How Load Optimization Can Reduce the Pandemic’s Impact on Logistics

Traditionally, manufacturing companies have seen transportation as a “necessary evil.” As Gartner writes, it’s the function organizations “often target for budget cuts.” 2020 has probably changed this for good. Today, shipping capacity is scarce and expensive, and logistics is largely unpredictable. An approach that is only focused on cost-cutting will not work anymore. Instead, companies are turning to new technologies to increase efficiency and agility. In this article, we discuss how load optimization, in particular, can help your company maximize resource utilization, lower the costs per shipped SKU, and make the right choices to ship goods in high demand.

Scarce and expensive shipping capacities present new challenges for manufacturers

Shipping rates for transport between Asia and North America have reached a record high in 2021. In April, Bloomberg reported that contract rates were at $2,500 to $3,000 for a 40ft container - that is 25-50% higher compared to a year ago. At the same time, e-commerce sales are booming. In the U.S. they went up from $598 billion in 2019 to $861 billion in 2020 - a 44% increase, as Deloitte reports. Logistics fulfillment capacities were maxed out, as logistics providers were not prepared for those volumes.

While road freight capacity is normalizing, driver shortages and cross-border restrictions still pose a challenge. As a result, manufacturing companies are facing more production and logistics disruptions due to missing materials and parts. Nike is among several manufacturers that reported revenue decreases due to resource shortages and port bottlenecks last year.

When there is enough and reasonably-priced transport capacity in the market, full truck or container loads with one product may have been the norm. However, given today’s volatility, this is no longer a viable or cost-efficient option.

In times of scarce transportation capacity and high freight rates, you want to make sure that you ship the right products (those which are truly in demand) and use the available transportation capacity to the maximum. In practice, this means you may need to mix a variety of products with different dimensions, quantities, stacking characteristics and demand priorities into truck and container shipments. Doing this manually takes too long and also reduces your team’s flexibility to react to short term adjustments.

Existing ERP, WMS, and TMS tools typically take only weights and volumes into account, and don’t consider real dimensions, or many of the physical, organizational or legal regulations for packing and loading. That’s where more advanced load optimization can make a big difference. ORTEC's 3D load building software combines mathematical optimization, industry expertise and cloud technology into an easy-to-use tool for manufacturing companies.

Gartner mentions 3D load building as an extended and high importance capability for transportation management. 3D load building uses mathematics to propose optimal load configurations to fill logistics units. It considers actual package dimensions and multiple physical, legal and business-specific rules.

ORTEC's cloud-native 3D load building software offers manufacturers the advantages of using packing and loading optimization in a flexible and scalable way. You can apply the solution in different business processes across multiple systems, without worrying about IT operations. Leading industry analysts have called our load building software the premier solution in the industry. In our experience, our load optimization software can help increase fill rates by 5% on average. At the prices we see in the market today, this could mean a potential saving of $125-150 on average per container. Customers are able to reduce logistics costs per item by improving freight capacity fill rates in different modes of transport (parcel, LTL, FTL, Road, Sea). And it doesn’t stop there. For instance, our solution also helps you avoid expensive repacking by ensuring the products will actually fit on one pallet or into one truck, and can help you choose the most efficient carton size for parcel shipments. Companies that use our solution see a 3-7% decrease in freight and labor costs on average by following the load optimizer’s recommendations. Customers also gain more visibility and transparency across the network in terms of logistics units planned.

There are considerable advantages to boost agility as well. When you use ORTEC’s latest load optimization technology in a software-as-a-service offering, all of your data, including business rules, is already in a cloud-based environment. This means, you can quickly set up a new operation or integrate a new 3PL without the need for extensive IT projects. You can apply the same quality standards for all supply chain partners, using the same master data, packing and loading rules and deploy the same optimization functionality across your ecosystem.

Find out why ORTEC is the premier vendor in the space

If you’re evaluating ways to gain efficiency in logistics and make the best use of your transport capacity, feel free to reach out. We’ll be happy to plan a demo of our solution.