Split shipments is a topic that comes up in 75% of conversations with customers and prospects globally. As you grow in complexity and volume, split shipments becomes increasingly difficult (not to mention the impact of the added cost). For example, if you ship from just 100 locations, for every split shipment with only two items, there are 4,950 potential ways to fulfill each order (see how to calculate this here). Not to mention the cost of shipping for a split shipment can be 2x what it would be as a single shipment.
So, as a business with multiple fulfillment locations, you might be asking: Do I split my shipments or not?
That’s the wrong question.
Why? Because splitting shipments is more nuanced than that. For example, many businesses use basic logic to split orders like this:
- Location of item (distance)
- Size of item (bulky, heavy)
But there is sophisticated logic you can use to optimize fulfillment, such as:
- Profit margin of item
- Value of item (low cost items)
- Sell through rate of item
- Customer type (VIP customers)
- Handling of item (fragile, hazardous)
For example, Freedom Furniture splits orders based on SKU margin. The goal being to not split shipments and take the additional shipping costs for inventory that has a low profit margin. Their logic says, ‘Split orders with X margin’ (Read more in the Freedom Furniture case study).
Splitting orders should be data-driven, not a yes or no question. The basis of it should be tied to business objectives like:
- Profitability of the basket
- Customer tier (VIP)
- Inventory turns by location or channel
So what’s the right question?
→ What is the best split shipment strategy for my business?
To optimize your fulfillment process, a well-defined split shipment strategy is critical. Every business is unique—so the strategy for optimization will differ. Begin by assessing your inventory and identifying the attributes that are important. And you can have both short and long term split shipment strategies.
For example, at a high level you might want to set up rules based on profit margin, so items are split only when the profit is X amount after shipping costs are applied. Or, you might have a driver move a slow-moving SKU at a particular location in order to reduce markdowns and increase inventory turnover. In which case you ship that SKU from a location which may be further away from the customer, but benefits your bottom line and allows you to to clear space and reduce markdowns.
And don’t forget about product attributes. Bulky items? Fragile products? Set up your split shipment strategy so those items are fulfilled from the location with the proper packing materials and experienced staff.
These are only a few of the ways you can split shipments and see a big impact on your business. Your split shipment strategy can enable you to increase revenue, reduce costs and increase customer retention and satisfaction.. So what are you waiting for? Add any number of product attributes and set up a scientific approach to your fulfillment strategy. Whatever your goals, Fluent Order Management empowers you to split orders your way.
