Using economic shipping parameters

Consolidating two or more shipments and shipping them together strengthens the potential to bring about significant savings in transportation cost. This also brings about a trade-off between the cost savings made through consolidated orders and the ability to stick to the delivery dates.

Economic Shipping Parameters (ESP) settings are used to assess the said trade-off between:

  • Holding a shipment until many items are available to ship together, and
  • Shipping in a timely fashion

Shipments can be held in two ways:

  1. Multiple orders are available at a given time, and the orders are consolidated into a single shipment to reduce costs
    1. Multiple orders with the same ship date
    2. Multiple orders with different ship dates
  2. An existing order is held in anticipation of another order to enable consolidation

Scenario 1-a: multiple orders available at a given time with the same ship date

This is an ideal scenario where all the available orders can be consolidated into one shipment, without compromising the delivery dates.

This is possible as all the orders share the same ship date.

Scenario 1-b: multiple orders available at a given time with different ship dates

In this scenario, there may be a trade-off in meeting the delivery dates for the orders. The ESP settings come into effect to keep the delays within acceptable limits.

In a scenario where two or more orders in this set of orders are spaced beyond the maximum number of days specified in the "Allow shipment delay" parameter or the applicable shipping window (the range of dates within which the order must be shipped), only the applicable orders are consolidated together.

For example, if the Ship By dates of orders O1, O2, and O3 are spaced by one day each (D1, D2, and D3), and the allow shipment delay parameter is set to one day, the ESP consolidates either order O1 and O2, or O2 and O3, and not all three. This is because the two-day gap between the Ship By dates of orders O1 and O3 is more than the allowed shipment delay.

Scenario 2: an existing order is held in anticipation of another order to enable consolidation

The one order/shipment available for shipping is held optimistically, in anticipation of another order to the same Ship To Address.

The ESP settings determine how long the order can be held, before it has to be released for further processing. As per the ESP settings, the orders are typically held until they fulfil the weight or volume thresholds, or complete the maximum number of days specified in the "Allow shipment delay" parameter, or the shipments' shipping window.

Shipments' shipping window refers to the window within which a shipment has to be shipped, and is bound by the "Requested Ship Date" on the shipment and the "must ship before date".

The "must ship before date" is computed as follows:

Step 1 Ascertaining customer requested ship date

If a Customer Requested Ship Date exists for the order, it is used.

If a Customer Requested Ship Date is not available for the order, then one of the following methods is used:

  • If the order has a Requested Delivery Date, the Customer Requested Ship Date is computed by subtracting the Global Transit Time from the Requested Delivery Date, and based on the "End of Shift" parameter using the end of shift of the resulting date.
  • If Requested Delivery Date is not specified on the order, the current time is assumed as the Customer Requested Ship Date.

Step 2 Calculating must ship before date

After the Customer Requested Ship Date has been ascertained, the Must Ship Before Date is calculated using the following formula:


MustShipBeforeDate = Min (Max (ReqShipDate, CustReqShipDate + ESPDelayDays), 
ReqCancelDate))

where,

  • MustShipBeforeDate is the date before which a shipment must be shipped,
  • ReqShipDate is the earliest ship date as requested by the customer,
  • CustReqShipDate is the date as ascertained in step 1.
  • ESPDelayDays are the number of days the shipment can be delayed from the earliest of the requested ship dates on the orders that make up the shipment. The ESP Delay Days is taken from buyer's inbound compliance or enterprise's outbound constraints or HUB's outbound constraints based on configuration for the freight terms on the order, and based on who maintains ESP parameters.
  • ReqCancelDate is the last date as specified by the customer for receiving the shipment.

Logic used to consolidate shipments with different requested ship dates

Two shipments with different Requested Ship Dates are consolidated into one shipment only when the Requested Ship Date falls between the Expected Ship Date and the Must Ship Before Date of the shipment to which the new order release is consolidated.

For the shipment consolidation to occur, the Must Ship Before Date should be set in an appropriate way. For instance, if the Requested Cancel Date is less than the Must Ship Before Date, then the Must Ship Before Date should be set to the Request Cancel Date.

Note: Scenario 1-A or 1-B can turn into Scenario 2 when the available multiple orders are consolidated together into one shipment, and this shipment is held in anticipation of another order that may be consolidated into this shipment.

For example, when orders O1 and O2 or O2 and O3 have been consolidated into shipment S1, this shipment may be held in anticipation of another order that may be consolidated into S1.

Although the use of ESP is optional, both buyers and enterprises can establish ESP. When established, a setting in Freight Terms is used to determine which ESP to use first.