"We're doing everything we can to control cost" is repeated monthly, ad nauseam, at many distribution companies. While not always correct, it reflects some basic sentiments:
"We can't influence our costs the way we would like to"
"We're doing what everyone else is doing to control costs"
"We're doing everything we know of to control costs"
Traditional cost control methods such as rate shopping, package consolidation and renegotiation mitigate costs but, in an inflationary environment, fail at reversing price increases. Also, since many shippers use these techniques, they no longer provide a competitive or incremental advantage.
Our organization developed a set of 11 new small package tools and techniques that raise the bar with "next" practices. We'll be sharing these at the upcoming Parcel Forum.
Each technique is a high return, low risk "quick win" initiative that could be fully implemented in a matter of weeks. These tools are unique in that they're carrier agnostic and don't require renegotiating or even talking with your carriers. They even generate incremental savings in the midst of multi-year contracts.
Here are some highlights:
Cartonizing: In a utopian world there would be enough unique containers deployed to exactly fit an order's contents, eliminating damage while minimizing void fill, transportation cost and packaging materials. In reality there are constraints to the container shape, size, and options that a shipper can choose from.
Cartonizing techniques tackle parcel costs by focusing on the order before it's put in the box. First, it is necessary to develop an optimal "carton regime" that determines which cartons best fit a particular order. Next, is quantification of the delicate balance between the additional complexities of more cartons versus the savings from adopting the right sized cartons. Lastly, for multiple box orders, it is important to look at what is put in each box so as to minimize the total order cost.
Optimal Packaging: A key measure of a container's effectiveness is the volume it holds; on the other hand its cost is dependent on the amount of material it requires. "Optimal Cartons" use the least possible corrugated or enclose the most volume possible. This along, with efficient cartonization, helps to minimize tare weight.
Next generation packaging optimization tools maximize the volume per cost or, equivalently, minimize the cost for a given volume. As a test, shippers can enter their carton dimensions at www.chicago-consulting.com/optimalCartons.shtml and find out how much they could save with optimally sized cartons.
Enhanced Zone Skipping: Zone skipping is a powerful tool to consolidate parcel loads across zones 5-8. But often there isn't enough volume to justify zone skipping into less frequented regions. Package consolidators can help but their "cut" of the action adds back cost. Enhanced zone skipping techniques provide novel ways of increasing load factors on these less travelled lanes.
In 2010 and 2011, shippers will continue to be faced with a difficult market environment. As described here it's possible for logistics professionals to combat and even reverse most parcel increases. We look forward to sharing more details on these techniques at Parcel Forum.
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Jeff Haushalter is a consultant with Chicago Consulting, a firm that specializes in designing and optimizing supply chains. Jeff can be reached at jeff@chicago-consulting.com.
"We can't influence our costs the way we would like to"
"We're doing what everyone else is doing to control costs"
"We're doing everything we know of to control costs"
Traditional cost control methods such as rate shopping, package consolidation and renegotiation mitigate costs but, in an inflationary environment, fail at reversing price increases. Also, since many shippers use these techniques, they no longer provide a competitive or incremental advantage.
Our organization developed a set of 11 new small package tools and techniques that raise the bar with "next" practices. We'll be sharing these at the upcoming Parcel Forum.
Each technique is a high return, low risk "quick win" initiative that could be fully implemented in a matter of weeks. These tools are unique in that they're carrier agnostic and don't require renegotiating or even talking with your carriers. They even generate incremental savings in the midst of multi-year contracts.
Here are some highlights:
Cartonizing: In a utopian world there would be enough unique containers deployed to exactly fit an order's contents, eliminating damage while minimizing void fill, transportation cost and packaging materials. In reality there are constraints to the container shape, size, and options that a shipper can choose from.
Cartonizing techniques tackle parcel costs by focusing on the order before it's put in the box. First, it is necessary to develop an optimal "carton regime" that determines which cartons best fit a particular order. Next, is quantification of the delicate balance between the additional complexities of more cartons versus the savings from adopting the right sized cartons. Lastly, for multiple box orders, it is important to look at what is put in each box so as to minimize the total order cost.
Optimal Packaging: A key measure of a container's effectiveness is the volume it holds; on the other hand its cost is dependent on the amount of material it requires. "Optimal Cartons" use the least possible corrugated or enclose the most volume possible. This along, with efficient cartonization, helps to minimize tare weight.
Next generation packaging optimization tools maximize the volume per cost or, equivalently, minimize the cost for a given volume. As a test, shippers can enter their carton dimensions at www.chicago-consulting.com/optimalCartons.shtml and find out how much they could save with optimally sized cartons.
Enhanced Zone Skipping: Zone skipping is a powerful tool to consolidate parcel loads across zones 5-8. But often there isn't enough volume to justify zone skipping into less frequented regions. Package consolidators can help but their "cut" of the action adds back cost. Enhanced zone skipping techniques provide novel ways of increasing load factors on these less travelled lanes.
In 2010 and 2011, shippers will continue to be faced with a difficult market environment. As described here it's possible for logistics professionals to combat and even reverse most parcel increases. We look forward to sharing more details on these techniques at Parcel Forum.
_______________
Jeff Haushalter is a consultant with Chicago Consulting, a firm that specializes in designing and optimizing supply chains. Jeff can be reached at jeff@chicago-consulting.com.
