# Delay penalty cost

When any ship node faces a delay beyond the agreed upon SLA, a delay penalty cost is applied to it. Delays might be due to extra backlog at a node, carrier transit time, or other factors, resulting in the inability to adhere to an SLA.

The delay penalty (also known as a delay cost) is applied to each order line for the node. It is based on a preconfigured value equivalent to 2 USD in the currency that is configured for the tenant. In a scenario where none of the carriers at a ship node can meet the SLA days, the carrier that charges the lowest shipping cost for the order is selected.

The following example demonstrates how the delay cost is applied to determine a solution.

Consider ORD0010, for example.

Table 1. ORD0010
Order line Quantity
SKU001 1
SKU002 1

## Scenario A - Some nodes have a delay

In scenario A for ODR0010, several ship nodes have a delay.
Table 2. Node delays in scenario A
Order line Nodes considered Delay days
SKU001 Node001 1
SKU002 Node001 1
Node002 0 (no delay)

Sterling Intelligent Promising considers two different options to fulfill this order based on the delay.

Table 3. Fulfillment options for scenario A
Number of packages Shipping cost Delay cost Total cost
One package from Node001 containing both SKU001 and SKU002 \$6 \$4

Since Node001 can delay the shipment, the delay cost is applied for Node001 at both order lines. The total delay cost is calculated as \$2 + \$2 = \$4.

\$10

The shipping cost of \$6 + the delay cost of \$4 = \$10.

Two packages (One package from Node001 containing SKU001 and one package from Node002 containing SKU002) \$7

SKU001 from Node001 costs \$2.50 to ship, and SKU002 from Node002 costs \$4.50 to ship. Therefore, the total shipping cost is calculated as \$2.50 + \$4.50 = \$7.

\$2

The delay cost for Node001 is applied only at the first order line and is the default of \$2.

\$9

The shipping cost of \$7 + the delay cost of \$2 = \$9.

For scenario A, Sterling Intelligent Promising suggests the option of sending two packages because the total cost of two packages is less than the cost of one package in this scenario.

## Scenario B - All nodes have a delay

In scenario B for ODR0010, all ship nodes have a delay.

Table 4. Node delays in scenario B
Order line Nodes considered Delay days
SKU001 Node001 1
SKU002 Node001 1
Node002 2

Sterling Intelligent Promising considers two different options to fulfill this order based on the delay.

Table 5. Fulfillment options for scenario B
Number of packages Shipping cost Delay cost Total cost
One package from Node001 containing both SKU001 and SKU002 \$6 \$4

Since Node001 can delay the shipment, the delay cost is applied for Node001 at both order lines. The total delay cost is calculated as \$2 + \$2 = \$4.

\$10

The shipping cost of \$6 + the delay cost of \$4 = \$10.

Two packages (One package from Node001 containing SKU001 and one package from Node002 containing SKU002) \$7

SKU001 from Node001 costs \$2.50 to ship, and SKU002 from Node002 costs \$4.50 to ship. Therefore, the total shipping cost is calculated as \$2.50 + \$4.50 = \$7.

\$4

The delay cost for Node001 is applied at the first order line at \$2. The delay cost for Node002 is applied at the second order line at \$2. Therefore, the total delay cost is calculated as \$2 + \$2 = \$4.

\$11

The total shipping cost of \$7 + the total delay cost of \$4 = \$11.

For scenario B, Sterling Intelligent Promising suggests the option of sending one package because the total cost of one package is less the cost of sending two packages in this scenario.

## Scenario C - Some carrier services at ship node have a delay

In scenario C for ODR0010, some of the carrier services at a ship node have a delay.

Table 6. Few carriers have delays
Order line Nodes considered Node delay Carriers service | Delay days
SKU001 Node001 0 FedEx Ground Service | 1

FedEx Express Service | 0

SKU002 Node001 0 FedEx Ground Service | 1

FedEx Express Service | 0

Assume delay penalty is \$2.
Table 7. Fulfillment options for scenario C
Number of packages Shipping cost Delay cost Total cost
One package from Node001 containing both SKU001 and SKU002 Shipping cost using FedEx Ground Service is \$4

Shipping cost using FedEx Express Service is \$7

Delay cost of \$2 is applied for FedEx Ground Service every day per package.

Delay cost of \$0 is applied for FedEx Express Service every day
Total cost is \$4 + \$2 = \$6 for package using FedEx Ground Service where package is delayed by 1 day.

## Scenario D - All carrier services at ship node are delayed

In scenario D for ODR0010, all the carrier services at a ship node have a delay.

Table 8. All carriers have delays
Order line Nodes considered Node delay Carriers service | Delay days
SKU001 Node001 0

FedEx Ground Service | 3

FedEx Express Service | 1
SKU002 Node001 0

FedEx Ground Service | 3

FedEx Express Service | 1
Table 9. Fulfillment options for scenario D
Number of packages Shipping cost Delay cost Total cost
One package from Node001 containing both SKU001 and SKU002

Shipping cost using FedEx Ground Service is \$4

Shipping cost using FedEx Express Service is \$7

Delay cost of \$6 is applied for FedEx Ground Service every day per package.

Delay cost of \$2 is applied for FedEx Express Service every day
Total cost is \$7 + \$2 = \$9 for package using FedEx Express Service where package is delayed by 1 day.

## Scenario E - Carrier services at different ship nodes are delayed

Table 10. Carrier delays at different ship nodes
Order line Nodes considered Delay days Carriers service | Delay days
SKU001 Node001 0 FedEx Ground Service | 1
Node002 0 UPS Ground Service | 3
Assume delay penalty is \$2.
Table 11. Fulfillment options for scenario E
Number of packages Shipping cost Delay cost Total cost
One package from Node001 containing both SKU001

Shipping cost using FedEx Ground Service is \$4

Shipping cost using UPS Express Service is \$3.8
Delay cost of \$2 is applied for FedEx Ground Service every day per package. Total cost is \$4 + \$2 = \$6 for package using FedEx Ground Service where package is delayed by 1 day.

## Scenario F - Same Carrier services having different delays on common ship node

The carrier services having different delays on common ship node when SKU001 and SKU002 have different days to deliver.

Table 12. Same carrier having different delays
Order line Delivery dates Ship dates Days to deliver
SKU001 2023-09-12 2023-09-09 3
SKU002 2023-09-12 2023-09-10 2

When same carrier service has different delays at common node, Fulfillment Optimizer uses maximum delay days during delay cost calculations. For example, 3 days is used for FedEx Ground Service for package from Node001.

Table 13. Fulfillment options for scenario F
Number of packages Shipping cost Delay cost Total cost
One package from Node001 containing both SKU001 and SKU002 Shipping cost using FedEx Ground Service is \$4

Shipping cost using FedEx Express Service is \$7

Delay cost of \$6 is applied for FedEx Ground Service every day per package.

Delay cost of \$2 is applied for FedEx Express Service every day

Total cost is \$7 + \$2 = \$9 for package using FedEx Express Service where package is delayed by 1 day