Optimized Parcel Rating: A key to control transportation costs
"Do you ship more than 100 parcels each day?"
Most of the large enterprises might say 'YES' to this question. In the last decade, the emergence of e-commerce coupled with the rise in smaller and more frequent orders has made parcel shipping operations as one of the key functions of transportation management systems.
Parcel shipping is an inherently complex and expensive mode. Logistics planners are generally faced with the challenge of meeting customer expectations of delivering goods at a lesser freight cost within the stated service time. Adding to their woes, FedEx and UPS have increased their rates for parcel shipments in 2010.
Generally in a truckload scenario, total shipment weight is used as a basis to calculate freight cost. But such a simple rating structure does not exist for shipping packages - where rating is comprised of per package charge, variable accessorial charges (commercial/residential), complex discounting algorithms and different service levels. Parcel rating also poses other unique challenges such as:
- Large volume of transactions - a major operational constraint
- Complex rate schedules ( zone or tier based) and negotiated discounts for each customer
- Periodic changes to existing rate structures
- Multiple carrier/service levels
Large parcel carriers such as FedEx and UPS offers a wide array of innovative services and costing options, which if leveraged properly can result in substantial cost savings. UPS offers a Hundredweight Service - a discounted rate to customers who ship multiple packages to the same address on the same day using the same services. Similar equivalent in FedEx is called Multiple-Piece Shipment (MPS). The savings that businesses realize when switching to FedEx Multiweight or UPS Hundredweight can be substantial.
Thus shippers can realize huge cost savings by efficient "rate shopping" i.e. selecting optimal carrier/service for each parcel movement. This will help shippers to substitute more expensive express services with less costly ground service to ship orders and still meeting the expected service levels.
Traditionally, rating of parcel shipments was typically not considered as one of the core functions of a Transportation Management System (TMS). However there is a huge savings opportunity for integration of these two functions. Oracle Transportation Management (OTM) which delivers robust transportation planning and execution capabilities to shippers and third party logistics providers can be integrated with 3rd party solutions like Kewill Flagship to support parcel rating and freight settlement for major express parcel carriers.
Courtesy: Nipun_Lakhotia
