In the fast-paced realm of eCommerce, understanding key terminology is essential for success. This article serves as a concise guide to important concepts such as eCommerce actors, warehouse operations and more. Whether you're a newcomer or a seasoned professional, grasping these terms is crucial for navigating online retail complexities.
Ecommerce actors
There are several key actors:
- Vendor, manufacturer, sometimes – merchant, seller is someone who initially owns a product, manufactures or creates it. Someone who has their own brand, but this is not a rule.
- Wholesaler is someone who purchases products from a vendor by wholesale and re-sells/re-supplies them to retailers afterwards. Suppliers/distributors can also act as both retailers and vendors.
- Retailer is someone who sells products to an end user.
Operating models in eCommerce retail
According to business principle
Here are retail’s basic operating models, whether that be marketplaces or offline retail.
There are also some combinations and derivatives of these operating models, for example, a VMI (Vendor managed inventory) - a customised purchase, when at the time of ordering a product is located at the warehouse of a merchant/vendor and the whole order fulfilment is performed by a retailer. (Yandex Market incorrectly calls it cross-dock).
Be careful not to confuse it with operations, for example, cross-docking, which has nothing to do with it. See the Operations section.
- Standard retail is an operating scheme of a shop/marketplace when products are stored at and are sold from a controlled warehouse of a shop/marketplace; stock balance and delivery are controlled by a seller. The level of service provided to a user is a complete responsibility of a retailer.
- Dropshipping is an operating scheme, when products are sold from a merchant’s warehouse, bypassing the basic fulfilment operations of a retailer.
There are also some combinations and derivatives of these operating models, for example, a VMI (Vendor managed inventory) - a customised purchase, when at the time of ordering a product is located at the warehouse of a merchant/vendor and the whole order fulfilment is performed by a retailer. (Yandex Market incorrectly calls it cross-dock).
Be careful not to confuse it with operations, for example, cross-docking, which has nothing to do with it. See the Operations section.
According to contractual principle
- Agency agreement - we work according to a rate, even if this rate is an interest.
- Commission agreement (a very rare type of agreement) implies actions made on the basis of a power of attorney. This type of agreement is hardly ever used in trade, but is widely used in logistics and transportation.
- Commission trade - is when a product is sold on our website on behalf of the product owner. The most widely-spread operating scheme of marketplaces.
Operations
Functions
Operations imply a toolset for maintaining business models. To achieve the desired business result, these tools may be combined, used only partially or in a different order. These tools are not marketplaces’/retail’s operating models in themselves.
- Fulfilment, fulfilment - in broad terms - is a complete process of order execution, from picking from storage, packaging and delivery to a spot where it is purchased by a customer. Can be substituted with a phrase "Order fulfilment". In narrow terms - is only a process of preparing an order to be sold and dispatched.
- Supply chain is a full cycle of product/order supply, control and delivery. It encompasses manufacturing, planning of product availability and availability of additional tools/materials and logistics operations.
Warehouse operations
- Unit load, handling item is a logistics operator’s term for a physical unit to be moved. It can either be a product, a parcel, a pallet, a sack, etc. In logistics, a unit load is an aggregated item of accounting.
- Shipment is an aggregated joint movement of goods within a unified set of documents. It usually comes with a certificate of transfer and acceptance, a consignment note, etc.
- Warehouse is a physical asset, where goods are accepted, stored and dispatched. There are different types of warehouses (see below).
- Distribution Centre a hub warehouse for logistics operations, where goods are permanently or temporarily stored before being further distributed to other offline assets of a logistics network. For example, a warehouse of Perekrestok supermarket chain in Sofyino (Moscow region), from which shops, or dark-stores or fulfilment centres are replenished. As a rule, such centres don’t deal with direct shipments to customers. Such warehouses usually handle batches of goods and store them in pallet format, although there might be exceptions.
- Fulfilment Centre is a hub warehouse for logistics operations, where goods and orders are processed on a full cycle before being further fulfilled and sold (see Fulfilment in narrow terms).
- Transit Warehouse (TWH) is an intermediate warehouse in a supply chain. It is usually a cross docking-terminal.
- Crossdocking terminal/warehouse is a transit warehouse, where crossdocking operation is performed. It usually has no storage area. The most prevalent arrangement is a pass-through warehouse with one side of it dedicated to acceptance and the other side of it to dispatch goods. The main function of a cross-docking terminal or a transit warehouse is focusing/centralising logistics flows for consolidation, decomposition and sorting of shipments.
- Temporary storage warehouse is normally a transit warehouse for short-term storage of goods (usually up to 1 month and up to a week on the average). It is usually a warehouse where goods are collected for further transit transportation. For example, companies like Trendyol, Alibaba, Amazon use aircraft linehaul for cross-border transportation of orders, so at their B2C warehouses they accumulate batches of orders for a further one-off transportation to an airport.
- Mezzanine is a multiple-level steelwork at a warehouse which can either be used for walking or where automatic equipment is placed. It helps to transform a single-level warehouse into a multi-level one. It is used to increase the actual storage area.
- Parcel is a packaged merchandise with an indication of logistics information on the package. There are following packaging types of parcels: boxes, bags and goods with missing packaging (e.g. 5-litre film-taped bottles).
- Delivery/Shipment is a set of parcels sent to an addressee in a single delivery. The instance of a delivery is a shipment.
- Multiparcel delivery is a method of registering an order with a delivery service/warehouse in a way that all the parcels of the given order are registered within a unified logistics order and thus are transported under a unified track-code.
