How to manage order peaks and your transport capacity?
There is a transport capacity crisis and with the coming holiday season there will only be more pressure on logistics.
After this article you know:
✔ How order peaks pressure capacity even further
✔ How to ensure on time delivery while controlling your costs
✔ How to stay relaxed during the holiday season
Shortage, holidays & promotions
As a logistics manager of a manufacturing company, you are fully aware of ever shifting order patterns of your customers. Whether these are small or large changes, you will always face different order sizes. Consequently, there are times you need substantially more transport capacity, the so called ‘order peaks.’ A year ago, this would be no problem, but in the current market, we often see the following scenario in play:
- On Thursday afternoon, your sales colleague announces a large promotion. It is for a big customer and the date of delivery is in 2 weeks’ time, all for delivery on Wednesday.
- This promotion doubles the number of orders to plan from 50 to 100.
- Your logistics buyer already has a hard job finding enough transport capacity, especially considering quality and cost KPI’s.
- Therefore, it is hard to deliver the regular 50 orders on time and in budget.
- Combining this transport capacity crisis with short-noticed, fixed date order peaks results in an even more stressed situation.
- In the end you have to explain to your superiors why the transport costs for this promotion exceeded budgets, why you did not meet on time performance levels and why customer service had to deal with so many complaints.
Does this sound familiar to you? Well, if it does this article is about to help you out. First, we will set out what is happening. Then, we will offer you some knowledge to prevent this from happening, this way future customer promotions will give you a bonus instead of a headache.
How do order peaks put transport capacity under pressure?
Order peaks typically occur because of promotions, supplying extra stock for weekends, the last week of the month, or for upcoming holidays like Black Friday and Christmas.
Usually, such a peak of orders causes increased pressure on the supply chain. In a transport market with a capacity shortage, this can easily become too much pressure. Just as we saw happening in the scenario, the high pressure causes unwanted effects like increasing prices and performance risks. Not to mention the higher empty kilometers and therefore unnecessary CO2 emissions.
For sure, peaks always have been and always will be part of the logistic process. However, for your customer these peaks are (mostly) predictable. The promotions (and therefore the orders) are part of their marketing plans and regular seasonal changes. Therefore, the peaks could easily be forecasted and thus anticipated if you as a shipper and the customer communicate in an early stage.
Key take away
Order peaks are an inevitable part of logistics. But, often they are predictable and therefore manageable. Thus, communication and information is key.
What can you as a shipper do about sudden order peaks?
An easy solution to make better use of the available capacity is to spread the peaks over a longer period. When you, as a shipper expect to have certain peaks try to flatten these out as much as possible. Thereby ask yourself: is it really needed for your customer to have all promotion articles in store on Wednesday, while the promotion starts the Monday thereafter? Or, could they receive some on Tuesday and the rest on Thursday?
Key take away
By spreading the volume, you can overcome order peaks, make sure that you obtain the required capacity and meanwhile meeting performance standards like on-time delivery and costs.
How can you spread the order volume?
Well, the main thing to do is contact your customer, and ask if there is any problem delivering on multiple days instead of one.
We have listed a few examples in the table below.
Customers asks for:
You can propose:
Why is this a win-win?
Promotion articles in store on next Wednesday
Can we deliver on three days like the Wednesday before and in the promotion week on Tuesday and Thursday?
Because the promotion runs one week after the requested delivery date, the customer just wanted to be sure of delivery. By spreading, there is less pressure on the customers’ warehousing.
Summer season articles to be delivered in high volume in the month July
To start two weeks before July and end somewhere in August
Because during summer time there is more demand for a certain product
Many pickups during the last week of the month
Can we pick up more loads during the third week of the month
Because sales would like the turnover to be registered in that month.
Three instead of one days to pick up or deliver goods already makes a large difference. Picture this: You have 6 full truck loads more to ship. Which will be best manageable?
- Increase your capacity from 6 trucks to 12 on a single day;
- Alternatively: you raise the amount of trucks from 6 a day to 8 for three days.
Key take away
By spreading your orders during peaks as much as possible, you have more control on your cost level as well as on time performance. At the same time, you will probably spread the pressure on in-store stocks and warehousing of your customer.
What can customer service do to achieve the best results?
The customer service is often the department to receive the orders. Therefore, they play a critical role in achieving a high delivery performance. However, many of them are not aware of their influence, likely caused by KPI’s such as ‘on time order processing.’
They can do a few things to unnerve this pressure: If they take the stake of transport, warehousing and the customer in consideration, they can prevent the issues by discussing the delivery moments and volume with the customer and explaining the impact on performance.
What about the sales department?
Let’s consider some basic business economics: just making a big deal for a good price doesn’t necessarily mean a good profit. The costs are equally important. In previous times, you could count on somewhat of the same low transport cost component. This has changed; capacity is low, demand is high so costs can double easily if you don’t anticipate. So, what has your sales colleague to do in all this? Well, they can turn a deal into a seriously good deal if they consider the impact on transport and warehousing from the start. In the ideal world, your sales colleague would consult you before making the deal final or at least ad these two factors to the deal:
- Orders should be send as soon as possible
- Flexibility on delivery, for example: a time frame instead of one date
That’s the obvious part, so what can you do to get them there?
Well, it might come as a surprise but changes are high your colleague does not really have a clue about the impact of the capacity crises on (your) daily business. So, try to explain that the transport market has changed, prices became more volatile and acquiring capacity truly is challenging. Then, ask them to do the previously mentioned, let them involve or at least consult you.
Chances are high your colleague understands after you explain the impact of such deals on logistics and how easily they can help to solve it. In the end you both have the same company goals, don’t you?
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