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VTM Transportation Glossary

Air freight forwarder: Non-asset-based firm whose primary advantage is cost. Negotiate low rates with the airlines and resell in small quantities to the shippers.

Airlines - asset-based: Also called integrated companies or integrators because they use their own fleets of airplanes and trucks.

Airlines - Majors: Those earning revenues $1 billion or more annually in scheduled service; formerly referred to as trunk carriers.

Airlines - Nationals: Those with annual revenues between $100 million and $1 billion.

Airlines - non-asset-based: Also called airfreight forwarders. Purchase space in large quantities from the integrators and resell in small quantities to shippers.

Airlines - Regionals: Those with annual revenues under $100 million.

Alternate insurance: A cheaper insurance method offered by insurance companies with discounts between 30 to 60 percent off the small parcel carriers' rates.

AQ rates: Apply on any quantity regardless of weight, and usually apply on bulky products in LTL quantities.

Asset-based third-party providers: Own transportation and/or warehouse equipment.

Average demurrage agreement: Basically a system of credits and debits in demurrage agreements with the railroads.

Backorder: Occurs when one is out of stock, but promises to ship a backorder when the product is available.

Benchmarking: The process of comparing your firm's performance against the best practices of other leading companies and determining how you might improve.

Bill of lading: The most important document in transportation. It is the contract between the shipper and the carrier and contains the terms and conditions.

Brokers (transportation brokers): Middlemen or facilitators or intermediaries between truckload carriers and shippers. Independent contractors who act as sales agents for truckload carriers, charging a commission for each truckload they arrange.

Class rate: The most expensive LTL freight rate; there is a class rate applicable on every product between every city pair in the country.

COD shipments: Those for which the carrier provides a collection service, obtaining payment of the seller's invoice from the buyer.

COFC: Container-on-flat-car, a type of intermodal rail transportation.

Combination rate: Two or more rates used in a single move by two or more carriers; almost always results in higher transportation charges.

Commodity rate: Negotiated with the carrier based on a promise of large quantities of freight between two specified points. Provided for specific products between specific points with minimum weights specified.

Consolidation: Combining two or more shipments. Inbound consolidation from vendors is called make-bulk consolidation; outbound consolidation to customers is called break-bulk consolidation.

Contract logistics firms: Specialized types of outsourcing firms; also called third-party logistics providers.

Contract rates: Agreed-upon rates between a shipper and a carrier; the trend today between large carriers and large shippers.

Contract warehousing: A form of public warehousing that is used for longer period of time than the typical public warehousing arrangement. Allows a firm more time to concentrate on its core competency.

Core competencies: Those functions of the firm in which the firm is most competent.

Customs broker: A highly trained import professional; licensed by the U.S. Customs Service.

Cycle time reduction: Reducing cycle time, cutting costs, and improving customer service, all at the same time, is the goal of this concept.

Dedicated contract carriage: The truckload carrier assigns dedicated equipment and drivers to the shipper's operation. The objective is for the shipper to eliminate its own private fleet.

Deficit weight: The difference between the actual weight and the next higher weight level is called deficit weight (or wind).

Demurrage: A penalty payment incurred by the shipper or consignee for holding a rail car beyond the free time allowed by the railroad.

Detention: A penalty against the shipper or consignee for keeping a truck or trailer beyond the specified free time.

Discount: An agreed upon percentage reduction deducted from the total transportation charges.

Diversion: Stopping a shipment short of destination and diverting it to an alternate destination.

Doublestack trains: Consisting of rail flatcars, with one container on top of the other.

Driver qualification file: Required by the DOT for every driver. Includes employment application, request for check of driving record from the state, request for information from previous employers, physical examination, and other documents.

DRP: Distribution requirements planning is the application of MRP principles to the distribution environment, integrating the special needs of distribution.

Dunnage materials: Temporary blocking, flooring or lining materials, racks, standards, strips, or similar bracing in a vehicle.

EOQ (economic order quantity) model: Attempts to determine the optimum quantity of material to order in a single transaction; balances two basic costs, carrying costs and ordering costs.

Exception rates: Sometimes called modified class rates, these rates are obtained by negotiating with the carrier for an exception to the NMFC classification rating.

Exclusive use of vehicle: The carrier loads only your shipment on a vehicle and seals it until arrival at the consignee's dock. Shipper pays a premium for this service.

Expediting: Notifying a carrier that a shipment is urgent, and you would like to have it rushed to destination as quickly as possible.

Export management company (EMC): Acts as a firm's export department, handling sales, overseas distribution arrangements, and export operations, usually for a commission representing a percentage of the sale price.

Exporting trading company (ETC): Buys products in one country and sells them in another.

FAK rates (freight-all-kinds): Simplifies ratemaking and reduces errors caused by misclassifying. The same class applies for all kinds of freight. Beneficial to companies that receive a wide variety of products.

FAAA Act of 1994: Effective January 1, 1995, eliminated all intrastate economic regulation by federal preemption.

FOB Destination, Freight Collect and Allowed: Title passes at destination, and buyer pays the freight and deducts it from the seller's invoice.

