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Shipping Terms Simplified: A Handy Guide

vijay

Vijay Kumar

Senior Specialist - Marketing @ Shiprocket

January 5, 2024

8 min read

The world of eCommerce is growing tremendously, capturing markets everywhere globally. Since buying and selling online has become very common with a vast majority of people, it is necessary to understand and familiarise yourself with the commonly used jargon in the industry. A clear understanding of the key terms can help online sellers avoid all types of mistakes during shipping.

Common Shipping Terms

If you consider shipping and logistics, several processes and details are involved in packing, picking, and shipping orders. Hence, understanding and learning the terminologies can help you substantially with the shipment process. This article lists all the common shipping terms and their definitions to help you gain familiarity with the industry’s jargon.

Understanding Common Shipping Jargon

Here is a list of the common shipping terms used in the industry:

●   3PL: 3PL stands for “third-party-logistics.” It strictly refers to logistics companies like Shiprocket that enable eCommerce businesses to outsource various order fulfillment operations. These include picking, packing, shipping, inventory management, warehouse management, etc.

Many eCommerce merchants partner with a 3PL agent to handle some or all of the business’s logistics processes for a certain fee. A 3PL partner generally gives the following services:

❖  Picking

❖  Packing

❖  Inventory management

❖  Warehousing

❖  Assembly

❖  Last-mile delivery

❖  Shipping arrangements

❖  Returns management and reverse logistics

By outsourcing, eCommerce businesses can focus on their business activities and workflows. Using a 3PL partner can be extremely cost-effective as they provide the right infrastructure and tools to improve the business’s overall efficiency.

●   Air freight (Air cargo): The process of transporting freight shipments using an aircraft is called air cargo. It is one of the many methods of shipping freights that eCommerce businesses use to gain inventory from far-away suppliers or simply ship parcels to far-off locations. Air transport can be used in both intermodal and multimodal transportation.

Generally, transportation via air is best for expedited shipments that are on a tight timeline and must be delivered quickly. Thus, air shipping is expensive and only generally viable for some eCommerce shipping.

●   Backorder: An order placed for an item that is out of stock and hence cannot be completed until the product in question is back in stock is termed backorder. An array of reasons causes backorders. A business might run out of a specific inventory item; when this happens, they order more inventory from their manufacturer or supplier. In the meantime, the product listing will stay on the business’s website, and the buyer will receive the order later when the stock is available. In cases where other items in the same order are in stock, the order might be split and shipped at different times.

●   Batch fulfillment: Batch fulfillment is also called batch picking, and it is a method that includes fulfilling a large number of orders that are all placed simultaneously. For this type of fulfillment, a picker picks up enough inventory to complete multiple similar orders in one trip through the warehouse.

●   Bill of lading (BOL): A bill of lading is a document made and issued by the carrier agency that acknowledges cargo receipt for shipping. Bill of lading was once valid only for shipments shipped via sea but is now also used for other freight shipping methods.

●   Blind shipping: A dropshipping method that ships orders from the manufacturer directly to the consumer is known as blind shipping. It is termed blind shopping, as the supplier’s identity will remain anonymous. Hence, consumers assume that it came directly from the merchant. Blind shipping is an extremely common SCM technique to protect a specific business. It also encourages target customers to order from these businesses again, not directly from the manufacturer. Hence, the merchant continues to hold the middleman role as the supplier remains unknown.

●   Bulk cargo: Cargo shipped loosely in an unpacked manner and in large quantities is termed bulk cargo. Such cargo is directly poured into the container and is shipped.

●   Bonded warehouse: A building or secure location containing and storing all dutiable cargo is known as a bonded warehouse. Private enterprises manage these.

●   Backhaul: Returning a transport vehicle from its original destination to its real point of departure is termed backhaul.

●   Dimensional weight: A weight estimated by calculating from the volumetric dimensions of a package using the longest point on all sides is known as dimensional weight. It can be used to determine the cost of shipping a package.

●   DDP shipping: Delivery Duty Paid shipping is simply an agreement between the buyer and seller. This places all the burden and risk associated with shipping freight on the seller until the buyer receives it. Although the DDP shipping process can be employed on any order, it is generally used for international shipments. As international orders travel large distances, they incur high shipping costs and are much more likely to get damaged.

