Every profession has their own acronyms, and they’re a great way of quickly communicating a profession specific phrase or reference. The logistics and supply chain profession is certainly no exception to this, so in this post we explain more than 50 of the most common supply chain and logistics acronyms in use in the UK today.
These are just the ones that are in regular use, we don’t doubt that we could get this list to 100+!
3PL: Third-Party Logistics Provider
A provider of outsourced logistics services, predominantly referenced to transport and warehouse providers who supply and/or manage logistics resources on behalf of their clients. Well-known 3PLs include DHL, XPO, Kuehne + Nagel and Ceva.
4PL: Fourth Party Logistics Provider
A 4PL is usually a non-asset based ‘organiser’. A 4PL orchestrates the alignment of resources and technology of 3PLs in order to provide a logistics service to an end client. In essence they are the main contractor for the service provided.
ABC (‘Analysis’ or ‘Classification’)
Not actually an acronym, and not to be confused with Activity Based Costing. ABC refers to classifying products according to their sales volume, frequency, value or strategic importance in order to manage inventory levels effectively or efficiently locate stock in a warehouse.
AEO: Authorised Economic Operator
AEO is an internationally recognised status and quality mark for logistics operators. AEO status confirms that the operators customs controls are standardised and compliant, and also gives the operator access to simplified customs procedures. There are two elements to AEO: operators can have Authorised Economic Operator Customs (AEOC) or Authorised Economic Operator Security (AEOS). When an operator has both of these then the general mark used is AEO.
API: Application Program Interface
In the context of logistics operations, API often references the protocol for the interface between an ERP system and an operations management system i.e. a Warehouse Management System (see WMS).
APICS: American Production & Inventory Control Society
APICS’s role is now somewhat broader than the acronym would suggest. APICS is a professional association for supply chain management and provides international research, education and certification programs in supply chain management. It merged with the Supply Chain Council in 2014 and is still quite US-centric. However, it also operates through regional partners including the Chartered Institute of Logistics and Transport in the UK.
ATO is a ‘supply chain postponement’ strategy to minimise finished goods inventory, reduce customer lead times and allow for product customisation. This is achieved by holding component stocks and assembling those components into the finished product when the customer order is received.
Sometimes referred to as a business strategy, but more closely fits with a simple classification of the market that the business sells to i.e. to other businesses (B2B) or consumers (see B2C).
As with B2B, B2C is sometimes referred to as a business strategy, but is more a simple classification of the market that the business sells to.
BI: Business Intelligence
A generic term for a technology platform than enables data analysis and presentation of large volumes of information. This information is usually derived from a company’s Enterprise Resource Planning system (see ERP).
BOM: Bill of Materials
The BOM refers to all the material that is required to manufacture or assemble a finished product or component part. Put simply, it’s the products ingredients.
CMILT: Chartered Member of the Institute of Logistics & Transport
For election to the level of Chartered Member, members must either hold the Institute’s Advanced Diploma, or an exempting qualification such as an accredited degree, along with at least five years’ relevant experience with a minimum of two years at a senior level.
COG: Centre of Gravity
In logistics terms COG refers to the optimal geographic location, usually of a Distribution Centre (see DC), where the inbound and outbound transport time, distance and/or costs are minimised. A COG analysis will usually consider both the inbound (supplier) and the outbound (customer) transport movements.
DC: Distribution Centre
Put simply, a DC is a warehouse that distributes goods outside of a company’s internal supply chain or to it’s retail estate. When a warehouse is used to support a company’s internal manufacturing, it is usually referred to as a warehouse, not a DC.
EDI: Electronic Data Interchange
EDI is the automated transfer of data between systems. In logistics, EDI is commonly referred to in the context of client Enterprise Resource Planning systems (see ERP) connecting with the Warehouse Management Systems (see WMS) of 3rd party logistics providers (see 3PLs).
EOQ: Economic Order Quantity
The EOQ is a calculation of the optimal quantity of goods to purchase in order to minimise carrying costs and ordering costs. It is sometimes known as the Wilson formula and was devised in the early 20th century. The original formula for EOQ is now widely recognised as ineffective for modern supply chain management, as the advent of technology means the cost of ordering is negligible (compared to the early 20th century ordering processes that required higher levels of staffing).
ERP: Enterprise Resource Planning
ERP refers to a software platform that allows a company to use a series of integrated software modules to manage their business. Modules within the ERP will usually include supply chain, manufacturing, finance and human resources among others. The most common ERP systems in the UK are SAP, Infor, IFS and Oracle.
