Since freight accounts for 70% of supply chain costs and a similar percentage of Scope 3 carbon emissions, optimizing load planning is essential for logistics operations. This blog post provides practical steps that companies can implement with minimal investment right now and explains how to make step-change improvements with the aid of supply chain load optimization tools.
Efficient Freight Management Starts with the Load Planner
Shipping partially filled loads is like a bartender serving only half a glass of beer; you’re not getting what you paid for. With over 90% of trucks having available capacity, there’s a significant opportunity to:
- Reduce the number of trucks on the road.
- Cut carbon emissions (Scope 3 emissions)
- Provide value to shareholders
In many areas of the supply chain (see diagram), there is a load planner: a person or system determining what will be loaded onto each truck. Often, these load builders don’t grasp the importance of load optimization or know strategies that can save a lot of money.
Common Challenges in Load Planning
The following outlines many challenges that shippers face.
1) Misunderstanding Truck Capacity
This is by far the most significant area of misunderstanding. Tribal knowledge has often incorrectly defined the capacity of the standard 53-foot US truck. Depending on the lane, one company has at least four different weight capacities for the same equipment. Why?
In addition, the item master data often contains errors. The dimensions, cases per layer, weight, etc., have not been correctly added to the system.
2) The California “Bridge” Formula
Often, companies reduce their target load due to what they call the California bridge formula. The California bridge formula aligns with regulations across the United States. Like some other states, the real issue is that California is strict about where carriers can position the axles on their trailers. California’s requirement states that the trailer’s rear axle must be no more than 40 feet from the kingpin, which requires different loading skills to utilize the vehicle’s payload fully.
Related Blog: Distribute the Load to Avoid Over-Weight Axles and The California Bridge Formula Problem
3) Misjudging Capacity
Even when there is some understanding of how much product trucks can carry, this insight is often compromised because an outlier truck may arrive with a significantly lower capacity. Like any statistical distribution, extending out three standard deviations to be “safe” distances you further from most carriers. The graph of reefer weights to the right indicates that to be able to load all trucks legally; the maximum load size would need to be set at 42,000 pounds, leaving ninety-nine percent of the other trucks underloaded.
4) Siloed Planning and Operations
Organizations are misaligned. Planning does not fully grasp the requirements of operations, or its data is based on history and may no longer be accurate (like your grandfather’s stories). For instance, an automotive products company previously limited shipments to 22 returnable containers per load because that was all that would fit. While this was true for earlier product designs, today, with significantly reconfigured products and containers, the company can exceed this capacity.
5) Siloed Transportation and Warehousing Organizations
Warehouses prioritize reducing labor costs while ensuring timely shipments. Convincing them of the benefits of increasing the load factor at the expense of additional labor is challenging. For example, shipping refrigerated products from California across the Rocky Mountains proves this point. With freight costs exceeding $100 per pallet, it becomes cost-effective to invest in some labor to maximize the volume of each shipment. One company engages in what they call “supersizing”: they take a full pallet, break it down, and “top-stack” it to make the most of the available headspace in the trailer. This process, which requires additional labor and specialized equipment, allows them to achieve freight savings that exceed the extra labor costs.
6) Misaligned Marketing and Operations
Marketing seeks to sell products, while operations aim for maximum freight efficiency. Often, marketing terms of sale neglect the importance of filling each shipment.
7) Direct Shipping from Production
Either by design or over time, as more lines are added, many plants have reduced the space on the dock to the point that the product needs to go directly from the production line to a waiting truck. This lack of space poses multiple challenges: What should go where? What constitutes a full load? And, of course, how do you ensure the loads are full?
8) Lack of Measurement
Only sophisticated companies measure vehicle fill rate (VFR), and many that do measure against artificially low targets. We all understand the importance of measurement, and it is critical for load optimization.
Load Optimization Tips to Boost Efficiency
The following are actionable load optimization tips that you can take today to improve VFR.
1) Understand Truck Capacity
Weigh and measure trucks; it’s surprising what you can learn. For instance, when a company believed they were saving a substantial amount by shipping frozen products on intermodal trailers, they found that the interiors of those trailers restricted the number of pallets that could fit—they simply weren’t wide enough. Additionally, weighing trucks overcomes tribal knowledge with irrefutable data.
