which are then discounted.) Shipping rates contain various accessorial charges.


Shrinkage is the term used to describe a misallocation of inventory, due to software miscalculations, stock mismanagement, orders being sent incorrectly, theft, or improper receiving counts. Shrinkage is usually discovered when inventory is depleted and physical inventory counts do not match perpetual counts.


Signature required is available through USPS, UPS, FedEx, and DHL. Signature required is an option to force a customer to acknowledge that they received a package. There are varying levels of signature required; Adult signature required, direct signature required, and indirect signature required.


S.tock K.eeping U.nit. This is used to identify an individual product. Often a unique SKU is used for color / size / combinations.


Inventory is maintained and held in another’s care in an organized and often labeled fashion.


Fulfillment companies will charge fees associated with the receiving, inventory and warehousing of a client’s goods. These fees will vary greatly by fulfillment company, and range from calculations based on actual dimensional storage requirements, to per item fees, to per pallet fees. Many fulfillment companies will also include their administrative fees within the storage fee.


This is the insurance that covers a client’s inventory when it is under the care and custody of another party. At a minimum, this insurance should cover theft, fire damage, and natural disasters. Storage insurance policies vary by fulfillment company. Often fulfillment companies will require you to carry your own policy to cover your inventory. Other times, fulfillment companies may hold an umbrella policy to partially insure your items.


Tracking services are provided by UPS, FedEx, and DHL. When a package is shipped, a number is provided which can be checked on the carrier website. The details on the website will show the package process as it makes it’s way to the final destination. This is used when a customer states that there package has not been delivered.



Zones are most easily thought of as transportation rings travelling outward from a package origin to the destination. The further the destination is, the higher the zone number. The higher the zone number, the more the transportation cost. There are also international zones, however, these are not based solely on distance or proximity to the origin. Instead, international zones are based on destinations that receive the most service.

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