FCILT: Chartered Fellow of the Institute of Logistics & Transport
Chartered Fellow is the highest grade of Institute membership and requires at least seven years’ experience in a relevant position of high responsibility within the logistics industry.
FCL: Full Container Load
FCL is a container shipping term. Contrary to the term, it does not necessarily indicate a full container, but rather a container with only one shipment for a single destination. Consequently, the container can be part full and FCL just indicates that it has not been consolidated with other shipments.
FLT: Fork Lift Truck
Generic reference to any type of fork lift truck i.e. reach, counterbalance, sideloader etc.
FMCG: Fast Moving Consumer Goods
FMCG refers to high volume, high throughput consumer goods that are usually relatively low cost. This includes most food and drink products, and many of the products you will find for sale in supermarkets. FMCG is most often a term used to classify a business sector as opposed to an individual product.
IBP: Integrated Business Planning
IBP is a relatively new term and is an evolution of Sales & Operations Planning (see S&OP). Whereas S&OP historically referred to balancing supply and demand by creating a consensus view between sales and operations, IBP expands on this approach by incorporating wider business functions such as finance and marketing.
IDW: Irregular Dimension and Weight
IDW is a term referring to products that may require specialist handling within the logistics network due to their size and/or weight. These types of products are also referred to as ‘ugly freight’ and include items such as kitchen worktops, mattresses and some sanitaryware products. Specialist logistics providers in this sector include DX and Tuffnells.
ISO: International Standards Organisation
ISO is an international non-government organisation that develops international standards for products, services and systems. In the logistics industry ISO standards help facilitate efficiency by creating standard coding, identification and marking of transit media such as shipping containers.
KPI: Key Performance Indicator
A KPI is a quantitative measurement, taken periodically, to ascertain business performance. KPIs within logistics vary widely but typically include inventory accuracy, inventory ageing, order picking accuracy and dock-to-stock time.
LCL: Less-than-Container Load
LCL is a container shipping term indicating that the volume of the shipment is less than a full container. LCL loads are usually passed to a consolidator who then fills containers with multiple shipments and separates at the destination port.
LSP: Logistics Service Provider
LSP is a term less commonly used for 3rd Party Logistics Providers (see 3PL).
LTL: Less-than Truckload
LTL is a road freight delivery that only requires a part of the vehicles full capacity, but is greater than a parcel i.e. a pallet. In the UK LTL is predominantly undertaken by pallet network providers. In the UK, LTL is also sometimes referred to as LTFL (Less Than Full Load).
LLOP: Low Level Order Picker
Low Level Order Pickers are powered pallet trucks where the forks are behind the driver. Often referred to in the warehouse as “Lollops”, they are used for picking from low levels in warehouses with fast moving picking operations.
MAD: Mean Absolute Deviation
MAD is a common measure of forecast accuracy. The calculation is relatively simple, it is the average variance between forecast and actual (with each variance expressed as an absolute number).
MAPE: Mean Absolute Percentage Error
MAPE is the same forecast accuracy measure as Mean Absolute Deviation (see MAD) but expressed as a percentage. To calculate MAPE you calculate the average percentage variation between forecast and actual (with each variance expressed as an absolute).
MILT: Member of the Institute of Logistics & Transport
Member of is the first grade of full membership of the Chartered Institute of Logistics and Transport (UK). To become a member usually requires at least 3 years’ relevant experience and relevant professional qualifications.
MOQ: Minimum Order Quantity
The Minimum Order Quantity relates to the minimum number of units a supplier will sell on a specific order. MOQs are usually introduced to avoid sub-optimal production runs, or to avoid cost inefficiencies in picking and transportation.
MRP: Materials Requirements Planning / Manufacturing Resource Planning
MRP is a system, or set of procedures, to ensure sufficient material and resources are in place to manufacture against product demand. Usually MRP processes relate to the order-book and a short-range forecast of up to 3 months. Beyond the 3 month horizon planning is undertaken at an aggregate level and is usually planned through a Sales & Operations Planning process (see S&OP).
MTO refers to producing a product only when the customer order is received. This is efficient in terms of reducing finished goods inventory, but has potential impacts to resource levelling in manufacturing and increased lead times, compared with the customer buying from stock.
MTS refers to a product that is manufactured and placed into stock so it is readily available for customer orders. MTS indicates that there is a ‘decoupling’ point in the supply chain i.e. supply and demand are not synchronised, and consequently a stock buffer is required. Usually an MTS product will have a set Reorder Point (ROP) and a manufacturing replenishment order will be made once the stock has reached the ROP.
