How Load Optimization Can Reduce Disruption 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 will probably change 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.

Shipping rates for transport between Asia and North America continually increased in 2021 with an all-time high in January 2022. Contract rates are set to increase sharply after double-digit increases in 2021. At the same time, e-commerce sales are booming, growing to $870 billion in Q1, 2022. Logistics fulfillment capacities are 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, full truck or container loads are 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.

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.