Context
One aspect of supply chain optimization concerns (re-)ordering supplies: How many should you order based on current stock levels, demand expectations, lead time, and other factors? One additional aspect is the Cost of shipping: If you are selling hardware or small electronics, ordering one unit more or less will not affect your shipping cost. But if you are working with furniture, appliances, or other bulky items, properly configuring your shipping units can significantly impact your bottom line.
Shipping containers
In Container Optimization, the word "container" refers to the unit of shipment - typically a freight container, a pallet, or another type of bulk container. We'll use freight containers as our example in this description, but the methods are the same for other types.
A container has a fixed volume (in cubic meters), and each product has a set volume. The goal is to fill each container as much as possible without overfilling it: 99% full, and you are just a little bit inefficient. 101% full, and you have a big problem because not all products will fit. Note that different products have different shapes and dimensions in most cases. Therefore, it is usually impossible to fill every container to 100%; the idea is to get close enough to be efficient.
Vendors and destinations
In most supply chains, you order from various vendors and ship to a series of warehouses or stores in your market area. Each flow of products - from vendor x to warehouse y - requires a separate container that is ideally filled. Destinations with a smaller sales volume may need a container that is not full to keep lead times reasonable.
Container Optimization - Main Screen
The Main Screen shows you a list of vendor-destination pairs - if any containers are shipping from a vendor to a specific destination, it is shown here. The number of ranges shows how many product lines are used on this route, and the number of containers shows how many shipping units are currently scheduled to travel that route. Total Cost shows the value of all containers on that route.
Note that you can filter by vendor and range at the top, and the table can be sorted by each column by clicking on the small green arrow next to each header.
To drill down further, click on "View Vendor" of a line that you would like to examine in detail:
Container Optimization - Vendor/Destination View
Important: Note that this does not show all shipments of this vendor, just the shipments for one specific destination.
In addition to Vendor/Destination, we now see information about each container: The Container ID or number, the size (20ft or 40ft), and how many product ranges are included. We also see the lead time in weeks and the calculated arrival at the destination. Lastly, we know the volume of the contents (not the container) in CBM (cubic meters) and the total value of that shipment.
To drill down further from here, click on the status, which will most likely show "Unedited" for most or all containers.
Container Optimization - Container View
We are now looking at a single shipping container, which is either part of a larger shipment of several containers or constitutes the entire current order for that vendor/destination.
The Container View consists of two sections: the Container Data and the Loading List (or Bill of Lading). The Container Data typically fits on one screen, but Loading List extends far to the right and contains many columns.
What you can see in Container View
Container Data
(Data in this section is about the entire container.)
Container Name: (here PHA_PTT_20220302_0) imported from your system or generated automatically from origin_destination_date_serial.
Edit Status: Unedited means that nobody has manually edited order amounts. Unedited containers will continue receiving changes and updates from the optimization model. Edited containers have at least one modification manually added by a user. Edited containers will no longer receive updates from the model.
Size: How big is the container, typically 40 ft or 20 ft.
Destination: Location to which this container will travel.
% Container Used: How full is the container? Ideally, this is close to 100%.
Freight Cost: Cost of shipping this container from vendor to destination.
Total Cost of order: Cost of all products plus freight cost.
Revenue: Sales price of all products in the container.
Ranges: Ranges are product types or product families. The optimization model tries to ship products from the same product range together. The number shows how many ranges are present in this container.
Proposed lead time: Estimated time in transit from a vendor to destination
Expected arrival: When this container is scheduled to arrive.
Loading List:
(Each line item in this list is one SKU shipped in this container.)
SKU: The article number of the item.
Priority: Our optimization process adds additional products in several steps based on preference. This complex process is described in a separate article in detail.
Name: The name of the product.
Recommendations:
Base: The number of products initially ordered, without any optimization
Optimized: The optimized number, based on our AI optimization. Always more than Base.
Manual: A manual correction by a user. It can be higher or lower than Optimized. It should not be lower than Base because, in that case, you're shipping fewer units than originally ordered.
Container Volume:
Total CBM: How many CBM (cubic meter) all units of this SKU take up, based on the Optimized Recommendation.
Adjusted CBM: How many CBM (cubic meter) all units of this SKU take up, based on the Manual Adjustment.
Financials:
Unit Cost: The cost of one unit of this SKU.
Line Cost: The cost of all units of this SKU, based on Manual Adjustment
Retail Price: The selling price of one unit of this SKU.
Revenue: The revenue generated from selling all units of this SKU.
Stock:
On Hand: How many units of this SKU are currently left in stock at the destination.
Reserved: Of the units on hand, how many are already sold / promised to a customer.
Available: Units on Hand, less units reserved - how many units are still freely available for sale (of those in stock at the destination).
Orders:
On Order: How many units of this SKU are currently in transit to the destination.
Reserved: Of the units on order, how many are already sold / promised to a customer.
Available: Units on order, less units reserved - how many units are still freely available for sale (of those in transit to the destination).
Net Stock:
To understand "Net Stock", study the two sections "Stock" and "Orders" above.
Stock Available: see above under Stock, Available.
Orders Available: see above under Orders, Available.
Unreserved: The sum of On Hand and On Order, above.
Net Available: The sum of Stock Available and Orders Available. How many units can be sold before reordering? (Can also be looked at as unreserved units currently in the supply chain.
Details:
Reorder Point: Once stock shrinks to that level, more units will be ordered. Chosen be the supply chain manager or recommended by a our AI. Depends on demand, demand volatility, lead time, and other factors.
Leadtime: On average, how many days does it take from placing an order to receiving that order at the destination.
Historical Sales:
Monthly sales volume (in units) for the last twelve months (actual numbers).
Future Sales:
Monthly sales volume (in units) for the next twelve months (based on our forecast).
Future Sales:
The accuracy of the forecast. The smaller the number the more accurate the forecast is.
What you can do in Container View
Essentially, three things: Modify the container contents, either by adjusting existing SKUs or adding entirely new SKUs. Once you're satisfied, you can approve the container so that the goods get ordered.
Adjusting existing SKUs
The first step in tweaking a container will usually mean adjusting quantities of existing SKUs. There are no hard and fast rules for this - after all, the AI model has already identified that theoretical optimum. But you may know things the mode doesn't: A recent magazine article with a favorable review of one product will make you increase the numbers for that SKU; a fire in one of your stores will make you decrease overall numbers. To adjust SKUs, simply edit the number in the "Manual" column.
Adding additional SKUs
Container Optimization is also a time when you can get "free shipping" on a few additional items. The freight cost will no go up for a few extra pounds, so you can add products that you expect will sell well in the coming months. To add SKUs, click the "+ Add other products" button in the bottom right.
Saving and Approving orders
For larger containers with many SKUs, adjusting all the quantities may be a big task that cannot be completed in one sitting. If that is the case, you can always hit "Save" and come back later.
Once the task is complete, and all adjustments are final, you can click on "Approve". This will close out the process, and mark the container ready for ordering. Be careful, because this step cannot be undone.