Scenario: Accelerating deliveries with cost optimization
In this scenario, the delivery speed optimization lever balances transit cost and transit time to achieve the desired business outcome based on industry and customer segment. While the standard cost optimization model prioritizes the lowest cost to serve, certain situations call for earlier delivery than the promised date, driving customer satisfaction and repeat purchases.
To enable this, transit time cost is introduced as a new cost to serve metric. It adjusts the base transit cost by factoring in a normalized delivery speed factor, creating a more balanced measure of cost versus speed.
Example 1
Now, in Sterling Intelligent Promising, you can apply the Optimizing delivery speed lever to focus on the costs or the delivery speed in the optimization profile. This lever adjusts the total transit time cost for each node to reflect the true impact of delivery speed on customer experience and operational efficiency.
In this scenario, Sterling Intelligent Promising determines the most optimal fulfillment node by balancing shipping cost and transit time.
- All nodes use the same carrier called UPS_GROUND.
- Nodes differ in distance and transit performance.
- Service Level Agreement (SLA) = 5 days.
The following table shows the carrier service performance and cost for each fulfillment node.
| Node | Transit rate | Transit days | Delivery speed factor |
|---|---|---|---|
| A | $4.00 | 2 days | 1.0 |
| B | $3.50 | 5 days | 1.0 |
| C | $6.00 | 3 days | 1.0 |
- Transit rate
- The transit shipping rate that is defined for a shipping zone.
- Delivery speed weight
- Represents a weight factor from 0% to 100%. A higher value prioritizes speed over cost.
- Normalized transit time cost
- This cost is based on and including delivery speed factors.
The adjusted transit time cost across nodes is based on a weight of 0% and 100%.
| Node | Transit rate | Delivery speed factor | Normalized transit time | 0% weight | 50% weight | 100% weight |
|---|---|---|---|---|---|---|
| A | $4.00 | 1.0 | 0.00 | $4.00 | $4.00 | $4.00 |
| B | $3.50 | 1.0 | 1.00 | $3.50 | $4.00 | $4.50 |
| C | $6.00 | 1.0 | 0.33 | $6.00 | $6.16 | $6.33 |
Example calculations:
Node A at any weight: $4.00 + (weight × 0.00 × 1.0) = $4.00 (remains constant because it has the fastest delivery time with normalized transit time of 0.00)
Node B at 50% weight: $3.50 + (0.50 × 1.00 × 1.0) = $4.00
Node C at 100% weight: $6.00 + (1.00 × 0.33 × 1.0) = $6.33
- With 0% weight that is optimizing on cost, the winning node is B at $3.50.
- With 50% weight that is balanced between cost and speed, the winning node is A at $4,00 because it has a faster SLA of 2 days for the same cost.
- With 100% weight, that is optimized on speed, the winning node is A at $4.00.
Example 2
| Carrier | Transit rate | Transit days | Delivery speed factor |
|---|---|---|---|
| USPS_NEXTDAY | $5.00 | 1 | 1.5 |
| USPS_GROUND | $3.75 | 5 | 2 |
| UPS_2DAY | $4.00 | 3 | 1 |
| Carrier | Transit rate | Transit days | Delivery speed factor | 0% weight | 50% weight | 100% weight |
|---|---|---|---|---|---|---|
| USPS_NEXTDAY | $5.00 | 1 | 1.5 | $5.00 | $5.00 | $5.00 |
| USPS_GROUND | $3.75 | 5 | 2 | $3.75 | $4.75 | $5.75 |
| UPS_2DAY | $4.00 | 3 | 1 | $4.00 | $4.25 | $4.50 |
Example calculations:
USPS_NEXTDAY at any weight: $5.00 + (weight × 0.00 × 1.5) = $5.00 (remains constant because it has the fastest delivery time with normalized transit time of 0.00)
USPS_GROUND at 50% weight: $3.75 + (0.50 × 1.00 × 2.0) = $4.75
UPS_2DAY at 100% weight: $4.00 + (1.00 × 0.50 × 1.0) = $4.50
- At 0% weight, USPS_GROUND is selected, to prioritize on cost.
- At 50% and 100% weight, UPS_2Day is selected, to prioritize on preference. The delivery speed factor of 1.0 for UPS_2DAY that is lower than the USPS_GROUND factor 2.0 indicates faster delivery, making it more favorable when speed is weighted higher.