Important Terms to Know in Global Supply Chain

The supply chain, which enables a manufactured product to reach the consumer in one or more steps and is therefore a set of many different and detailed processes, includes many specialized terms due to its complex nature.  To be successful in supply chain management and to achieve an efficient supply chain, it is important to familiarize yourself with these complex-sounding terms. We have summarized the terms involved in detailed processes such as ordering and shipping used in typical supply chain networks in their simplest form for you:

EDI, which stands for Electronic Data Interchange, is the exchange of files (ERP to ERP) between commercial partners in formats whose standards are determined by international organizations. In other words, it is a standardized and systematic way of transferring commercial documents as data. Thanks to EDI, data can be easily read by all systems. This is because with EDI, data is transferred from one computer system to another in a standardized way. In business communication, where the exchange of information between two or more parties usually takes place on paper, it is not possible to achieve this manually. The transfer of invoices or orders to a large number of suppliers, customers or third parties in an internationally standardized and virtually error-free manner supports the development of business relationships. Different EDI systems can be provided for different business solution requirements.

These two terms are cost lot tracking methods in which goods are valued and sold in the order in which they are purchased. In FIFO, the first inbound consignment is first out in the order in which the goods are dispatched. LIFO, on the contrary to FIFO, is a last-in-first-out system. LIFO is a cost lot tracking method where the last purchases are sold first as a sorting difference.

It is a cloud-based order management system that enables SMEs to organise inventory flows across multiple channels, locations and currencies. With this system, there is a systemisation based on the supply chain with measurement and evaluation with FIFO logic. Stock flows can be organised in the simplest way with Zoho inventory, which offers tools that support the supply chain upstream and downstream, such as reverse logistics.

It is a form of purchase order with multiple delivery dates over a specified period of time, agreed to benefit from predetermined pricing. The buyer purchases from the supplier certain quantities of products or a variety of products over a period of time, which may vary from a few days to several months. Depending on the agreement, the seller may ship the products in parts and on specific dates during this period. In this way, advantageous purchases such as guaranteeing commercial flow or discounts are provided in a certain period of time against an increase in demand or anticipated problems in product supply.

Especially in the B2B sector, the most difficult issue is the issue of stock in storage. In this regard, problems may arise from time to time in the supply process. In extraordinary events such as global epidemics, disasters, wars, etc., there may be situations such as a decrease in supply or a sudden increase in demand. As a result of this, if a good is temporarily not available in the warehouse with sufficient stock, the supply process becomes difficult. Back ordering is a form of ordering that is usually adopted for products that become difficult to supply in times of high demand and when there is an increase in demand, in other words, for the supply of products that are temporarily not in warehouse stock and have already been ordered by customers.

The seller’s products are sent directly to the customer on behalf of the seller and the payment is made directly to the seller on whose behalf the sale is made. The customer recognizes the first seller, not the intermediate seller, and in this way advantages such as getting rid of the burden of storage and maintenance are provided. In this type of sale, it is important that the goods do not cause problems such as expiry during transport and have a long shelf life.

It is a shipping document prepared by the seller on behalf of the carrier, containing the type and quantity of the goods in the shipment, the transport route of the point of origin of the shipment and the destination address, and containing the details of the buyer and seller. No matter which route and in which way the shipment is sent (by land, sea or air), the bill of lading document is required when the goods are transported from one point to another.  This document legally replaces a kind of payment receipt and is a legally usable document type. The bill of lading contains the signatures of all parties involved in the shipment. These parties (seller/shipper, carrier and consignee/buyer) must sign the bill of lading at the relevant stages, such as delivery or transport of the goods at the delivery of the shipment.

It is the process of approving the delivery in return for a bank guarantee and the related document. In other words, it is the name given to the method and document whereby the consignor obtains a personal or bank guarantee from the consignee in return for the release of the goods in escrow. According to the instruction “Please confirm my delivery against guarantee”, it is the documentation that applies mainly to shipments where the consignee cannot present the relevant shipping documents (such as bill of lading) to the sender.

It stands for “Just in Time”, which means just in time. JIT is an inventory optimization method in which each batch of product arrives “just in time”. It is the “just in time” optimization of each batch of product for the next stage, which can be a shipment or production cycle.

The total cost of a good in the process of ownership. The cost price is calculated to cover transport charges, customs duties, taxes and other costs borne by the buyer.

It is a type of document that is legally valid in more than 80 countries, which allows the international temporary export of goods to be re-imported to the USA within the same year without paying import duties. Most types of goods covered by this document can be listed, except for consumables (food, oils, etc.), agricultural products, mail, explosives and disposable materials (everything that will be discarded and not taken back after export).

A warehouse is a storage area, managed by the customs authority or a government agency, where dutiable goods for commercial purposes and import goods subject to customs duties are stored. Goods in warehouses are taxed when they are removed from the warehouse. It is preferred by retailers in the import of large quantities of goods in order to provide the advantage of distributing tax burdens by deferring some tax payments.

This term, which can have multiple meanings, is often used as an international logistics term. Consignment is the entrustment of goods to an intermediary for carriage to a place specified by the intermediary, while the producer is still considered to be the rightful owner. Consignment of a good means the act of entrusting it to the buyer or warehouseman who will store it in his warehouse in return for a certain payment. This third-party buyer may, according to the terms of the agreement in the co-operation, in addition to storing the goods, sell or ship them to the customers of the original seller. All these services are charged to the seller in separate items. Such actions or the goods themselves are called consignment.

It is a logistics method that can also be called “Partial”, also known as piece goods transport. In groupage, small goods to be transported in pieces and partially, if they are not large enough to fill the containers, are combined and shown on a single bill of lading. In this method, multiple shipments from different sellers, each carrying its own bill of lading, are collected in a single bill of lading. In this way, it offers a more economical logistics advantage for the sender as it shares the transport costs. Sea, air or land transport can be preferred in groupage transport.

In order to facilitate the transport of goods, it is a method of transporting goods by dividing them into two or more parts and then combining them before delivery.

Binding service means the process or service of combining into a single shipment the parts of two or more consignments originating from different places and transported under a single bill of lading from a sender to a consignee. It is used when all individual consignments have the same sender or consignee and when approved by the transport tariff authorities.

They are codes that provide guidelines for the safe transport of radioactive, explosive, flammable materials and ensure that measures are taken to prevent problems such as leakage, pollution, accident or danger that may occur during the transport of such materials. IMDG Codes, which stands for “International Maritime Dangerous Goods Code”, was adopted in 1960 under the SOLAS (Safety of Life at Sea) convention and has been in force since that year.

The HS Code, known as the Harmonised Code Set, is the coding of internationally standardized names and numbers that allow businesses and government agencies to classify traded goods when buying or selling globally. Depending on where they are used, HS codes, which are usually created in 4 – 10 digits, are developed by the World Customs Organization (WCO) and are used in global trade as it is an internationally accepted system of codes.