Josh Bartel, chief executive officer of Hydrian Inventory Optimization, explains what split shipments are, why they happen, how they increase fulfillment costs, and how they can be avoided.
Split shipments occur when a single customer order requires multiple deliveries, often on multiple days. Often they result in a degradation of customer service and the imposition of additional costs, which are frequently borne by the shipper.
The reason for a split shipment might be that a local stocking location is out of one part of the order, requiring the shipper to reach out to a distribution facility that might be across the country. Rather than hold back the entire order, which could result in non-salable inventory, the shipper will send the portion that’s immediately available, and require the customer to wait for the rest.
It can be challenging to track the impact of split shipments on customer service. A company might turn to a freight auditor to quantify the cost, by scrutinizing the available options and zone charges that accompany the complete order. Bartel says the added distance and packaging involved in fulfilling a split order can increase shipping costs by two to five times.
One way to avoid split shipments is to beef up local inventories. But companies must also weigh the cost of keeping product at multiple locations. Making matters even more complex is the need to adjust to omnichannel fulfillment, giving the ultimate customer multiple options by which they can purchase product.
The right mix of inventory can be achieved by high-level metrics that determine the location of customers, and the likelihood that an order can be filled in full from a local distribution center. Customers care less about transit time than the total period from order to delivery, Bartel says.
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- Source: https://www.supplychainbrain.com/articles/36179-watch-split-shipments-what-they-cost-and-how-to-avoid-them