2) Address the California “Bridge” Formula
Many companies are shipping heavy loads in California, necessitating a different product placement approach. Collaborate with some more experienced loaders and encourage them to recognize the proper loading patterns. This means placing heavier products at the front of the trailer and lighter ones at the back.
3) Plan Strategically
It’s essential to be reasonable. Plan for an average or median in the distribution of vehicle tare weight. Remember that products are typically added in full pallet loads, each carrying significant weight, making it impractical to reach the maximum weight. As a result, loads often fall short of the maximum.
4) Align Planning and Operations
Regularly review and adjust all planning and operational constraints.
5) Build Consensus Between Transportation and Warehousing
Once again, achieving consensus is crucial. Take the time to understand what truly matters. For example, one company stored all its double-high pallets, allowing a forklift to lift them simultaneously, significantly boosting productivity. Some warehouses use double-high, double-width forklifts, so planners should ideally create deployments that ship in batches of four pallets.
6) Involve Marketing in Load Planning
Marketing wants to sell stuff, and operations want to be as efficient as possible. Often, marketing’s terms of sale don’t consider the value of filling each shipment. Work with marketing to set order guidelines that push the load factor while still being operationally achievable. (There is nothing worse than asking a customer to buy more and then being unable to get it all on the truck.)
7) Optimize Direct Shipping
This complex issue requires systems capable of adapting to changing production and operational constraints.
8) Measure and Analyze
It’s simple: measure each lane’s truck capacity and generate summary statistics from that data.
ProvisionAi: Simplifying Load Optimization with AutoO2
Having been there and done that, the team from ProvisionAi can provide both AI load planning that enhances freight efficiency and the change management skills necessary to implement the required processes and procedures. ProvisionAi’s bases its solutions on years of practical experience managing truck fleets, overseeing warehouses, and conducting planning.
It’s crucial to understand that supply chain load optimization tools are handy because, quite frankly, it’s challenging to fill trucks completely. For instance, could you quickly determine the better method? (See graphic to the right).
Related Blog: Load Planning Revolutionized with AI
Planning the loads correctly is where AutoO2 (Automatic Order Optimization) comes into play. Using mathematical optimization, AutoO2 can maximize each load and minimize the shipping costs for orders planned in-house, resulting in 5-10% savings. Consider the chart below, depicting an ice cream manufacturer that ships novelties (light) and traditional half-gallons (heavy).
How ProvisionAi Eliminates Common Challenges
Truck Capacity: We bring industry best practices. We still recommend that companies weigh and measure trucks. Again, this is part of driving acceptance.
California and other states: AutoO2 knows the axle position for each state traversed. When designing loads, it designs them to be axle-legal and damage-free. Each load has a defined three-dimensional and two-dimensional load diagram suggesting the placement of every pallet on the load. The diagram below shows an example of a 3-D load diagram:
Optimized payloads built to match the capacity of each truck with AutoO2: AutoO2 can accommodate different equipment sizes. For example, one company moves its product using lightweight trailers. Because this equipment is limited in availability, they use AutoO2 to build shipments that match the capacity of each vehicle.
Eliminating Silos:
- Planning
- Warehousing
- Marketing
We collaborate with organizations to align planning, warehousing, and transportation. By streamlining shipping processes, AutoO2 helps marketing revise sales terms to encourage larger orders, driving significant savings.
Direct Shipping from Production: Here is where the AI technology embodied in AutoO2 comes to the forefront. Autoo2 projects carrier equipment needs based on the production schedule, and it also designs optimal loads. Using a Kanban concept, some products are kept in a small reserve area to fill loads. Of course, load designs may need to change as production lines are not 100% reliable. The need for rapid recalculation and adjustment over time indicates that automation is the only way to enhance VFR as much as possible.
ProvisionAi’s optimization tools leverage the power of AI.
The Role of AI in Freight Optimization
AI is transformative in enhancing supply chain load planning and optimizing freight efficiency. With so much at stake—ignoring improvements in load building is no longer an option. AI optimization tools are essential for bridging knowledge gaps, aligning siloed operations, and streamlining processes to drive measurable results.
However, adopting AI requires more than just the right technology; it demands a collaborative approach to change management. Change can be challenging, but with our deep expertise in managing plants, warehouses, and truck fleets, we ensure smooth adoption and implementation at every step. Contact us to learn how we can help!
