Companies in industries like Manufacturing, Chemicals, and Consumer Packaged Goods must deal with many deliveries every day, so they need to combine them in a clever way to cut costs. Typically, they create “milk runs” to deliver the goods to different customers, and they need to consider optimal pallet building or load building configurations. In an ideal world, trucks would be 100% full when they hit the road. However, most transportation managers know that it’s easy to exceed that threshold and have left-over pallets on the warehouse’s staging area. This creates a lot of problems and leads to frustration for everyone involved: warehouse employees, planners, customer service representatives and customers. So, to avoid this and create a buffer for uncertainty in load calculations, trucks are typically planned to be about 90% full. But that extra 10% can make a huge difference when you have high transport costs.

To achieve savings, our customers combine deliveries in such a way that the minimum number of transportation units (trucks, overseas containers, rail cars or other) is used to fulfil sales orders. Using advanced optimization technology, they can automatically identify optimal delivery splits to increase load fills.

The same method can be applied for deliveries to the same location (where no milk runs, or route optimization is required). For example, deliveries created from Stock Transport Orders to replenish distribution centers. This flow is depicted in figure Scenario 1. Optimization based on Deliveries.

Planners generate Stock Transport Orders (STOs) in SAP to replenish warehouses/DCs with products that need to be moved to fulfill customer orders. Since these are intra-company movements, it is easy to adjust required product volumes to optimize truck loads and decide when to transport the stock. The flow is shown in figure: Scenario 3. Optimization based on Stock Transport Orders.

For example, Henkel, one of our customers, creates weekly STOs. Each STO has the equivalent of hundreds of pallets worth of product. Instead of planners having to split the pallet loads manually per truck, they use ORTEC’s optimization technology to cut the Stock Transport Orders into outbound deliveries the size of full truck loads automatically. These trucks are then scheduled to move the product on various days during the week.

A potential problem with creating STOs first and then running advanced optimization is that the product can be locked too far in advance, creating artificial shortages. For example, if you generate an STO for a high priority order locking stock that needs to be delivered in two-week’s time, you’re not able to use that product for other earlier deliveries.

Instead of using STOs as input for load building optimization, as described in the previous scenario, you can use stock transport requisitions (STR) based on deployment requisitions (DepRecs). Deployment requisitions are requests that come from a warehouse when they need inventory to service customers or replenish stock levels. When you use STRs as the input for optimization, you will get optimized transport orders (STO) as output. This means you will assign the right amount of product to the right shipment from the start. You don’t only get an optimal load building configuration, but can also schedule deliveries and shipments automatically, as you’ll have the right amount of stock on hand. See flow in figure: Scenario 4. Optimization based on Stock Transport Requisitions

When you optimize early in the process, you get an overview of everything that needs to be transported. This makes it easy to identify if there are shortages as well. In such cases, you can either let the planner decide who gets what or set up some rules to divide and assign available products automatically. The advantage of using optimization before assigning STOs is that you remove tedious activities in SAP. It means you can avoid manually removing STOs from SAP and reassigning stock manually. The exact setup depends on the way SAP is configured and used at your company.