NDC: National Distribution Centre
As with a Distribution Centre (see DC), an NDC is a warehouse that distributes goods outside of a company’s internal supply chain or to its retail estate. However, the ‘National’ prefix implies that it also transfers goods to Regional Distribution Centres (see RDC).
OEM: Original Equipment Manufacturer
OEM refers to a company that manufactures and supplies component parts that are then assembled into an end product by a separate company. For example, in the automotive industry, Magna supply a range of component parts to Jaguar for their finished vehicles. In this context Magna are considered an OEM.
POD: Proof of Delivery
POD is the requirement for a logistics provider to be able to demonstrate, on request, that a delivery has been received by the intended recipient. POD is now commonly captured electronically, although paper based systems are still in regular use by some smaller logistics providers.
RDC: Regional Distribution Centre
As with a Distribution Centre (see DC), an RDC is a warehouse that distributes goods outside of a company’s internal supply chain or to its retail estate. The ‘Regional’ prefix usually implies that the RDC is part of a warehouse network and it is supplied from an National Distribution Centre (see NDC) in order to better service a local region.
RFID: Radio Frequency Identification
RFID is a method of identifying and tracking products and assets within the supply chain. An RFID tag contains electronically stored data which is read by strategically positioned readers using electromagnetic waves. RFID is considered an evolution from bar code scanning as RFID tags and readers do not need to be within line of sight.
ROL: Reorder Level
ROL is an inventory policy that dictates that a replenishment order is placed when the inventory reaches a predetermined level (see ROP – Reorder Point).
ROP: Reorder Point
The ROP is the level that inventory must reach, or be forecast to reach, before a replenishment order is made within a Reorder Level inventory policy (see ROL). It is sometimes referred to as just OP (Order Point).
ROP: Reorder Period
Where ROP refers to Reorder Period, it implies that the inventory policy is to replenish at regular intervals as opposed to when inventory reaches a certain level. The ROP is the frequency of replenishment i.e. daily, weekly etc.
ROQ: Reorder Quantity
The ROQ is the number of items that need to be ordered to replenish an existing inventory. ROQ is used within both a ROL policy (see ROL) and a ROP policy (see ROP – Reorder Period).
S&OP: Sales and Operations Planning
S&OP is a process, first conceptualised by Richard Ling in the 1980’s, that facilitates supply and demand balancing on the mid to long term planning horizon (usually 3 to 18 months). It’s purpose is to ensure that sales requirements and operational resources are aligned, and that all plans have consensus and harmonisation. It has now evolved to include wider business functions such as finance and marketing (see IBP).
SCOR: Supply Chain Operations Reference Model
SCOR is a supply chain framework that links processes to performance metrics. SCOR focusses on 6 process areas that are referred to as ‘Level 1’; they are: Plan, Source, Make, Deliver, Return and Enable. SCOR was developed by management consultants in the 1990’s and endorsed with the Supply Chain Council, which is now part of APICS.
SLA: Service Level Agreement
A Service Level Agreement is a contract, or informal agreement, that defines the service required between a supplier and a customer. For supply of physical products it will usually include supply lead times, contingency arrangements and customer support requirements.
SOP: Standard Operating Procedure
SOPs within logistics are normally simple step-by-step instructions used to inform operational staff on how specific tasks should be undertaken. The aim of SOPs is to ensure conformity and efficiency in areas such as warehouse picking, vehicle loading, stock replenishment etc.
SKU: Stock Keeping Unit
A SKU is a physical item that has a unique set of attributes distinguishing it from any other item. For example, if a company sells A4 paper, then A4 Paper may be the product family but ‘A4 Paper 80 gsm’ will be a SKU and ‘A4 Paper 100 gsm’ will be a separate SKU. Separate SKUs can also be created where the same product is sold in varying pack configurations.
TMS: Transportation Management System
TMS is a generic term for a system that enables planning, execution and reporting of transport movements within the supply chain. TMS functionality can include route planning, vehicle tracking and metrics reporting.
VMI: Vendor Managed Inventory
VMI is where the vendor of a product agrees with the customer to maintain a level of inventory at the customers premises. The vendor is responsible for monitoring inventory levels at the customers premises and providing replenishment in line with the agreed inventory targets. VMI should not be confused with consignment stock, which is a stock at the customers premises that is owned by the vendor and isn’t paid for by the customer until it is consumed.
WIP: Work in Progress (or sometimes Work in Process)
WIP is an inventory of goods that are not yet fully manufactured and consequently are still in progress.
WMS: Warehouse Management System
WMS is a generic terms for a system that facilitates the key warehouse fulfillment activities, from goods receipt to storage, picking and despatch. The WMS will also manage sub-processes such as replenishment, inventory checks, resource management and quarantine.