Over the past several years, shippers have prioritized getting orders out the door as quickly as possible. This approach is a natural response to the demands of an increasingly impatient consumer base, and has affected B2B and B2C companies alike. It has, however, proved to be costly.
“That results in a one-to-one order to shipment [scenario], which isn’t very transportation-efficient,” Echo Global Logistics Executive Vice President of Managed Transportation Mike Mobley said.
When shippers push orders out as soon as they come through, they compromise efficiency in favor of speed. In a global, consumer-driven culture that tends to believe faster is better, this may seem like a small price to pay. In reality, it translates to a substantial wastage of time, money and miles.
Shippers can unlock a myriad of cost savings by building in one or two days between receiving an order and sending it out the door. This approach gives shippers and their third-party logistics partners time to evaluate existing orders as a whole, ultimately enabling them to identify more cost-effective ways to move the same grouping of orders.
This business model shift benefits consumers as well. When shippers realize systematic cost reductions, consumers often benefit via more attractive prices. In addition, customers (whether businesses or end consumers) will reduce their operational costs due to fewer receipts. Additionally, when orders are moved as efficiently as possible, lost and damaged orders tend to occur less frequently.
Most shippers see about a 10%-15% cost reduction when implementing order optimization processes in partnership with Echo, according to Mobley. Clients’ money-saving potential is tied to their shipment volumes, with higher volumes leading to more opportunities to save.
For example, Echo works with one company that sends in order data for multiple distribution centers on a daily basis. Echo then sends its client an optimized load plan that can be executed the very next day, effectively driving down costs within a matter of hours.
That said, shippers that have historically prioritized speed over efficiency when sending out orders will need to have conversations with their customers surrounding these shifts. Companies can manage customer expectations by being upfront about the order optimization process. This also gives shippers a chance to outline the ways more efficient supply chains benefit everyone, including their customers.
While cost reduction is one of the most attractive side effects of order optimization, it is far from the only benefit. When shippers optimize their transportation efforts, they reduce the overall number of miles traveled to deliver their freight. This can have a significant positive impact on the environment, a growing area of concern for both the logistics industry and end consumers.
Overall, the positive impacts of order optimization more than justify the relatively short amount of time required to formulate and execute a load plan. Those benefits extend to every member of the supply chain, including industrial and end consumers.
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