Split shipments occur when a single order for multiple items can’t be fulfilled all at once and so is shipped in parts, with packages arriving separately, rather than the whole order being delivered at the same time.
They are commonly seen by retailers as a costly drag on resources and profits and something to avoid.
When Kohl’s online orders jumped 60%, their profit margin took a 2.75% hit, which their CFO Jill Timm blamed on shipping costs. As they’d cut their inventory by 26%, they were forced to ship items from their stores, leading to more split shipments and increased shipping costs.
But to deliver a satisfying omnichannel experience to customers, sometimes it’s necessary to split orders into two or more shipments to deliver items to the customer as fast as possible.
McKinsey’s recent digital consumer survey found that, “five of the top nine factors driving customer value in omnichannel retail are related to logistics.” Customers expect to receive their orders quickly, while “more than 90 percent of US online shoppers expect free two- to three-day shipping.”
However, speed is not the only factor influencing consumers’ buying decisions. The same survey found that customers also place high value on the breadth of products available to order and want control over the delivery process.
The Effects of Split Shipments
Why do split shipments occur?
There can be several reasons for splitting up shipments:
- Inventory available sooner – Shipping one item as soon as it’s ready to go is often preferable to waiting for all items to be in stock.
- Merchandise located in separate locations – If part of an order is in a different warehouse, shipping direct to the customer from separate locations is often quicker and more efficient than waiting for everything to arrive at the same fulfillment center. A flexible OMS that has real-time SKU level tracking can see where goods are located and make decisions about where to send them from.
- Item size – If not all items can fit in the same package, or if you’re sending irregular, fragile, or very large items, you might need to send them separately.
- Shipping costs – You should factor in the dimensional weight of an item (a calculation that shipping companies use to determine fees based on the length, width, and height of the package.) Sometimes, splitting orders into smaller packages can be cheaper overall.
- Cargo and freight considerations – You need to weigh up shipping schedules, how much space you’ll need, and international timetables.
- Customer wants delivery to multiple locations – If part of the order is a gift, for example, it might suit the customer to have items delivered to two or more addresses. If you’re able to give this option to customers at checkout, it can give you an edge in providing an outstanding customer experience
What are the effects of split shipments on retailers and customers?
For retailers, having to send separate packages for the same order means doubling up on shipping costs. If you’re having to send multiple packages cross-country or internationally, costs can quickly spiral.
However, this has to be weighed against the need to get orders to customers quickly. Remember, customers don’t expect to wait more than a few days for their order to arrive.
For customers, split shipments mean receiving their order on different days, which is usually an inconvenience. Plus, they have to wait around for the remaining parts of their single order to arrive
On the other hand, it does mean that they receive a part of their order sooner than they would if the retailer waited until all items were in stock and available to ship the order. It may even be more convenient for a customer to decide to split shipments on certain occasions.
Any split shipment decisions should be communicated to the customer so they are kept updated, have visibility, and feel ownership over the process to ensure the best customer experience possible.
Effectively Managing Split Shipments with a High-Powered OMS
A flexible, automated Order Management System (OMS) lets you manage inventory efficiently, streamlining your fulfillment operation and bringing down costs. A good OMS will not only make decisions based on the best way to fulfill the individual order but on what works best across your network.
It can optimize orders against business as well as logistical rules, minimizing costs and making split shipments a viable option.
Kibo’s inventory management capabilities
Kibo Order Management is designed for scaling brands, allowing retailers to:
- Have global inventory visibility and management
- View inventory by product or by location
- Segment your inventory by region, purpose, or channel
- Map inventory to types of order it can be promised to
- See all Available to Promise (ATP) items, regardless of the segment or channel they sit in
- Optimize fulfillment automatically by setting business rules
- Set filters based on custom values, datasets, or data points from your catalog
- Generate multiple packing slips for the same order to create flexible delivery options. Assigning each part of the order to its own packing slip allows you (and your customers) to track all parts of the order.
Kibo’s Distributed Order Routing capabilities
Kibo’s intelligent order routing engine automates decisions about how to fulfill orders, taking variables like store locations and vendor partners into account. It takes the headaches out of omnichannel inventory management and allows non-IT teams to easily manage diverse fulfillment locations from a single UI.
Smart order routing allows you to split orders automatically, minimizing the number of splits and reducing your overall shipping costs.
Conclusion
Split shipments can be an expensive, logistical nightmare. But sometimes, especially when managing inventory across multiple channels, they are unavoidable if you want to provide a high level of customer service and keep up with the delivery times demanded by today’s consumers.
A high-powered OMS can remove inventory silos, automate routing decisions, and keep you delivering an outstanding customer experience.
Want to learn more about order management and inventory visibility? Download our report, “Order Management: Only as Good as Your Inventory Visibility,” from Kibo and Supply Chain Brain.
