A few weeks back I was reviewing some shipping data with a client. I was simply highlighting all of the times they shipped on the same day to the same customer and calculated the windfall of savings they would have realized if they easily combined these orders onto a single shipment. My client was floored because, although he admitted his company might not be the best at combining shipments, he didn’t think the premium he would be paying was as high as it was. But it was and considering this was happening several times a week and could cost of tens of thousands of dollars a year in extra transportation costs if it continued…thus inspiring this week’s Freight Savings Tips article.
Although many companies do their best to ensure their daily customer orders get shipped together, invariably the manual process companies use to ensure this happens has chinks in its armor. When this does occur, the penalties seem benign until someone points out exactly how costly this actually is.
Just how much does NOT combining shipments cost?
The cost to your company by not combining shipments can cost a ton and can be a profit killer. Want an example? Check out the real life data below that comes from an actual client (I changed some info to protect the innocent but the cost detail is actual info). As you can see, twice in one day this particular company shipped two orders on two separate shipments to the same customer. In one case it cost them more than 50% by not combining orders and the other instance it cost them 51%.
“That won’t happen to our company because we chop people’s heads off when that happens!”
I’m with ya, but I hear a lot of people say that and yet things slip through the cracks…especially when it’s governed by a process that allows for human error. I’m just telling you, I live in this world and see this happen more than you’d think from companies who are as Lean Six Sigma as they come.
Other costly things that might be happening at your company.
Another thing that I see often is that although multiple shipments to don’t get shipped on the same day, they end up getting delivered on the same day. From a customer service standpoint, what’s the difference what day they ship on if they deliver on the same day? The difference is that whoever is paying the freight bill is throwing money out the window.
Check out this example. This shipper shipped two orders to the same customer a day apart from each other and yet, the customer received them on the same day. This is especially common in the retail world where retailers hold deliveries to fit into appointment windows despite when an order was placed. The problem is that, again,there is a premium in freight cost by not combining orders. This data is actually from the same customer I talked about above.
Money will fly out of the sky if you can take it a step further.
If you think the above examples are powerful, you should see what it’s like when you start looking at the cost benefits by combining weekly orders into one shipment. That usually takes more of a collaborative approach with customers but its incredibly impactful to the bottom line freight costs.
How can our company ensure we don’t ship multiple orders on the same day?
The first thing you want to do is create a business policy and process around this topic. As you can see from the above numbers, it’s well worth it. However like I said above, these types of things usually don't slip through the cracks because companies are aloof. They occur because its a manual process. The best thing to do is use a TMS (transportation management system) if you can. That will take human error virtually out of the equation.