What are Split Shipments? How to Manage Split Shipments?
By Komal Puri | August 11, 2023
In modern logistics and supply chain management, split shipments have become an integral part of achieving operational efficiency and customer satisfaction. This article delves into the intricacies of split shipments, their significance, common practices, challenges, and effective solutions for businesses to navigate this complex landscape while maintaining their bottom line.
What Is a Split Shipment?
A split shipment refers to the practice of dividing an order into multiple shipments that are dispatched separately. Each shipment may contain a portion of the ordered items, and these components are sent at different times or via different routes. They are essentially a strategic maneuver to ensure timely delivery and optimize logistical processes.
Why Are Split Shipments Used?
The primary purpose of utilizing them is to enhance the efficiency of order fulfillment and meet customer expectations for prompt deliveries. By breaking down a single order into smaller segments, companies can capitalize on available inventory, distribution centers, and transportation resources. This allows them to expedite the delivery process, especially when certain items are available in one location but not in another.
Why Are Split Shipments So Common?
Split shipments have gained widespread popularity due to the increasingly complex nature of supply chain operations. In a world where customers demand fast and accurate deliveries, businesses seek ways to streamline their processes. Split shipments enable companies to optimize their resources, avoid delays caused by single-item unavailability, and adhere to tight delivery windows.
Why Split Shipments Are Costly for Businesses
Split shipments have emerged as a double-edged sword in the logistics world, offering benefits in efficiency while carrying the potential to escalate costs for businesses. While the practice of splitting orders into multiple shipments might seem like a strategic approach to expedite deliveries, it's essential to delve into the underlying factors that contribute to the costs associated with them.
Fragmented Shipping Costs: One of the primary reasons they become costly is the fragmentation of shipping costs. With multiple shipments dispatched separately, each incurs its own set of shipping expenses. These expenses include charges for packaging, handling, transportation, and often, last-mile delivery. When an order is split into several shipments, these individual costs accumulate, leading to a higher overall shipping expenditure. For businesses managing a substantial volume of orders, the cumulative impact of fragmented shipping costs can strain operational budgets and erode profit margins.
Operational Overhead: They introduce complexities that require additional resources to manage effectively. Each split shipment demands separate packaging, labeling, and documentation. This multiplies the administrative workload, increasing labor costs and consuming valuable employee hours that could be allocated to other critical tasks. Moreover, tracking and managing multiple shipments demand greater oversight, necessitating a more robust logistical infrastructure. The operational overhead associated with them can inadvertently inflate operating expenses and reduce operational efficiency.
Transportation Inefficiencies: They can result in suboptimal use of transportation resources. When orders are divided into smaller shipments, each may occupy a fraction of the available space in delivery vehicles. This leads to underutilization of capacity, driving up the cost per unit of transported goods. Additionally, they often involve multiple carriers or routes, leading to a lack of consolidation in transport. The inefficiencies arising from underutilized capacity and the complexity of coordinating multiple routes contribute to increased transportation costs.
Inventory Management Challenges: Another critical factor driving up costs is the impact they have on inventory management. Businesses must maintain higher safety stock levels to account for the unpredictability of split shipments. This precautionary measure ensures that items are available for fulfillment, even if an order needs to be split. However, higher safety stock levels tie up capital that could otherwise be invested in more productive ventures. Moreover, the need to manage stock across multiple shipments and locations increases the chances of stockouts or overstock situations, further complicating inventory management and driving up carrying costs.
While they are employed to meet customer expectations for timely deliveries, it's crucial to recognize the nuanced financial implications they bring to businesses. As businesses navigate the landscape of modern logistics, addressing these challenges becomes pivotal to maintaining a balance between operational efficiency and cost-effectiveness.
How to Avoid Split Shipments
Businesses can adopt various strategies to minimize the need for split shipments. One effective approach is to maintain centralized inventory management systems that provide real-time visibility into stock levels across all locations. Accurate demand forecasting, optimizing warehouse layouts, and synchronized inventory replenishment can further reduce them.
When Might Businesses Want to Intentionally Split Shipments?
