How to Effectively Manage Split Shipments

How to Effectively Manage Split Shipments

How to Effectively Manage Split Shipments

In today’s fast-paced and interconnected world, the efficient movement of goods is crucial for businesses looking to thrive in the competitive marketplace. One strategy that has gained significant traction in recent years is the use of split shipments.

Split shipments occur when a single order for multiple items can’t be fulfilled all at once. So the order is shipped in parts, with packages arriving separately rather than the whole order being delivered at the same time.

By strategically dividing shipments, companies can overcome logistical challenges, minimize transit times, and adapt to ever-changing customer demands. Moreover, the benefits of split shipments extend beyond operational efficiency; they play a crucial role in meeting customer expectations for speedy and reliable delivery, ultimately driving customer loyalty and repeat business.

McKinsey’s 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 a high value on the breadth of products available to order and want control over the delivery process.

In this article, we’ll explore why split shipments occur, the benefits of a split shipment strategy, and how to implement split shipments.

What is a split shipment?

A split shipment, or split order, is when an order is divided into multiple shipments, and each shipment is delivered separately with its own packing slip. This may happen for various reasons, such as when one or more item is out of stock, or the items are being shipped from multiple warehouses or stores. Split shipments can also provide partial delivery of an order to a customer who needs some of the items urgently while the rest are being prepared for shipping.

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 order management system (OMS) that has real-time SKU level tracking and agile order orchestration can see where goods are located and make decisions about where to send them from.
  • Item size – If all items can’t fit in the same package, or if you’re sending irregular, fragile, or very large items, you might need to send them in multiple boxes.
  • Shipping costs – You should factor in the dimensional weight of an item (a calculation that shipping companies use to determine fees based on the package’s length, width, and height). 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. You could also customize the gift packing slip to hide information like price. If you can 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 transportation costs. If you must send multiple packages cross-country or internationally, the shipping cost can quickly spiral.

However, this has to be weighed against some of the positive benefits:

  1. Increased customer satisfaction: By using splitting shipments, retailers can provide customers with partial fulfillment of their orders, ensuring they receive at least some of the items sooner. This enhances customer satisfaction as they do not have to wait for the entire order to be fulfilled.
  2. Faster fulfillment: Split shipments enable retailers to fulfill orders more quickly. Instead of waiting for all items to be available in the warehouse, the retailer can ship the available items immediately. This reduces the overall order processing time and helps meet customer expectations for faster delivery.
  3. Higher sales and average order value: Split shipments can encourage customers to place larger orders. Knowing that partial shipments are possible, customers may feel more inclined to order additional items, even if some are out of stock. This can lead to higher order values and increased sales for the retailer.
  4. Cost optimization: By adopting split shipments, retailers can optimize shipping costs. For example, if an order contains both bulky and lightweight items, splitting the shipment can help avoid higher shipping costs associated with the entire order’s weight and volume. Additionally, by reducing backorders and improving inventory management, retailers can minimize costs associated with stockouts and excess inventory.
  5. Flexibility in inventory management: Split shipments provide flexibility in managing inventory. Retailers can ship items as they become available, even if the complete order cannot be fulfilled at once. This enables efficient inventory turnover and reduces the risk of overstocking or holding excessive inventory for a prolonged period.
  6. Reduced backorders: Split shipments help minimize backorders, which occur when an item is temporarily out of stock. Instead of holding the entire order until the out-of-stock item becomes available, the retailer can ship the in-stock items separately.

For customers, split shipments mean receiving their orders on different days, which is usually inconvenient. 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 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.

Best practices for split shipment customer communication:

  • Notify the customer as soon as you know the order will be split into multiple packages
  • Send an email confirmation when each package is shipped and include tracking information and shipping method
  • Provide regular updates on where each package is in the fulfillment process

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 reducing 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.

Split Shipments Kibo

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 send to another inventory location or split inventory into multiple packages. 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, “The Ultimate Guide to Order Management.”

 

This article was originally published in March 2022 and updated July 2023.

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