Automatic Batch Assignment & Order Release

Automatic Batch Assignment & Order Release

Orders should be assigned to their optimal shipment (1) a group of orders that travel together (2) an individual movement of commodities from an establishment to a customer or to another location of the originating company (including a warehouse, distribution center, retail or wholesale outlet). A shipment uses one or more modes of transportation including parcel delivery, U.S. Postal Service, courier, private truck, for-hire truck, rail, water, pipeline, air, and other modes and pick wave.  The optimal shipment assignment (to a mode, carrier, and specific shipment ) minimizes transportation cost yet satisfies the customer’s response time requirements.  The optimal pick wave assignment (to a group of orders picked together in a warehouse) minimizes the material handling cost yet satisfies the departure time requirement of the order’s shipment .  Order batching should be on-line and in real-time so that delivery time commitments can be made on-line and communicated immediately to the customer.  Once assigned, order release to the transportation management shipment (1) a group of orders that travel together (2) an individual movement of commodities from an establishment to a customer or to another location of the originating company (including a warehouse, distribution center, retail or wholesale outlet). A shipment uses one or more modes of transportation including parcel delivery, U.S. Postal Service, courier, private truck, for-hire truck, rail, water, pipeline, air, and other modes and warehouse management system should be automated in real-time.

 

Change Orders

Change Orders

Customers and consumers should be allowed to change orders up until the loading of the order into the transportation container A Container is defined as any conveyance entering the U.S. used for commercial purposes, either full or empty. Includes containers moving in-bond for the port initiating the bonded movements. The following are examples of a Container: Stakebed truck, truck with a car carrier, van, pickup truck/car, flatbed truck, piggyback truck with two linked trailers/containers = 2 containers, straight truck, bobtail truck, railcar, rail flatbed car stacked with four containers = 4 containers (on each rail car if there is multiple box containers count each container and the flatbed car.), and tri-level boxcar with multiple containers inside = 3 containers [TransStats] and/or up until the point the change will delay the entire shipment (1) a group of orders that travel together (2) an individual movement of commodities from an establishment to a customer or to another location of the originating company (including a warehouse, distribution center, retail or wholesale outlet). A shipment uses one or more modes of transportation including parcel delivery, U.S. Postal Service, courier, private truck, for-hire truck, rail, water, pipeline, air, and other modes .  Order changes outside those parameters should be entered as new orders.

 

Unit Values

Unit Values

The unit selling price (USP) for an item is the price paid per unit by a customer for the item.  The unit inventory value (UIV) for a purchased item is the price paid to the supplier for the item including inbound transportation cost. The unit inventory value (UIV) for a manufactured item is the cost of manufacturing the item, sometimes referred to as the standard cost. Unit gross margin (UGM) is the difference between unit selling price and unit inventory value. The higher the unit gross margin, the higher the cost of lost sales associated with that particular item.

UGM = USP – UIV

For example, if an item sells for $25.00 per unit and its unit inventory value is $14.00 per unit, then its unit gross margin is

UGM = $25.00 – $14.00 = $11.00 per unit

The unit gross margin percentage (UGM%) is the ratio of the unit gross margin to the unit selling price.

UGM % = UGM/USP

In this case the unit gross margin percent would be

UGM% = UGM/USP = $11.00/$25.00 = 44%

 

Merge-in-Transit

Merge-in-Transit

Merge-in-transit is a supply chain flow strategy made famous by Dell Computer. The basic merge-in-transit concept is to use the transportation function (vs. warehousing) to assemble the components of an order manufactured on demand in disparate locations.

 

 

Example Merge-in-Transit Flow

 

This logistics strategy at one time allowed Dell to achieve return on invested capital rates in excess of two times their closest competition. Some of the keys to success for them included:

 

  • Direct internet sales
  • Supplier owned inventory held less than 15 minutes away
  • Supplier City with vendors on-site performing inventory management on Dell’s behalf
  • The merge-in-transit flow concept
Deployment Optimization

Deployment Optimization

One of our clients is a large food company delivering on a DSD basis to grocery chains around the southeast. Their historical deployment strategy had been to centralize and hold inventory, delaying deployment as late as required delivery windows would permit. The approach was based on the lean principle of inventory postponement; holding back inventory in a central location until an order is received. It could be called delayed deployment or deploy-to-order.

Based on their outbound transportation cost I suspected the approach might be overly expensive. They were willing to have a look at some other options. The resulting analysis is presented in Figure 1. The figure is a screen shot from our Multi-Echelon Inventory Optimization System. The system considers multiple network configuration options for each SKU. Network configuration options are defined as the number of central warehouses, the number of regional warehouses, and the number of local warehouses. In the example a single central warehouse serves 12 sales centers which each serve 17 small depots. Based on minimizing total logistics cost including transportation, inventory carrying, and lost sales cost, an optimal inventory deployment emerges. The key is to understand the optimal allocation and assignment of inventory for each type of SKU. In this particular case the recommended deployment is 20/30/50; 20% of the inventory held centrally; 30% held regionally; and 50% deployed in depot locations near large customers. The previous deployment had been 60/20/20. The revised deployment was worth $12,000,000 in total logistics cost savings.