Configuring landed cost optimization in Order Hub

Landed cost settings are used by scheduling rules where the Optimization option is set to Cost, then number of shipments, then priority, then date. Cost can be configured to include true and perceived costs, which are grouped into four different components. The components include item cost, handling cost, transportation cost, and node attribute cost. For more information about the different costs, see Cost-based scheduling.

Procedure

  1. Click Fulfillment from the menu.
    Note: You need to be assigned both the Tenant administrator and Fulfillment manager role to access the Fulfillment menu.
  2. Select an enterprise from the Enterprise list.
    Note: The Enterprise list is displayed only if there are more than one enterprise within your network.
  3. Select Scheduling rules.
  4. Click Edit for Landed cost.
  5. Select the components that you want to include in the landed cost calculation. You must select at least one option.
    Item cost
    The average cost to fulfill an item at a node. Item cost can include mark-down costs and also the cost to store and replenish the item. The item cost comes from a data feed into IBM Sterling Order Management by using the loadInventoryNodeCost API. If loadInventoryNodeCost is not implemented, then item cost is not included in the landing cost.
    Transportation cost
    Includes transfer costs (internal and external) and last leg transportation costs.
    Handling cost
    Includes handling cost based on node type.
    Cost based on node attributes
    Includes factors such as node priority, node consumption, hours of supply, and shipment delays.
    Review the following tables for more information about each attribute.
    Table 1. Details for Transportation cost
    Option Description
    Maximum volume of a shipping carton Enter the maximum volume of the carton and select the volume unit of measure. The value is used to calculate the transportation cost based on the number of cartons. This field helps to calculate the number of shipments needed for an order, and thus calculate the cost more accurately.
    Transfer cost
    Cost currency The cost factor currency.
    Cost for internal transfers Enter the transfer cost factor and select the correct unit of measure for internal transfers. Internal transfers costs are the costs to transfer inventory within the fulfillment network, such as transferring inventory between nodes in the enterprise.

    The internal transfer cost factor is used to calculate transfer cost for transfer schedules between two nodes.
    Cost for external transfers Enter the transfer cost factor and select the correct unit of measure for external transfers. External transfer costs are the costs to transfer inventory outside of the fulfillment network, such as transferring inventory from an outside vendor.

    The external transfer cost factor is used when a transfer schedule does not exist between two nodes.
    Last leg transportation cost This option is displayed in the user interface to denote that last leg costs are included when you select Transportation costs. Last leg transportation is the cost to ship inventory from the ship node directly to the buyer. This value is usually imported by using API calls to an external system and is set up by an IT support team. You can also use the Application Manager (Cross Application > Logistics > Outbound Constraint) to configure constraints that define how orders are shipped on the last leg.
    Table 2. Details for Handling cost
    Option Description
    Node handling cost factor Enter a number greater than or equal to zero as the handling cost factor for nodes. This value can be used as a quick way to increase or decrease the overall handling costs. Handling cost = (Node handling cost factor) * (Node type cost)
    Handling cost based on node type Define the inbound and outbound costs based on node type. You can have only one entry per node type.
    • To create an entry, click Add node type.
    • To edit an existing entry, click the entry under the Node type column.
    • To delete an entry, select the checkbox beside the entry and then click Delete.
    You can set costs that are based on Per shipment, Per line, and one of Per unit or Per unit weight.
    Table 3. Details for cost based on node attributes
    Option Description
    Cost factor currency The cost factor currency.
    Apply cost factors Determine whether node attribute-related costs are based on a Per shipment line or Per Unit basis.
    Node priority cost factor Enter the node priority cost factor.

    This factor applies to the distance of the node to the customer to determine the cost of shipping from a node.
    Node consumption cost factor Enter the node consumption percentage cost factor.

    This factor applies to the consumed capacity percentage to determine the cost of shipping from a node.

    Hours of supply cost factor Enter the hours of supply cost factor.

    This option applies to the hours of supply that is remaining at the node, which is calculated using the node's available supply and item velocity.

    Shipment delay cost factor Enter the Shipment Delay Cost Factor.

    The factor applies to the shipment delay cost, which is the cost that is based on the number of days that are required to deliver a shipment to the customer.