- Multi-order delivery / multi-order is a method of registering an order with a delivery service/warehouse in a way that each parcel of a customer order is registered as a separate logistics order. Each parcel is transported under its own unique identification code.
Inbound operations
- Inbound — all inbound operations of logistics partners or large-scale processes. For instance, all operations related to receiving shipments at a warehouse are called inbound. For a last-mile logistics operator, receiving goods from a middle-mile operator will also be considered an inbound operation. Receiving customer and non-customer returns by a warehouse is also an inbound operation.
- Pick up is a service or an operation of receiving goods from a partner or someone at a partner’s facility and their further transportation to a target destination. For example, a pick-up from a merchant’s warehouse to a warehouse in Sofyino: our car or our partner’s car comes to a merchant, picks the goods up and takes them to a warehouse in Sofyino. It does not matter if the car has made a stopover or if the goods have been restacked before getting to Sofyino warehouse.
- Receiving is a logistics operator’s inbound operation оf receiving cargo/goods/orders in any form. In warehouse logistics, receiving usually ends with placing goods in a storage area. In delivery logistics, it ends with either allocation or transfer for further processing.
- Identification process is a process of identifying goods or handling items, which is performed before they are logged into or verified in an accounting system. It is used as a major tool to record the movement of goods and handling items. At our warehouse, this process is called secondary receiving.
- Shipment discrepancies are the differences between the amount of goods, declared by a consignor and the actual amount of goods, received by a receiving party. Shipment discrepancies are documented in a transfer and acceptance certificate, as well as in TORG-2 form.
Storage and warehousing
- Storage is self-explanatory.
- Stocktaking is a complex of operations aimed at a physical and/or system check of goods/handling items that are located at a logistics operator’s. As a rule, there are two types of stocktaking: a cyclic count and a full stocktaking. Based on the results of stocktaking, shipment discrepancies may be documented (see Shipment discrepancies). For B2B services, the results of stocktaking are documented in papers with an INV prefix, e.g. INV-5.
- Cyclic or spot stocktaking is a procedure aimed at checking availability and the current status of some goods/stock. It is usually carried out quite often or upon request from the owner of the goods.
- Full stocktaking is a full check of the current status of all goods/handling items etc, located at a logistics partner’s. It is carried out at least once a year in accordance with audit procedures.
Outbound operations
- Wave is a group of orders put to picking. A wave is usually the major aggregate matter in order picking and packaging. A wave usually ends with packaging. As a rule, waves have dependent groups of orders: batches, as well as picking orders. They help monitor and manage warehouse operations.
- Batch is a group of orders within a wave, arranged according to a certain principle. Batches are usually used to bring orders to a certain consolidation or packaging station, or to put up separate order picking spaces. Batches are widely used in warehouse automation to group orders into separate flows.
- Picking order is a group of orders within a wave or a batch, which is sorted in a specific way, usually with an indication of a storage location and a picking route. This group is assigned to a warehouse employee.
- Order start is a complex process of creating waves and launching them. Order starts are divided into manual and automatic ones. When an order starts, goods are reserved for orders (if this hasn’t been done yet), then the waves, batches and picking routes are created. An order start is a complicated procedure, which requires the assessment of warehouse capacities in terms of all outbound procedures, otherwise, if the waves are launched in an unbalanced manner, congestion, as well as stock and parcel excess may occur.
- Picking is a process of withdrawing goods from storage for further packaging and dispatch.
- Sequence picking, simple picking is an order-picking technique, when the goods from customers’ orders are given to a picker in a way that the whole order makes up just one picking order. This picking method is perfect for low-capacity single-level warehouses, but it does not suit large multiple-level warehouses because of its inefficiency: a picker has to move between the levels and the picking routes are extremely hard to cut.
- Parallel picking is an order-picking technique, when the goods are picked from each zone simultaneously, in parallel. A picker is not assigned with any goods from other zones or levels. Such picking technique is accompanied by an obligatory order consolidation before packaging.
- Consolidation is a process when the goods are divided into separate groups for packaging in accordance with the customers’ orders .
- Packing, packaging is a process of creating a shipment. The goods are typically packed into boxes or sealed bags. A packaging must be marked with a delivery label (a tag, a nameplate). Depending on the type of transportation, there are multi-delivery and multi-parcel orders, and this determines the manner of parcel identification.
- Shipment sorting, sorting is a process when completed shipments are distributed according to shipping destinations and vehicles.
- Dispatch is a set of activities, which includes loading vehicles, handing over the accompanying documents and their departure from a logistics operator’s warehouse. It is usually followed by a write-off of goods and handling items in favour of the recipient.
Transit operations
- Crossdocking/Xdocking is a process that involves products being transferred directly from incoming transport to outbound transport, which eliminates the need for storage. The major KPI of crossdocking is the processing speed. There may be several crossdocking formats: crossdocking with packaging, without packaging, with sorting according to destinations or with consolidation. Crossdocking may also be carried out without changing the type and content of transportation. A more clear explanation: Cross-Docking - Your supplier's truck shows up. You unload the shipment. Instead of putting the delivery into your inventory, you move it "across the dock" into a truck, ready to deliver to your customer.
- Complex routing is transporting goods using various types of transport or transport operators, with the involvement of several logistics agents. The vast majority of the world’s transportations is complex.
- Linehaul is a term that refers to transportation of large volumes of goods by any means of transport by land, air or water between two specified stations. The linehaul’s main feature is that the shipping cost is based on the quantity of cargo and the volumetric weight.