National Logistics Associates, LLC

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Thursday, February 11, 2010


Economic Order Quantities (EOQ): By requiring larger minimum size orders from your customers, or correspondingly, by providing incentives to customers for placing larger orders, (1) shipments will be larger; (2) and less frequent.
Contingency inventories: Creating geographically based finished goods inventories (1) that are designed be delivered in smaller volumes on a “just-in-time” basis, or (2) that might need to be delivered at a moment of spike demand, enables larger volume shipments to those stocking locations, and then smaller shipments only at the final stages of delivery.
Consignment inventories: Providing incentives for customers to order larger volumes of products in trade for corresponding price concessions can lead to significant transportation related cost savings for shippers, and win-win opportunities for both shippers and consignees.
Customer service requirements planning: In many instances, shippers replenish to their customers’ stock, and not directly to stores. When shipments are not required “just-in-time”, it often makes sense to extend the order to shipment (or order to delivery) cycle from, possibly 7 days to 14 days, or from 14 days to 21 days, etc. By so doing, it may create the opportunity to consolidate several shipments within the extended order to ship window, creating larger and fewer shipments, and driving down transportation costs.
Shipment consolidation: Larger volume shipments can be created by consolidating multiple shipments to a given consignee, and then by compounding those consolidated shipments to multiple consignees that are geographically proximate. Ultimately, a delivery strategy such as multiple stop TL deliveries, or pool distribution deliveries must be engaged – but only after significant savings that are created by the larger volume shipments to the designated geography. Of note - the concept of “Zone Skipping” for parcel shipments is premised on consolidating shipments destined for a geographical area, and moving those shipments in volume to regional service centers, or even to their direct delivery unit (DDU).
Flow or pool distribution: Large volume shipments to cross-dock distribution points that can be derived by consolidating many smaller shipments. A distribution agent can then make final deliveries of smaller shipments, after cross docking those shipments, for the last leg of their journey. Although the cost of the final leg is usually at a higher cost per unit volume than the larger (consolidated) inbound shipment, savings generated by the inbound consolidated shipment substantially offset the cost of the final delivery of smaller shipments from the flow distribution site.
Shippers associations: Shippers with product and geographical similarities can associate, aggregating their finished goods for distribution, and create larger volume shipments, driving down the cost of transportation for all members of the association.
Packaging: Besides protecting and unitizing products, packaging should be engineered to be as space effective as possible, and able to be filled to capacity, insuring maximum, product for example, in each package, on each pallet (if palletized), and for each shipment.
Aggregating shipping locations: In planning business models, it makes great sense, when feasible, to co-locate manufacturing lines in order to create shipping volume from a single origin, as compared ultimately to shipping smaller volumes from more locations. Absent a single manufacturing location, it can make sense to aggregate outbound shipping volumes at a single rear area consolidation point, thus creating larger volume shipments from a single, location.
Trailer loading optimization: Simply put, “shipping air” is not an operationally or financially sound practice. Loading transportation assets to their visual limit (cube) or to their legal weight limit will optimize the transportation yield, and obtain the lowest “per unit volume” costs. When less dense product is involved, it pays to investigate creative packaging solutions, and to any feasible extent, compress or seed products to optimize transportation yield. To assist, on the one hand, there are computer assisted load optimization models to assist, and on the other, packaging engineers.
Production scheduling and logistics integration: To the extent possible, it makes sense for manufacturers to schedule production in ways that will enable the creation of volume shipments that have similar termination geographies and service requirements.