In
today’s economic climate, companies need to find new ways to reduce shipping cost, eliminate shipping errors, and be more efficient in processing shipments. Doing more with less has become the new normal. That being the case, it is no surprise that transportation costs and warehouse processing efficiency are closely scrutinized by today’s organizations. Analysts who track this data will tell you that most companies spend between four to eight percent of their total revenue on transportation. As an example, a company with 50 million dollars in sales will normally spend two to four million dollars a year on transportation. These same analysts have revealed that deploying “automation” in the transportation arena can save a company anywhere from four to eight percent of their overall transportation spend. If you apply this to our example of a 50 million dollar company, it will save between $160,000.00 and $320,000.00 per year of its transportation spend. You do the math for your company, and you will see why lots of people are interested in learning more about how to reduce shipping cost by optimizing their shipments. So, how can companies control shipping costs in the face of rising fuel costs and annual carrier rate increases? Shipment optimization is a revolutionary new way for companies to offset rising transportation costs and improve efficiency within their warehouse. Shipment optimization not only reduces freight cost, but it can also drive processing velocity within the warehouse. Shipment optimization can be used to predict shipping cost, whether this be orders taken via the Internet or at order entry time. Shipping costs are also a key reason a customer often chooses one vendor over another, and there is no question that shipping costs directly affect the profitability of companies of all sizes. One way for companies to ship more efficiently is to accurately predict the cost of shipping in advance of shipping. Finding a way to optimize shipments is the new way companies can approach shipping and servicing their customer. It can also give companies a competitive advantage over others that can not optimize their shipments. Can shipment optimization be a game changer for you?
What Is shIpment OptImIzatIOn? } Simply stated, shipment optimization is the ability to
accurately predict shipping cost in advance of actually shipping the product.
What advantages dOes shIpment OptImIzatIOn prOvIde? } It allows you to quote freight at the time an order
is placed. } It allows you to take orders in a web shopping cart and
quote real shipping cost. } It allows you to save money on your shipping cost.
} It allows the ordering experience to be a better experi-
ence for your customer. } It allows you to streamline processing within your
warehouse. Would any of the above be a competitive advantage to you? If so, please read on! If you take orders over the web and use traditional freight costing methods to calculate freight, maybe there is a better way. Would you like the ability to accurately determine shipping cost at the time the order is processed? If you absorb shipping cost, then shipment optimization allows you to ship at the least cost, and if you add shipping to the order, it allows you to present a more reasonable, friendly, and accurate way to charge shipping to customers. Now just imagine that when you process the order, you can print shipping labels up stream before the goods are picked or packed. This could enable you to pick and pack more efficiently and increase processing velocity within your warehouse. Shipment optimization could also allow you to eliminate traditional “manual” shipping stations. In order to print labels in advance, you need a way to calculate what items should go into each box. This has been historically known as a cartonization process. Cartonization systems were deployed mostly by large shippers and were either developed in-house or by Warehouse Management Software companies, but never Transportation Management Software companies. Once a cartonization process determined what box items could be packed into, it might even compute the cost of shipping if it was hooked up to a rating engine. These systems offered the hope that shipping cost could be accurately predicted, but upon further analysis, we realized that cartonization systems were NOT actually using freight cost to determine the right size container. Being in the shipping business, it was clear to us that this was the wrong approach. Cartonization systems found in the market today can determine the size of the container but do not use rating to predict the correct box or boxes needed to process the order the most cost-effective way. Shipment optimization, on the other hand, uses real shipping cost to predict the right number of boxes and the size of each box. In our opinion, cartonization systems had it all backwards, as they were predicting the box first and then maybe rating the box, which doesn’t consistently give you the correct answer. This might have worked 20 years ago, but not today. Today, carriers have complex rules for dimensional rating, a multitude of services, and even flat rate packaging. In addition, the dimensional rules differ from carrier to carrier and even service type to service type. What makes this even more complex is that carriers even negotiate specific DIM weight factors on a customer by customer basis. That’s why shipment optimization has made these old style cartonization systems obsolete.
may-june 2012 | www.PARCELindustry.com
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