Glossary of Common Freight Terms

Glossary of Commonly Used Freight and Shipping Terms

Assessorial Charges - These are components of freight costs that the freight carriers have added on to their base freight rates in recent years. Examples of these charges include:

  • Freight Surcharge
  • Dimensional Surcharge
  • Delivery to Residence
  • Address Corrections
  • Weight Errors
  • Insurance

Base Shipping Rate (also referred to as Base Rate) - The base freight expenses that applies to an individual shipment

Bill of Lading - A document that must accompany each shipment that defines the contents of the shipment

Business Rules - The internal business rules that have been defined by each company that determine freight carriers and shipping modes. These rules have a direct impact on freight expenses

Carrier Agreement - The written agreement with a specific freight carrier that determines the prices and discounts, by shipping mode and service level, that applies for the term of the agreements. Most agreements apply to 1, 2, or 3 years.

Claim - A dispute on the freight expense incurred on an individual shipment, or a request for reimbursement for products damaged during he shipping process

Consignee - A company that receives an individual shipment and acknowledges the receipt in writing

Free on Board (FOB) - The seller agrees to deliver merchandise, free of all transportation expense, to the place specified by the contract.

Freight Broker - A company that serves as a sales agent for a freight carrier

Freight Bill - Shipping document to confirm shipment delivery and indicate payment terms (prepaid or collect). The document describes the shipment, its weight, the amount of charges and taxes and whether the bill is collect or prepaid. If the bill is prepaid, the shipper pays the shipping charges. If the bill is collect, the consignee pays the shipping charges.

Freight Carrier (also referred to as Carrier) - A company that provides any type of shipping service

Freight Forwarder - A company that arranges for products to be shipped by international freight carriers, and pickups or delivers the product from either the company shipping the products, or from the company receiving the products

Freight Invoice Approval - The process of approving invoices received from Freight Carriers

Freight Policy - The internal policy defined by an individual company that defines when specific shipping modes, specific freight carriers, and specific service levels should be utilized. It can also define what personnel has the authority to make decisions that impact freight expenses

Freight Spend - The total amount of expenses incurred for freight in a given time period, typically a year.

Imports - products that are purchased internationally

Inbound Freight - The freight expense that is incurred on products purchased from vendors, typically related to incoming purchase orders

Outbound Freight - The freight expense that is incurred on products shipped to customer, typically related to outbound customer orders

Packing List - A document that accompanies each shipment and contains the contents of each shipment

Returns - Shipments that are returned to the supplier

Service Levels - The level of service options that are available for each shipping mode. As an example, the options that typically available for parcel shipments are 1) next day, 2) second day, … Note these options can vary by Freight Carrier.

Ship Via - The individual Freight Carrier to be used on an individual shipment

Shipper - The Vendor providing the materials.

Shipping and Handling Charge - The amount on an individual invoice that identifies the freight expense, provided by a freight carrier, plus an allowance for the internal handling expenses.

Shipping Charge - The amount on an individual invoice that identifies the amount of freight expense, provided by a freight carrier, that is to be paid by the company receiving the products.

Shipping Charge Correction - A charge that appears on the freight carrier's invoice, received after the actual shipment occurs, that identifies a correction to the amount of the freight expense.

Shipping Container - The package or container that the products are typically shipped in

Shipping Label - The bar coded label that must used on each shipping container.

Shipping Modes - These are the modes of shipping that most companies use for shipping their products. Common modes used include:

  • Small Parcel - the mode used to ship product shipped in individual packages
  • Truck Load - the mode used to ship products in full truck loads
  • LTL - the mode used to ship products in less than full trucks loads, typically in pallets - what is FAK?
  • International Export - the mode used to ship products internationally
  • International Import - the mode used to purchase products internationally
  • Trade Shows - the mode used to ship displays and sales materials to trade shows
  • US Mail - the mode used to ship via the US post office
  • Air - the mode used to ship via airplane
  • Rail - the mode used to ship via the railroad

Shipping Routing (also referred to as Routing) - The specific route determined by the freight carrier for the shipment of san individual shipment

Shipping System - The computer system used to facilitate the shipping process. Typical functions performed are generation of bar coded shipping labels, generation of bills of lading, freight carrier selection, and freight cost calculation. They can also generate the required customs paperwork required for international shipments. These systems can be purchased from either individual freight carriers, if the company uses a single freight carrier for shipping their products, or from third party suppliers, if a company uses multiple freight carriers for shipping their products. These computer systems are separate systems from the company's ERP systems, and may or may not be electronically interfaced with the ERP system.

Shipping Zones - Predetermined sections of the US that are determined and used by individual freight carriers to calculate freight expenses

Strategic Sourcing Initiative - The process of documenting a companies total shipping requirements and soliciting formal quotations from the applicable freight carriers

Tracking Number - A unique number assigned by a freight carrier to an individual shipment that allows the end consumer to inquirer about the status of the shipment anytime during the shipping process.