Better Shipping Through Software

Oct 01, 2004 9:30 PM  By

Because catalog customers want to receive their orders as quickly and inexpensively as possible, catalogers have to figure out the quickest and least expensive way to ship those orders. But the delivery method that’s most efficient for a 2-lb. package to Seattle may not be the best option for a 50-lb. carton to Boston.

“Different carriers prefer different shipment weights in different origin-destination combinations, and their rates reflect these preferences,” says John Blanchard, transportation practice leader for Toledo, OH-based supply chain execution consultancy ESYNC. Hence the need for parcel manifesting software.

Many warehouse management systems (WMSs) — among them Warehouse Management Solution from Atlanta-based Manhattan Associates and CWCollaborate from Natick, MA-based CommercialWare — include a parcel manifesting functionality with a rate-shopping feature. The function pinpoints the most cost-effective carrier for each package, based on criteria the cataloger has configured into the software. The criteria typically include the physical dimensions of the box the item will be shipped in, the weight of the package, the destination, and the approved carriers.

If the rate-shopping function is not included in the WMS, you can buy an add-on program, such as NexGen.Ship from Irvine, CA-based Pfastship Worldwide Logistics and TRA/X Global Parcel from Dublin-based Precision Software. According to Blanchard, such packages typically cost $50,000-$200,000. Pricing usually depends on the number of distribution centers the cataloger ships from, and the volume of packages sent. Installation of the software takes one to three months depending on the company’s number of distribution centers.

Putting two and two together

Beyond calculating the optimal shipping methods, some software can organize into one package orders that would otherwise be boxed and shipped separately. This function, says Sally Sheward, vice president of marketing for Redwood Shores, CA-based software developer Escalate, is especially helpful for catalogers who often ship products composed of multiple parts that are delivered from vendors to the catalogers in multiple boxes.

Escalate’s consolidation software prints out a pick ticket indicating the parts that should be picked together. Once the order reaches the packers, a label is waiting for the grouped items to go out in one box. The software determines the proper size box for the order based on the combined cube size of the components.

The Escalate program is controlled by an application service provider that is accessed through a secure Website. The program is priced based on the number of orders processed per month. The average monthly charge paid by customers, says Sheward, is $5,000.

Chatsworth, CA-based lighting marketer Lamps Plus uses Escalate to make sure orders containing multiple parts, such as its upright lamps, get put in one box and picked and tracked through the mail as one order, says director of planning and supply chain management Bill Gratke. The company, which houses 7,000 SKUs in its 350,000-sq.-ft. distribution center, generally receives the lamp base in one box, the shade in a second box, and the bulbs in a third.

Prior to going live with Escalate on April 1, Lamps Plus spent 150 days incorporating the program into its operations. It took 48 hours to train pickers and packers how to use the program. In the months since implementing the software, Lamps Plus has cut the number of boxes it uses for shipping by 30%-50%.

The DIY direction

Henry Schein, a $3.35 billion distributor of dental, medical, and veterinary supplies, also uses software to help it consolidate packages. For Schein, though, this means grouping together large orders that need to be transported by freight to the same city or state.

“Products that might be $5 each if sent separately might be $8 for both if sent together,” says David Kagey, vice president of distribution for the Melville, NY-based cataloger. “We’ve saved in excess of $1 million by banding products together like this.”

Schein’s software also separates into different boxes customer orders that exceed 50 lbs. “The majority of our orders go to the individual practitioner, so our system is set so that no box is more than 50 lbs. We realize that someone has to lug that box into the office and unpack it,” Kagey explains. The software uses data regarding the weight and dimensions of each product to build pick and pack tickets. “It may divide an order into three boxes that will be picked by three different people,” Kagey says. “It is programmed to create as few boxes as possible that don’t exceed 50 lbs.”

Rather than use an off-the-shelf package, Schein developed its own shipment routing software 15 years ago. The company, which gets 99.9% of its customer packages out the door the same day the orders are placed, uses the software to determine which of the company’s five distribution centers the package should be shipped from to get to the customer fastest. Eighty-three percent of customers are only one day from a Schein warehouse by normal ground delivery.

Schein ships the majority of orders through United Parcel Service. “We look at every customer zip code in the U.S. and ask how it will get there fastest,” says Kagey. “We pick the warehouse and the UPS hub that will deliver the next day and that will give us the lowest cost.” Schein will ship the orders from its warehouses via trucks that will drive to the appropriate UPS hub. If UPS cannot offer next-day delivery, Schein will truck the orders to local carriers.

Creating your own software, like investing in a ready-made system or working with a developer to tailor a program for you, can cost hundreds of thousands of dollars. Is the investment worth it?

“You could save as much as 8%-15% in shipping costs resulting from consolidation, carrier selection, and contract compliance by making better decisions during the shipment execution cycle,” insists Jeremy Davidson, senior engineer, process improvement with Reading, PA-based operations logistics design firm Fortna. “For example, the accurate generation of carrier codes, charges, and routing codes alone avoid errors in carrier billing, which almost always favor the carrier and may be largely unknown by the shipper.”