Shipping operations are crucial for all businesses. They are an integral part of logistics and supply chain management. They connect all the isolated links of a supply chain. This facilitates the movement of products from the manufacturer to the consumer.
Shipping operations are the biggest cost drivers in a supply chain. On average, they account for 50.3% of the expenses. So you can reduce supply chain costs by better managing shipping operations.
Shipping operations also has a direct impact on sales, marketing, and customer service. Efficient shipping operations can help you control the delivery time, product pricing, shipping charges, and so on. Each of these has a major impact on purchasing decisions and customer satisfaction.
Shipping operations have an enormous impact on several aspects of a business. Hence, you need to understand shipping operations management and its role in the supply chain.
What are Shipping Operations?
Shipping Operations is a part of logistics distribution. It concerns the transportation of goods between places. In a supply chain, shipping operations management transports products throughout the supply chain. It involves all the cycles of transportation between the manufacturer and the customer.
In a supply chain, the operations of a shipping company include the following transportation cycles:
- Transporting inventory from supplier to manufacturing unit
- Transporting inventory from manufacturing units to warehouses
- Transporting inventory from warehouses to distribution centres or fulfilment centres
- Transporting products from distribution centre to retail outlets
- Transporting products from the fulfilment centre to the customer’s address
These shipping operations fall under distribution logistics. A company would have in-house logistics for centralised shipping operations. Or, you can outsource it to a 3PL or 4PL logistics partner.
What are the Types of Shipping Operations?
Each transportation cycle uses different types of shipping operations. Based on the size of cargo, operations in shipping can be divided into two categories:
- Freight Shipping
- Small Parcel Shipping
Freight shipping refers to the transportation of large cargo. The size of cargo in freight shipping has a volume larger than 685.8 cubic metres. Freight cargo also typically weighs more than 68 kg.
Freight cargo also depends on the density per metre square. Any cargo with a density higher than 800 kg per cubic metre is freight.
In freight shipping,you club several products to form a parcel or a pallet. Freight shipping is usually employed for logistics distribution in shipping operations management. Logistics use freight to move inventory between suppliers, manufacturers, warehouses, distribution centres, fulfilment centres, and retail outlets.
Freight shipping can be further classified into three types:
Each of these shipping modes offers different advantages. Road freight is commonly used for domestic shipping operations. It is the most common mode of transport in a supply chain for logistics distribution.
The largest volume of goods is transported by sea. Ocean freight is responsible for 70% of international trade. It is also the cheapest mode of transport for cargo operations in shipping. On the other hand, the most expensive mode of transport is air freight. But, it is also the fastest mode of freight shipping.
Small Parcel Shipping
Small parcel shipping refers to the transportation of individual parcels. Any parcel that weighs less than 30 kg fall into this category. It is usually employed at the final stages of a supply chain. These include order fulfilment and reverse logistics.
The majority of companies use 3PL partners for this part of shipping operations. However, some companies may develop their vehicle fleet for small parcel shipping.
What is Shipping Operations Management?
Shipping operations management is a crucial part of logistics and supply chain management. They link different stages of a supply chain. The operations of a shipping company include:
Collectively, these operations form one cycle of transportation in the supply chain. Each of these shipping operations links with other supply chain processes. The above processes are common among all types of shipping operations.
The first stage of shipping operations involves receiving orders for transportation. This stage connects procurement, warehousing, and inventory management.
Once the order is received, a shipping operations manager needs to check the available resources to complete the order. This includes:
- Available Inventory
- Storage Locations
- Viable Shipping Options
The shipping operations manager will arrange shipping based on the first two criteria. This can be a warehouse or a fulfilment centre. At this stage, you also need to check the available inventory for shipping. The shipping operations software links with warehouse and inventory management systems of this.
The distance between the chosen storage location and destination will help narrow down the shipping options. It will also determine the number of transportation cycles in shipping operations.
After receiving the order for shipping, the next stage is order processing. You need to plan the shortest, fastest, and most cost-effective way to transport the required inventory to its destination.
The most important criteria to consider for planning shipping operations include:
- Cargo Size/Volume
- Expected Delivery Lead Time
Based on these three criteria, you can plan the shipping operations. The cargo size will help you decide between freight and small parcel shipping. The distance will help you identify the mode of shipping.
This can is the preparation stage in shipping operations. The fulfilment stage requires coordination between warehousing and shipping carriers. Most companies use shipping operations software to streamline communication between these two links.
The fulfilment stage in shipping operations management involves:
- Picking, packing, and labelling products
- Preparing cargo for loading
- Preparing dispatch schedule
- Designating carriers and shipping vehicles for cargo
- Preparing shipping documents (shipping labels, commercial invoice, bill of lading, etc.)
At the end of the fulfilment stage, the carrier initiates the shipping process. They dispatch the vehicles to load the cargo.
The final stage of shipping operations management begins with loading the cargo into the shipping vehicle. And it culminates with unloading the cargo at its destination. In a supply chain, the end of the shipping stage for one phase is often linked to the receiving stage of the next phase.
For instance, shipping inventory from the manufacturing unit ends when the warehouse receives the goods.
The carrier has to ensure that the cargo is shipped within the defined delivery lead time. And they have to do it by exhausting minimum resources. The carrier also needs to track the cargo during this stage and report its progress to the customer.
You can do this using GPS trackers attached to the shipping vehicle. These trackers are usually integrated with the shipping operation management software. This allows all parties to get real-time information about the shipping status. The shipping is complete when the carrier collects proof of delivery.
Shipping operations management is integral to all kinds of supply chains. It is the connecting phase between different stages of supply chain management. Shipping operations are also crucial for several other business aspects. These include marketing, distribution, and customer service.
Optimising shipping operations can help you develop a more efficient supply chain. They also play an essential role in business expansions into new markets.
You will need to invest heavily in resources to develop centralised shipping operations. Alternatively, you can choose a dependable logistics partner, like PACK & SEND. We can help you create a flexible, agile, scalable, and cost-effective shipping operations management.