Logistics: key terms, formulas and examples

Logistics moves goods from supplier to customer: procurement, warehousing, freight and last-mile delivery. Safety stock guards against surprises; just-in-time cuts inventory.

Key terms

Supply chain

The network that moves a product from raw materials to customers.

Just-in-time

Receiving goods only when they are needed, to keep stock low.

Lead time

Time between placing an order and receiving it.

Procurement

The process of finding and buying what a business needs.

Safety stock

Extra inventory kept to avoid running out when demand or supply surprises you.

Inventory

Goods a company holds to sell or use.

Warehouse

A building used to store goods.

Distribution center

A facility that receives goods and ships them to customers.

Freight

Goods moved in bulk by road, rail, sea or air.

Drop shipping

Selling items that the supplier ships straight to the customer.

Backorder

An order that cannot be filled yet because stock ran out.

Last-mile delivery

The final leg of a delivery to the customer.

Reverse logistics

Moving goods back from customers, such as returns.

Third-party logistics

Hiring another company to handle storage and delivery.

Cross-docking

Moving goods straight from inbound to outbound trucks.

Bill of lading

A document listing the goods being shipped.

Demand forecasting

Predicting future customer demand.

Formulas