FOB Destination, Freight Collect: Title passes at destination, and buyer pays the freight.

FOB Destination, Freight Prepaid: Title passes at destination, and seller pays the freight.

FOB Destination: Title passes at destination, and seller has total responsibility until shipment is delivered.

FOB Origin, Freight Collect: Title passes at origin, and the buyer pays the freight.

FOB Origin, Freight Prepaid and Charged Back: Title passes at origin; seller pays the freight and adds it on to the seller's invoice for the goods.

FOB Origin, Freight Prepaid: Title passes at origin, and seller pays the freight.

FOB Origin: Title passes at origin, and buyer has total responsibility.

FOB (Free On Board): Contractual terms between a buyer and a seller, which determines where title transfer takes place.

For-hire carriers: Classified into two general categories, specialized and general freight motor carriers.

Foreign Trade Zone (FTZ): Zone for holding goods pending customs clearance; legally duty-free storage place. Area set aside at or near a port or airport, under the control of the U.S. Customs Service.

Freight collect: Indicates that the consignee pays the carrier.

Freight forwarders (surface): Similar to for-hire truck lines, except they generally do not own their own line haul equipment. They contract with motor carriers or railroads for space.

Freight prepaid: Indicates that the shipper pays the carrier.

ICC Termination Act of 1995: Eliminated the ICC; Surface Transportation Board was established within the DOT to take over the ICC functions.

Inbound consolidation (make-bulk): Occurs by having your vendors in a particular area deliver LTL to a local assembly center. Then the consolidated truckload is shipped to destination. This is much cheaper than having the vendors ship each individual small shipment LTL.

INCOTERMS: International selling terms developed by the International Chamber of Commerce to define sellers' and buyers' responsibilities as clearly and precisely as possible.

Intermodal marketing company (IMC): Consolidates container loads or piggyback trailers from several shippers. Contracts with the railroads for volume rates.

Intermodal: More than one mode of transportation is involved (e.g., piggyback, fishyback, or birdyback).

International freight forwarders: Also called foreign freight forwarders or ocean freight forwarders; handle booking, paperwork, and consolidation for exporters.

Interstate Commerce Commission (ICC): From 1887 to 1996, was the dominant governmental player in economic regulation, regulating rates and granting operating authority to carriers.

ISO 2004: A series of five international standards for quality management and quality assurance developed in 1989 and promoted by the International Organization for Standardization (ISO).

JIT (just-in-time): Focuses on the systematic reduction of waste and inefficiencies in operations to improve overall performance. The end result is the delivery of products at just the right place, in just the right quantity, and at just the right time.

Joint rate: A single rate provided by two or more carriers involved in a single movement between any two points.

Less-than-truckload (LTL) carriers: Maintain a network of freight terminals and a large staff of dock workers to handle small shipments as they are loaded and unloaded.

Local rate: A single rate by one carrier between any two points.

Logistics: The process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.

Long form bill of lading: The terms and conditions of the contract are contained on the reverse side of the long form bill of lading.

Materials handling: A function of logistics management, centering on the actual handling of products and materials between procurement and shipping.

Materials management: Inbound logistics from suppliers through the production process. Includes all facets of procurement, movement and control of materials and products from acquisition through production.

Mileage rate: Rate per mile offered by truckload carriers.

Minimum charge: The lowest charge that can be assessed for a particular movement, regardless of the weight.

MRP: Materials requirements planning is a concept developed in the 1970s to make use of computers in modeling the requirements of materials for manufacturing operations.

NAFTA: The North American Free Trade Agreement was signed by leaders of the United States, Canada, and Mexico in December 1992; a 2,000 page publication that will phase out tariffs (import duties) among the three countries over the next 15 years.

National Motor Freight Classification (NMFC): Class rates are based on the NMFC, and virtually all shipments are subject to class rates. Every product that can be shipped is assigned a class rating; also contains rules pertaining to claim filing procedures, packing provisions, handling and service requirements, the application of commodity descriptions, and rules of packaging.

Negotiated Rates Act of 1993 (NRA): Was enacted to solve the undercharge claim issue. Provided procedures for resolving undercharge claims.

Non-asset-based third-party providers: Do not own assets, such as transportation and/or warehouse equipment.

Non-asset-based air carriers: Air carriers that do not own assets, for example, air freight forwarders.

NVOCC: Non-Vessel Operating Common Carrier (also called NVO) consolidates small shipments from different shippers into full container loads and arranges all details from origin to foreign delivery.

Off-bill discounting: An illegal activity in which the carrier bills the shipper; who in turn adds this amount onto its invoice; later the shipper gets a rebate from the carrier.

Order bill of lading: Negotiable document used primarily in international trade. There is an intermediary, usually the bank. The original order bill of lading is mailed to the consignee's bank, and the carrier will not deliver the freight until the consignee has paid to bank and the bank has released the original order bill of lading to the carrier.

Outbound consolidation (breakbulk): Consolidation of a number of small shipments for various customers into a full truckload. Shipped to a location near the customers; then has the carrier distribute the small shipments to the customers.

