Replenishment logistics promotes inventory reduction through more frequent and lower quantity orders. This shifted replenishment from LTL to parcel carriers and has brought increased attention to shipment integrity. Consignees accustomed to receiving an entire shipment must contend with the possibility of an incomplete delivery resulting in the shipment being staged, paperwork left open, and consolidation completed the following day or even days later. Shippers are usually not aware of split shipments unless they receive feedback from consignees. Some consignees will not pay for a shipment until all of the parcels arrive while others will outright refuse delivery of split shipments.
To set the record straight, there is no such thing as shipment integrity when you ship with parcel carriers! The underlying root cause can be found in their processing method.
First, let’s look at how LTL carriers process shipments. Shipments are usually loaded onto pallets and shrink wrapped by the shipper. The pallet travels to the destination. If a shipment is comprised of loose parcels instead of a pallet, each one is handled separately but a manifest is used to manually consolidate them for delivery.
On the other hand, parcel carriers rarely receive parcels on pallets. If they do, the pallets are “broken down” before they leave the origin terminal since each parcel is processed through the hub and terminal network as its own individual shipment. In fact, parcels are placed into one of three distinct categories for sortation: Smalls, Regulars, and Non-conveyable. Each one is processed differently.
Smalls can best be described as any parcel that can fit through a coat hanger in any two directions. To minimize expense, Smalls are put into plastic bags at the origin terminal and sent to the hub for special processing in a Smalls sort area. The bags are opened and the parcels are sorted manually into bins based on the destination ZIP code. Sorted parcels are bagged and sent to a destination trailer.
Regulars are standard parcels with flat sides that can be transferred on a power conveyor belt, and are too large to be a Small.
Non-conveyables are parcels that cannot be transferred on powered conveyor systems. This includes such items as pails, cylinders, and tires. Non-conveyables are often processed using carts.
Frequently parcels go through multiple hubs before arriving at a destination terminal for delivery. As described above, there are many opportunities for parcels in the same shipment to go astray since shipment integrity is not maintained during sortation. Theoretically, all parcels in a shipment should arrive at a destination delivery terminal at the same time. In practice, this is not the case.
Parcel shipment integrity is clearly driven by one overwhelming issue: On-Time Service. If a carrier provided 100% on-time service, then all shipments would be delivered intact on the scheduled day. As we all know, no carrier provides 100% on-time service. Since each parcel is treated as its own shipment, each is treated as an independent and discrete statistical event. The poorer the on-time service, the more likelihood of split shipments. For example:
- Shipment A has 3 parcels
- Shipment B has 5 parcels
Let’s assume the on-time service for the carrier in question is 97%. Using basic statistical probability, the split shipment rate would be:
Shipment A: 97% x 97% x 97% = 91%, or conversely, a 9% chance of a split shipment.
Shipment B: 97% x 97% x 97% x 97% x 97% = 86%, or a 14% chance.
Parcel carriers have only one way of achieving shipment integrity for their customers: accurate and timely parcel sortation. It is fair to write that the carriers diligently work to maintain shipment integrity. It’s a battle that must be fought every single day.
Joe Loughran is President of Parcel Rate Solutions and an expert in the parcel industry. Parcel Rate Solutions is a transportation consulting company offering services in Carrier Rate Analysis and Carrier Agreement Analysis. Joe can be reached by phone at (724) 934-0626 or email: firstname.lastname@example.org.