There are scenarios where businesses intentionally do it to cater to specific customer needs. For instance, if an order contains both perishable and non-perishable items, the business might choose to ship them separately to ensure the perishables reach the customer swiftly.
Do Customers Ever Intentionally Split Shipments?
Customers, too, occasionally prefer them due to convenience or necessity. For example, if a customer has an urgent need for a specific item, they might request a split shipment to receive that item promptly while allowing other non-urgent items to follow later.
Is Packaging Ever a Cause for Splitting Shipments?
Packaging considerations can indeed influence the decision to split shipments. Items of varying sizes, fragility, or temperature sensitivity may require specialized packaging, which could lead to the separation of items to ensure their safe delivery.
Best Practices for Minimizing Split Shipments
Centralized Inventory Management: The Backbone of Efficiency
Real-Time Visibility: Implement centralized inventory management systems that provide real-time visibility into stock levels across all locations. This ensures accurate information is readily available to both fulfillment teams and customers.
- Dynamic Replenishment: Utilize automated replenishment strategies that trigger restocking orders based on predefined inventory thresholds. This proactive approach prevents shortages and eliminates the need for partial shipments.
Strategic Warehouse Layouts and Order Batching: Smoother Operations
Optimized Layouts: Design warehouse layouts that facilitate easy access to high-demand items. Organizing products logically reduces the need due to inaccessible stock.
- Efficient Order Batching: Implement efficient order batching processes to consolidate items for multiple orders. This minimizes the chances of incomplete order fulfillment and reduces the necessity for them.
Accurate Demand Forecasting: Anticipate Needs
Historical Data Analysis: Leverage historical sales data to forecast demand accurately. An in-depth understanding of seasonal patterns and trends enables better inventory management, minimizing the likelihood of stockouts.
- Customer Behavior Analysis: Analyze customer preferences and purchasing behaviors to predict demand fluctuations. Armed with this insight, you can adjust inventory levels proactively and avoid partial shipments.
Multi-Channel Fulfillment Strategies: A Comprehensive Approach
Unified Fulfillment Platforms: Utilize integrated platforms that streamline multi-channel fulfillment. This approach ensures that stock information is consistent across various sales channels, reducing the chances due to discrepancies.
- Optimal Stock Allocation: Allocate stock strategically across distribution centers based on demand patterns for different regions. This mitigates the need to transfer items between centers.
Effective Communication and Customer Interaction: Setting Expectations
Clear Delivery Windows: Clearly communicate delivery windows to customers at the time of purchase. This manages their expectations and allows for better coordination.
- Customer Preferences: Offer customers the option to consolidate items into a single shipment or delay delivery until all items are available. This empowers customers to decide on their preferred delivery approach.
How to Manage Split Shipments
Managing them requires a balance between operational efficiency and cost-effectiveness. Companies must streamline their processes, monitor inventory levels closely, and leverage technology to optimize routing and scheduling.
How Routing Increases the Efficiency of Split Shipments
Routing significantly enhances the efficiency of split shipments in logistics by allocating resources optimally, minimizing transportation costs, reducing transit times, improving the customer experience, dynamically adapting to changing conditions, ensuring load balancing, and reducing environmental impact.
It achieves this by employing algorithms to determine the best allocation of trucks, drivers, and fuel, optimizing routes to reduce costs and time, and dynamically adjusting plans based on real-time data. The resulting benefits include streamlined communication, route optimization for different criteria, and a positive impact on both operational efficiency and environmental sustainability.
How FarEye Helps Companies Manage Split Shipments
FarEye, a trailblazer in logistics technology, empowers companies to effectively manage split shipments. Through its advanced platform, businesses can gain real-time visibility into inventory levels across locations, optimize route planning, and enhance delivery accuracy. FarEye's cutting-edge solutions assist companies in minimizing them while ensuring timely and seamless deliveries, ultimately bolstering customer satisfaction.
Komal Puri is a seasoned professional in the logistics and supply chain industry. As the Senior Director of Marketing and a subject matter expert at FarEye, she has been instrumental in shaping the industry narrative for the past decade. Her expertise and insights have earned her numerous awards and recognition. Komal’s writings reflect her deep understanding of the industry, offering valuable insights and thought leadership.