Packaging functions: Important part of logistics; purpose includes aesthetics and protection.

Parcel shipments: The smallest truck (and air) shipments, which are by far the most expensive in terms of cost per unity (per pound or hundredweight).

Partnerships and strategic alliances: Shippers and providers concerned about one another's welfare; goal is a win-win relationship between the two firms.

Physical distribution: Outbound logistics, from the end of the production line to the ultimate customer.

Pick to light: The break pack order fillers scan the order into the computer. Lights go on over the shelves where the ordered products are located. The order filler picks the product as specified by the light and turns off the light. This reduces paperwork, as well as orders filler error.

Post-audit (freight bill): Checking the freight bill after payment of the bill. Maybe be audited internally or by a third-party audit firm. Overcharge claim must be filed in a timely manner for recovery from the carrier. Agreements are usually negotiated with an auditor who receives a percentage of the actual money collected.

Pre-audit (freight bill): Performed before the freight bill is paid; rate correction adjustments are made before payment. The third-party audit firm normally charges the shipper on a per bill basis.

Prepay and add: The seller pays the carrier and adds the freight charges onto the invoice for goods purchased.

Private carriers: Those motor carriers whose primary business is other than transportation; manufacturers or distributors, who use their own trucks in their own private business.

Private warehouse: Owned or leased by the manufacturer or distributor, who pays for the facility whether it is empty or full.

Public warehouse: A firm that specializes in warehousing and holds itself out to serve the public like a for-hire carrier. One pays only for space used.

Quick Response (QR): Introduced in the textile and apparel industry and has spread throughout general merchandising. QR became a business strategy for formulating strategic exchange relationships.

Reconsignment: Changing the consignee in transit. Carrier charges the shipper for this service.

Reengineering: Means reinvent, reevaluate, reexamine, redesign, and redo.

Released value class rating: An agreement in writing (on the bill of lading) to place a limit on the amount that can be claimed, if loss or damage occurs. In return, the carrier provides a lower classification rating.

Reverse logistics: A specialized segment of contract logistics management; the backside of logistics, logistics after the sale and after the initial delivery to the customer.

RoadRailer: A truck trailer fitted with a second axle bearing railroad wheels that may be hauled on the highway or on rail tracks.

Routing guide: Instructions for the supplier concerning carrier to use and other requirements.

Rule of analogy: If the product is not specifically described in the NMFC, the description that most closely resembles it applies.

Shippers' associations (shippers' cooperatives): Similar to freight forwarders, except they are non-profit organizations, and all users must be members.

Shipping wind: Sometimes it is cheaper (yet legal) to ship at the next higher weight level. The difference between the actual weight and the next higher weight level is called wind or deficit weight.

Short form bill of lading: Does not include the terms and conditions on the form itself, but rather references the terms and conditions as specified in the NMFC.

Small shipment: A shipment of less than 10,000 pounds. Approximately 95 percent of small shipments are less then 1,000 pounds, and the majorities are 600 pounds or less.

Specialized for-hire truck carrier: Transports heavy machinery, liquid petroleum, refrigerated products, agricultural commodities, motor vehicles, building materials, household goods, and other specialized items.

Stockouts: Occurs when one is out of stock.

Stop-off consolidation: The consolidation of several large shipments in which the carrier may pick up or deliver while in transition to a larger consignee. A premium is charged for this service.

Straight bill of lading: One that is non-negotiable; the contract between shipper and carrier for a shipment direct to a consignee.

Supply chain management: A broader concept than logistics; extends the concept of logistics beyond the firm to all firs in the supply chain, including vendors, customers, carriers, facilitators, and channel intermediaries.

Third-party consolidation (3PL): Normally performed by freight forwarders, shippers' associations, intermodal marketing companies, or other third-party logistics firms.

Time-critical shipments: Non-stop, door-to-door delivery; not co-mingled with freight of other shippers.

Time-definite services: Delivery is guaranteed at a certain time of the day. Shippers pay a premium for this service.

TIRRA of 1994: Primarily known as the law that repealed the filed rate doctrine. In other words, carriers are no longer required to file tariffs.

TOFC: Trailer-on-flat-car (piggyback), type of intermodal rail transportation.

Total cost concept: Making logistical decisions by looking at total costs, rather than only one or a few of the logistical components.

Total Quality Management (TQM): Successful programs have had certain common characteristics, focusing on five essential elements: customer focus, total involvement, measurement, systematic support, and continuous improvement.

Tracing: Trying to locate a shipment that has been reported undelivered by the consignee; finding the current status of the shipment. Tracing has become more effective through the use of EDI (electronic data interchange).

Tradeoff: Spending more on one function to save on another.

Truckload: Carriers handle approximately 41 percent of all truck shipments (volume) and earn 37 percent of total truck revenues.

Zone-skipping: Consolidation of a large number of small parcels into a full truckload. The freight is transported across several postal zones before finally being delivered to the post office or parcel courier. The designated courier then delivers the parcel to each designated consignee.