Smarter mode planning, Part 1
Most companies have a transportation planning function of some kind, whether it’s a Transportation Management System like Oracle OTM, or a more manual process. A critical choice is made during this planning phase that determines how costly the shipment will be: whether to use a Parcel Carrier or an LTL Carrier. If you’re just getting started with mode planning or think you’ve got it down to a science, smart cartonization might give you an unexpected edge.
Making the right decision about how a large order should be shipped is important, but what needs to be considered? Perhaps obviously, the first question is this: How many boxes are in the order, and what is the “billed weight” of each box? The problem is, in the carrier’s eyes, weight is not always weight. Here is how UPS defines billable weight.
Why bother measuring LTL against parcel? The freight savings are huge when done right, that’s why! However, most companies take the easy way out and operate on a rule of thumb like this: If the shipment is less than 200 pounds it goes parcel, and if each package does not weigh more than 150 pounds, all the rest goes LTL.
Companies have spent millions of dollars on TMS systems to eliminate that rule and use more automated intelligence in the hope of savings 10x of the cost of those systems. The problem is these TMS systems can’t calculate parcel rates correctly because they don’t have the ability to anticipate how an order might be packed. The “rule of thumb” approach might save a quite a bit of money, but nearly as much as if cartonization and palletization algorithms are deployed.
LTL vs Parcel – How do I decide?
This is the challenge. There is an overlap when you could ship an order in either mode, based on shipment characteristics.
As reviewed earlier it is not as simple as just knowing the weight of the order and seeing which is least expensive. It’s the ultimate apples and oranges comparison.
So how do we do it? Use an API like Paccurate to cartonize the order, then compare the parcel services to your LTL services. Pick the option with the best value and go. If you have a TMS in place all the better, link it up with Paccurate and get the most savings.
In Part 2, we’ll go through some example orders that demonstrate the breakpoint between parcel and LTL shipments.