11 Essential Global Logistics Terms
Here are the essential global logistics terms you need to know to understand the freight forwarding process and manage an efficient supply chain.
1. Landed Cost
Landed cost is the total cost of a product to the point it’s ready to be delivered to your customer. That includes not only the base cost to purchase your products from your supplier overseas, but also costs associated with transportation, duties and taxes, insurance, handling fees, etc. Knowing the landed cost helps you price your product correctly to adequately cover your costs and better understand profitability.
Working closely with your international freight forwarder helps predict and minimize negative impacts to your landed cost.
A consignee is the entity that the shipper is sending the goods too. That’s typically you, the importer, but there are exceptions. (A consignee could be someone that acts in your name, for example.) Typically, you’ll see consignee along with the word consignor and consignment. The “consignor” is the shipper of your goods; the “consignment” is the actual goods being shipped.
3. Bill of Lading
Two common bills of lading types are the house and master.
The house bill of lading (HBL) is a receipt or contract between you and your NVOCC/freight forwarder. Learn more about a house bill of lading.
The master bill of lading (MBL) is the contract between your NVOCC/freight forwarder and the actual carrier. Learn more about a master bill of lading.
LCL stands for less than container load. If you ship LCL, your shipment shares the container with cargo from other importers. Transit time is longer for LCL due to the consolidation and deconsolidation before and after ocean transit, but is more economical for smaller shipments.
FCL stands for full container load. This means only your cargo occupies the container (rather than sharing space as is the case in LCL). It’s usually cheaper (from a landed cost perspective) and faster to ship via FCL, and the risk of damages or loss are decreased since your goods aren’t handled as LCLs.
Drayage is a truck service that moves containers to and from a port. Learn more about the origins of the word drayage.
The term “Incoterms” is short for International Commercial Terms. Specifically, they are trade terms published by the International Chamber of Commerce (ICC) and are internationally recognized by the shipping industry. As an importer, incoterms are what you and your supplier use to define responsibilities and risks in a transaction.
Two common incoterms used by your importers and exporters are Free on Board (FOB) and Cost Insurance and Freight (CIF). Find out how to choose the right incoterm for your shipments.
8. Steamship Line/Carrier
These two terms are often used interchangeably in ocean freight and refer to the operator of the vessel itself. When you see an ocean container that says Maersk, Evergreen, OOCL, etc. – those are names of steamship lines (or ocean carriers).
Large volume importers typically sign contracts directly with steamship lines to take advantage of their buying power. Smaller and mid-sized shippers typically are best served by freight forwarders to provide the best mix of competitive rates, value added services, and flexibility.
NVOCC stands for non-vessel operating common carrier and is a type of Ocean Transportation Intermediary (OTI). Although the term NVOCC is often used synonymously with the term freight forwarder, there are some technical distinctions. NVOCCs act as “virtual” carrier and issues their own bill of lading. Per Federal Maritime Commission (FMC) requirements, an NVOCC must also publish and maintain a regulated tariff.
10. Marine Insurance
Marine insurance is insurance for ocean freight. As we discussed in a previous blog, marine insurance can cover damage or loss to your cargo while in transit. For most commodities, marine insurance is relatively cost effective and helps mitigate the risk of common losses or even a general average situation.
3PL stands for “third party logistics.” A 3PL service provider offers outsourced solutions for a company’s fulfillment and distribution needs. The term 3PL is relatively broad but often involves other related transportation, warehousing, IT, and/or supply chain services
To point out the ambiguity of the word, we created a parody video back in 2012 for April Fool’s day and launched a fictional 10PL service. Check it out below.
Have more questions about global logistics? Dedola is happy to help you navigate the world of ocean and air freight logistics.
Contact us today to find out how our business can serve yours.