Replenishment logistics promotes inventory reduction through more frequent and lower quantity orders. Combining this strategy with attractive pricing by parcel carriers for the low end LTL shipments has resulted in more and more inventory replenishment being performed by parcel carriers.
The ongoing shifting of replenishment from LTL to parcel has always brought increased attention to shipment integrity. Consignees accustomed to receiving one manifest for an entire shipment arriving on a pallet must now contend with loose parcels and separate delivery information for each parcel. This issue is exacerbated when multiple parcel shipments are not delivered as scheduled. Shipments must be staged, paperwork left open, and consolidation completed the following day or even days later. Shippers are usually not aware of split shipments unless they receive feedback from consignees. Some consignees will not pay for a shipment until all of the parcels arrive while others will outright refuse delivery of split shipments. Needless to say, parcel carriers have been receiving constructive feedback from both ends of the supply chain for many years.
To set the record straight, there is no such thing as shipment integrity when you ship with national parcel carriers! The underlying root cause can be found in their processing method.
First, lets look at how LTL carriers process shipments. Shipments are usually loaded onto pallets and shrink wrapped by the shipper. The pallet travels to the destination. If a shipment is comprised of loose parcels instead of a pallet, each one is handled separately but a manifest is used to manually consolidate them for delivery.
On the other hand, parcel carriers rarely receive parcels on pallets. When they do, the pallets are broken down before they leave the origin terminal since each parcel is processed through the hub and terminal network as its own individual shipment. In fact, parcels are placed into one of three distinct categories for sortation: Smalls, Regulars, and Non-conveyable. Each one is processed differently.
Smalls can best be described as any parcel that can fit through a coat hanger in any two directions. To minimize expense, Smalls are put into plastic bags at the origin terminal and sent to the hub for special processing in a Smalls sort area. The bags are opened and the parcels are sorted manually into bins based on the destination ZIP code. Sorted parcels are bagged and sent to a destination trailer.
Regulars are standard parcels with flat sides that can be transferred on a power conveyor belt, and are too large to be a Small.
Non-conveyables are parcels that cannot be transferred on powered sortation systems. This includes such items as cylinders, tires and oversized boxes. Non-conveyables are often processed using carts.
Frequently parcels go through multiple hubs before arriving at a destination terminal for delivery. As described above, there are many opportunities for parcels in the same shipment to go astray since shipment integrity is not maintained during sortation.
Theoretically, all parcels in a shipment should arrive at a destination delivery terminal at the same time. In practice, this is not the case.
Parcel shipment integrity is clearly driven by one overwhelming issue: On-Time Service. If a carrier provided 100% on-time service, then all shipments would be delivered intact on the scheduled day. As we all know, no carrier provides 100% on-time service.
Since each parcel is treated as its own shipment, each can be treated as an independent and discrete statistical event. The greater the number of packages in a shipment, the more likelihood of split shipments. For example:
· Shipment A has 3 parcels
· Shipment B has 5 parcels
Lets assume the on-time service for the carrier in question is 98%. Using basic statistical probability, the split shipment rate would be:
Shipment A: 98% x 98% x 98% = 94%, or conversely, a 6% chance of a split shipment.
Shipment B: 98% x 98% x 98% x 98% x 98% = 90%, or a 10% chance.
Parcel carriers are always struggling with solutions for providing shipment integrity. They have programs that can be deployed on a short-term basis using special handling and information systems. These efforts can be viewed as a band aid to the real solution: accurate and timely parcel delivery.
With the technology available in todays Information Age there is no reason why carriers cannot electronically notify (e.g. email) shippers of split shipments. It would be a welcomed consolation for shippers and the right way for carriers to handle the industrys ongoing shipment integrity problem. Given that carrier on-time service is not 100%, the aforementioned would be much appreciated.
Joe Loughran is President of SmartTran, Inc. and an expert in small package pricing and carrier rate analysis. SmartTran is a transportation consulting company offering services in carrier rate negotiation, guarantee refund service and logistics planning for twelve years. SmartTrans management team has over 70 years of executive level experience in package transportation management. Joe can be reached by phone at 724-934-0626 or by e-mail firstname.lastname@example.org.