Optimizing your supply chain for least-cost delivery
February 24, 2017
Flexibility may not be a quality traditionally associated with supply chains. However, the digital age has brought an infusion of adaptable performance to eCommerce and omnichannel organizations. The speed of data today, combined with the plethora of delivery options available, has enabled least-cost routing, and companies that employ this process can see immediate effects on their bottom lines.
Working with small companies around the country and world is the crux of least-cost routing.
The advantages of not being chained to one carrier or network are clear: If someone can do the job as effectively at less cost, it's a wise decision to work with that organization. However, discovering the financial case for a given shipper at a particular moment is not a hands-on process that can be handled by employees. Instead, companies will need strong back-end algorithms.
Seeing the advantages
The financial benefits of employing least-cost routing instead of sticking with a single carrier can be immediate and noticeable. During a Logistics Management roundtable discussion, industry consultancy CEO Rob Martinez stated that companies are shaving as much as 25 percent to 40 percent off their costs when working with a least-cost routing model, combined with modal shipping and carrier optimization. Every kind of partner is on call in such a system, from national carriers to regional businesses and the postal service.
Following the roundtable, Logistics Management delved into the role regional package providers play in a least-cost routing solution. This is a vital point to consider, because the potential presence of these smaller companies is one of the major differences between using an adaptable routing method and going with a single delivery service. The source noted that industry panelists came up with several reasons to include local companies in a logistics strategy, ones that help these organizations stand out in an increasingly crowded logistics space.
For example, staging inventory locally and using regional delivery companies to get it to customers is one way to slash delivery times. Serving key markets with logistics organizations based in those places, along with warehousing that's ready to go, could be the basis of a remarkably smooth pathway from an omnichannel company to its customers.
Logistics Management also turned to a survey of companies using regional carriers to back up their usefulness. More than half of companies said these organizations have customer service advantages over their national or global peers, while nearly the same number pointed out that they are cheaper. Other advantages include low delivery times and additional service at the point of delivery.
Least-cost routing gets logistics firms of all kinds involved.
Picking the right platform
Companies in the market for a new order management solution should consider selecting one that employs helpful least-cost routing algorithms. The advantages in both cost and delivery time make the decision clear. If sticking with a single carrier is more expensive and slower, it begs the question of why any merchants do so. With an OMS market that now supports least-cost routing, companies have an advantage to shake up their logistics strategies for the better.
Once leaders decide on an OMS upgrade, choosing which system to go with is the next step. Every merchant's logistics needs will be a little different based on geographic reach, industry and clientele. This means flexibility is at a premium. Solutions that can work with existing assets, scale up or down intelligently and set up custom fulfillment networks have a clear advantage over more rigid options.
With a strong enough algorithm, cost and speed of delivery both come into focus, letting merchants reach their customers effectively, no matter where they're operating or what their overall goals may be. Finding such capabilities is a valid reason to seek out an OMS upgrade, and one that leaders may be very glad they followed up on.