Shippers, carriers, and suppliers of industrial goods are frequently challenged with the task of optimizing their delivery process to ensure the timely delivery of products. An approach that is frequently employed is split shipments.
What are split shipments?
Split shipments, also known as order splitting, means dividing a single order, which may contain multiple products, into separate shipments that are delivered in more than one delivery.
These challenges can arise in various types of delivery flows:
- In intercompany shipment flow in which the movement of goods happens within the same company.
- In parcel shipment flow in which the transportation involves specifically parcels
- In freight shipment flow in which the transportation of goods involves large quantities, typically transported by trucks.
Managing split shipments in any of these flows can be demanding, requiring goods to be delivered simultaneously, in small batches, or in a specific sequence, as requested by the customer.
In this article, we’ll explain why split shipments occur and how to best manage split shipments.
Why are split shipments used?
To meet the demands of the customers or delivery schedules, businesses split shipments which can serve different purposes. For example, one company may use split shipments to improve inventory management, while another may use it to optimize the shipping process.
Splitting shipments can happen for a variety of reasons:
- Customer demands
- Order priority (e.g., when ordering two books, one can be delivered now, the other one only in two weeks from now.)
- The customer needs inventory to be sent to different locations.
- Customer's warehouse space limitations
- Inventory locations
- inventory is stored in different warehouses or distribution centers.
- Product availability
- SKU shortage in certain locations
- Backorders – if inventory is partially ready it may be shipped in parts, starting with the inventory that is
- Shipping constraints
- Loading meter availability
- Vehicle weight constraints
- Fleet shortage
- Carrier network incentives
- Carriers incentivize shippers to align the shipments with their network capabilities (e.g., it's more cost-efficient to split a shipment into two when there is a parcel surcharge with a maximum dimension of 60 cm.)
- Shipping cost reduction incentive for shippers
Disadvantages of split shipments
When shippers, carriers, or manufacturers choose to split shipments and send separate vehicles over long distances or internationally, they may incur additional shipping costs.
This not only leads to higher expenses, but can also create unnecessary stress for businesses, customers, and the environment.
Extra packaging
Shipping items in multiple deliveries means more materials and packaging you have to pay for.
Unanticipated shipping costs
Split shipments can occur due to a variety of factors such as backorders, different delivery locations, shipping constraints, or customer demand which all can lead to unforeseen shipping costs.
CO2 emissions
Moreover, when split shipments require multiple vehicles, this can result in increased CO2 emissions, which may be a concern for customers who prioritize sustainable and eco-friendly practices.
How to take advantage of split shipments?
While these cons exist, split shipments are a common and necessary practice, which is why you must take full advantage of them.
Businesses must balance this against the need to ensure timely delivery. By using split shipments, you can save money and make better and more cost-effective decisions.
- Faster delivery times: Split shipments help businesses deliver products to customers faster, as they can be sent from the closest warehouse or distribution center.
- Lower shipping costs: By splitting shipments into multiple ones, shippers or manufacturers can take advantage of more cost-effective transportation options, such as less-than-truckload (LTL) or parcel carriers, which can be more cost-effective than full truckload (FTL) shipping.
But due to the complex carrier rate structures and surcharge types cost efficient packing can get quite counterintuitive. - Lower inventory costs: By splitting orders and shipping only the necessary inventory to specific locations, businesses reduce the amount of inventory held at any given location and lower storage costs
Solutions to Managing Split Shipments
To plan and manage split shipments, it's important to review both the order and inventory data to determine which items should be included in each shipment and in what configuration they should be.
For different types of delivery flows there can be different ways of managing split shipments.
Manual order splitting
The traditional method of managing split shipments typically involves using spreadsheets or other manual methods to track inventory levels.
However, this process can be challenging for businesses that have inventory stored in multiple locations or that require complex shipping arrangements to fulfill customer orders.
The high complexity factors for intercompany, parcel & freight shipment flows such as transport schedule, carrier rate structures, or item allocation are not taken into consideration when managing with manual planning, leading to suboptimal, packaging, load plans, and wasted resources.
Load planning software
An optimized order-splitting solution for freight shipment flow is truck load planning software.
Determine the optimal amount of freight to book ahead of time and automate the management of split shipments with capacity planning: calculate the number of trucks needed, days in advance, without doing the load planning.
By calculating the right number of vehicles to ship your orders you can determine if split shipments are necessary.
- Forecast how many parcels or pallets will fit in a truck to fulfill an order
- Forecast shipping or transportation cost
- Reduce transport costs by exploiting your carrier rate structures and finding the optimal load plan
- minimize the number of vehicles used by using every space in the vehicle
- find the right vehicle types for your orders
- Increasing the fill rate of your available space
If split shipments are necessary, you can encourage your customers to order more by informing them of vehicle fill rates. This way you provide them with an incentive to increase their order size by maximizing the vehicle's capacity - adding additional products for the same transport cost.
Load planning software also helps in managing the Just-in-time (JIT) process of load planning.
Quickly adapt your load plan when facing changing order priorities and unpredictable driver arrival times.
The software can provide your team with ad hoc instructions to optimize axle weight distribution. This way, you can ensure efficient order splitting and reduce the risk of delays or increased costs due to inefficient load planning.
Another feature of load planning software is assistance during loading operations.
With the assistance of 3D load planning algorithms, ensure the optimal fill rate while taking into account that the first order loaded in the truck should be the last one off the truck.
You won’t need to think about cargo requirements and vehicle characteristics, or how you're going to group destinations together, all while dealing with re-planning due to disruptions and emergencies.
Cartonization
For order-splitting in parcel shipment flow, cartonization is the solution.
Carriers provide complex rate structures and surcharges or so-called “incentives” to their customers to steer toward the parcels or pallets that fit their distribution network.
Due to this, it's an impossible task to look up the transport rates and surcharges for every carrier and order, while still maintaining a high handling speed.
Yet for cost-optimal packing in order splitting, these rates and surcharges must be considered. If done right, it has a massive impact on your transport costs. But cost-optimal packing can be counterintuitive due to carriers' pricing models which make splitting an order more cost-efficient.
This means that more packages must be transported, but because of the categorization of volumetric weight rates, the carrier contract rates can be exploited.
Here’s an example of shipping cost-saving potential in parcel shipment order splitting.
The carrier rate is calculated by taking into account dimensional weight (or volumetric weight) and actual weight. The carrier will consider the largest weight of the two, also known as chargeable weight - if the actual weight is larger than the dimensional weight, that parameter will be considered when calculating the transport rates.
Carrier A has its own base rate and additional weight rate depending on the chargeable weight category. The cost of shipping is the sum of the base rate and chargeable weight times the weight rate. To reduce parcel transport costs, an order that could perfectly fit into one needs to be split up across two boxes.
In this scenario, the rate structure is exploited by splitting an order into 2 separate packages, which decreases the cost of transport by 42 %.
While actual weight across the 2 boxes remains the same, dimensional weight or DIM weight falls under the smallest weight category in carriers' freight rate, so the total cost or transportation cost can be significantly reduced.
A cost-efficient 3D cartonization solution accounts for transport rates and can enable you to save significant financial resources as well as time on item handling.
Conclusion
Both load planning software and cost-efficient 3D cartonization can be applied in intercompany shipment flow allowing you to optimize overall workflow operations and making your life easier through automation.
Learn how Optioryx solutions can help you manage your supply chain more effectively and grant you the speed, certainty, and reliability you need in your operations.
Integrate Optioryx solution with other existing systems, such as warehouse management systems (WMS) and transportation management systems (TMS), or enterprise resource planning (EPR) systems to provide a more holistic view of the entire supply chain.