●   Ex-works: Ex-works (EXW) is also an agreement between the buyer and seller. The arrangement says the purchased items are to be dropped off at a specific location, upon which the buyer bears the liability and responsibility for the goods. However, the seller is not responsible for loading goods into the buyer’s method of transportation.

●   Free carrier: Free carrier (FCA) agreement is a form of a delivery agreement wherein the seller is responsible for transporting and delivering purchased goods to a carrier location of the buyer’s choice. The costs associated with this are also the buyer’s responsibility. This is brilliant for eCommerce businesses as they are not liable for costs due to damage or export fees.

●   Free on Board: free on Board is an applicable agreement for freights shipped via sea. Here, the seller must transport items to the buyer’s location and assume the fee incurred. The seller is also responsible for all the damages and other issues during shipping.

●   Freight forwarder: This is an intermediate service between a freight shipping company and a merchant to arrange different elements of the freight shipping process. These include mode of transportation, freight rate negotiation, packing, etc.

●   Incoterms: These are a series of standard commercial terms designed to avoid confusion in international business, logistics, transportation, and trade agreements.

●   Last-mile delivery: It is a logistics term that is used to describe the transportation of a specific parcel from any fulfillment center to the final destination of the parcel. The ultimate goal of last-mile delivery is to reach its destination as quickly and cheaply as possible.

●   Order fulfillment: The entire process of getting an order to a buyer from the customer to fulfilling its delivery at the customer’s doorstep is known as order fulfillment. As it involves several complicated processes, merchants benefit by outsourcing it to a 3PL partner.

●   In-house or self-fulfillment: Self-fulfillment pertains to eCommerce businesses that choose to store inventory in their facilities. They pick, pack, and ship all their orders by themselves.

●   Reefer: An intermodal shipping container having a refrigeration facility for transporting temperature-sensitive goods is called a reefer carrier.

●   Shipping zones: This refers to geographical areas that carriers ship to, spanning from zone one to zone eight. Zone 1 will be the closest to the fulfillment center, and zone 8 will be the farthest.

●   White-glove delivery: White-glove delivery services tend to exceed the typical expectations. They often include unpacking and placement services as well.

●   White-label shipping: White-label shipping is a form of shipping with no branding or labelling on the packages to identify the supplier from which the goods have arrived.

How can Shiprocket’s Shipping Solutions Help you?

Shiprocket is extremely well-known for providing creative and innovative solutions to all the shipping needs of an eCommerce business. You can experience smooth, fast, and efficient international shipping through their various solutions. Irrespective of whether you are selling via an eCommerce website or through social media, Shiprocket’s excellent software solutions will help you with all your tracking and management needs.

They seamlessly integrate with all platforms and are extremely dynamic, hence,  can be customised to meet your needs. Shiprocket has been employed by over 2.5 lakh merchants across India, and they complete over 20 crore transactions every year. Moreover, they have a 30K crore annual GMV with over 25 crore delivered shipments. Hence, Shiprocket is an ideal partner to choose to meet all your needs.

Conclusion

Speaking the language of international trade will come naturally to you if you have a solid grasp of the Incoterms regulations. You will become better acquainted with the terminologies that previously seemed complicated and feel more assured while negotiating your contracts. Most significantly, you’ll be better positioned to bargain for the best terms for your company’s financial line if you understand the incoterms in your agreements. You will constantly come across these terms while looking at international trade agreements and documents. So,  having a thorough understanding of the most commonly used terms will help you avoid mistakes and read the fine print better.

Why are shipping terms important?

Shipping terms are important for several reasons. They help you clearly define the responsibilities of all parties involved in the shipment of goods. Shipping terms can also help you make informed pricing decisions.

What are some of the most common forms of shipping?

Some of the most common forms of shipping include truckload, less than truckload (LTL), and intermodal. Ocean freight is a common and cost-effective form of shipping for importers and exporters.

Which agency issued the Incoterms?

Incoterms, a set of 11 individual commercial rules, is issued by the International Chamber of Commerce.

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