3PL glossary: billing and warehouse terms explained

3PL contracts and invoices use a lot of shorthand. This glossary explains the terms you are most likely to meet on a rate card or a monthly bill, in plain words, with a link to the page that covers each fee in detail. For how the pieces fit together, start with 3PL pricing explained.

3PL

A third-party logistics provider: an outside company that stores your inventory, packs and ships your orders, and often handles returns. You pay it per activity (orders, units, pallets) plus some fixed fees, as set out in a rate card.

4PL

A fourth-party logistics provider manages your logistics as a whole, coordinating one or more 3PLs, carriers and freight partners for you instead of running the warehouse itself.

Accessorial

Any charge on top of the basic service, such as a residential surcharge, an address correction or a liftgate delivery. Carriers and 3PLs both use the term for extras beyond the base rate.

Account management fee

A fixed monthly charge for keeping your account open, often covering an account manager, reporting or system access. See account management fees.

Additional item fee

A per-item charge for every item in an order after the first, on top of the pick fee for the first item. It is one of the most common lines to check after a rate change. See pick and pack fees.

Address correction

A carrier fee for fixing an incorrect or incomplete delivery address, passed through to you by the 3PL. See address correction fee.

ASN

An advance shipping notice: the record you send the warehouse before an inbound shipment arrives, listing what is coming, how many units and in how many cartons. Warehouses use it to plan and check receiving.

B2B

Business-to-business: orders shipped to retailers, distributors or other companies, often in cartons or on pallets with their own labeling rules. B2B orders are usually priced differently from DTC orders.

Bill of lading

The document that goes with a freight shipment, listing the shipper, receiver, contents and terms. It is the main record for pallet and LTL shipments.

Billable weight

The weight a carrier uses to price a package: the greater of its actual weight and its dimensional weight.

Bin

A small storage location in the warehouse, such as a shelf space or tote, used for smaller or slower-moving items. Some 3PLs charge storage per bin instead of per pallet.

Carrier pass-through

A carrier charge (postage, surcharges, adjustments) that the 3PL bills to you, either at cost or with a markup. See shipping markup.

Carton

A shipping box, usually the unit in which inventory arrives at the warehouse. Many 3PLs charge receiving per carton.

Cost per order

Your total fulfillment cost for a period divided by the number of orders shipped. It is the simplest way to compare 3PLs or track your bill over time. See 3PL cost per order.

Cross-docking

Moving goods from an inbound shipment straight to an outbound one with little or no time in storage.

Cubic foot storage

Storage billed by the volume your inventory takes up, in cubic feet, instead of by pallet or bin. It suits small products that would not fill a pallet. See storage fees.

Cycle count

Counting part of the inventory on a regular schedule, instead of counting everything at once, to keep stock records accurate. Some 3PLs include cycle counts and others charge for them.

Delivery area surcharge

A carrier fee for delivering to ZIP codes the carrier lists as less accessible, such as rural areas. It can apply on top of a residential surcharge.

Dimensional weight

A weight calculated from a package's size (length x width x height divided by a carrier divisor), used when it is greater than the actual weight. See dimensional weight and the dimensional weight calculator.

Dock-to-stock

The time between inventory arriving at the warehouse dock and being available to sell. Contracts often set a target for it in the SLA.

DTC

Direct-to-consumer: orders shipped to individual shoppers, usually one parcel per order to a home address.

Dunnage

Packing material that fills empty space in a box to protect the product, such as paper, air pillows or foam. It may be billed as a packaging charge.

EDI

Electronic data interchange: a standard way for companies to exchange orders, shipping notices and invoices between systems, common in B2B retail orders.

FIFO

First in, first out: shipping the oldest stock first. It matters for products with expiry dates or lot numbers.

Fuel surcharge

A percentage carriers add to shipping charges to reflect fuel prices, updated weekly. See fuel surcharge.

Fulfillment

The full process of getting an order to a customer: receiving and storing stock, picking and packing the order, and shipping it.

Inbound

Inventory arriving at the warehouse, from your supplier or another location. Inbound work is billed as receiving.

Kitting

Assembling several items into one product or bundle before it ships, such as a gift set. See kitting fees.

Long-term storage

A higher storage rate for inventory that has been in the warehouse past a set number of days. See long-term storage fees.

LTL

Less than truckload: a freight shipment that does not fill a whole truck and shares space with other shippers' freight, common for pallet shipments.

Minimum monthly billing

The least you agree to pay the 3PL each month. If your charges fall short, the 3PL bills a top-up for the difference. See monthly minimums.

Order accuracy

The share of orders shipped with the right items and quantities, a common performance measure in 3PL contracts. See 3PL KPIs.

Outbound

Orders and shipments leaving the warehouse, to customers or to other businesses.

Packaging materials

Boxes, mailers, tape, labels and fillers used to pack orders. Some 3PLs include basic packaging in the pick fee and others bill it per order. See packaging fees.

Pallet

A flat wooden or plastic platform that goods are stacked on for storage and freight. Pallets are a common unit for warehouse storage pricing.

Pallet position

One pallet's worth of storage space in the warehouse racking. Pallet storage is usually billed per pallet position per month. See storage fees.

Parcel

A single package shipped through a carrier's small package network, as opposed to freight on a pallet.

Pick and pack

Taking the items for an order from storage (picking) and putting them in a box or mailer ready to ship (packing). See pick and pack fees.

Pick fee

The charge for picking an order, usually covering the first item, with an additional item fee for each item after that.

Rate card

The price list in your 3PL contract that sets every fee and how it is calculated. It is the document every invoice line should be checked against. See the 3PL rate card template.

Receiving

Unloading, counting, checking and putting away inbound inventory, usually billed per carton, per pallet or per hour. See receiving fees.

Residential surcharge

A carrier fee for delivering to a home instead of a business. See residential surcharge.

Returns processing

Receiving returned orders, inspecting them and restocking or disposing of the items, usually billed per return plus per item. See returns processing fees.

Shipping markup

The amount a 3PL adds on top of the carrier's charge, often as a percentage. See shipping markup.

SKU

Stock keeping unit: a code for one distinct product, such as one size and color of a shirt. Some fees are charged per SKU.

SLA

Service level agreement: the part of the contract that sets performance targets, such as same-day shipping cutoffs, order accuracy and dock-to-stock time, and sometimes credits when they are missed.

Special projects

One-off work outside standard services, such as relabeling or inspections, usually billed per labor hour. See special project fees.

Storage basis

The method a 3PL uses to measure storage for billing: for example the monthly average, the peak, or a single count on a set day. The basis can change the storage bill as much as the rate. See average vs peak storage billing.

Unit of measure

The quantity a fee is charged on, such as each, case, carton, pallet, order or hour. A rate is only meaningful with its unit of measure, so check both.

Value-added services

Extra work beyond standard fulfillment, such as kitting, labeling, inserts, gift wrap or photography. See special project fees.

WMS

Warehouse management system: the software a 3PL uses to track inventory, orders and billable activity. Most invoice lines are generated from WMS records.

Zone

A number carriers assign to each origin and destination pair based on distance. Higher zones cost more to ship to, so warehouse location affects postage.

If a term on your bill is still unclear, our 3PL invoice audit guide shows how each line is checked. 3PL Checker does that check for you against your rate card and Shopify orders, and the first audit is free.