When you are looking for cost savings opportunities in your Transportation Network, a good area to explore is Transportation asset utilization. One of the tools that you can leverage to evaluate optimal utilization is Load Factor modeling, a pretty basic but powerful tool to explore your packaging, vehicle and fleet utilization.
Though the name may sound fancy, the model is essentially a straightforward utilization calculation. The framework of the model is shown below. At a very high level, Load factor modeling is simply calculating your utilizations (Load factors) at various levels.
Though the model may seem very basic, doing a load factor analysis can provide some very useful insights. We can explore this through an example. In our example, we are a widgets manufacturer. We ship multiple Full Truck Load of shipment each week to our only customer. As an internal logistics consultant, you are trying to explore the opportunity to reduce your Transportation costs and one of the areas you are looking into is the utilization of your vehicle. You have calculated load factors for various levels, the levels are shown in the figure below.
Level I: Primary packaging, 20 widgets go into one box. Average volume for each widget is 300 cubic inches . Inner dimensions of a primary package are 22.8in X 17.8in X 21.8in and outer dimensions are 23in X 18in X 22in.
Level II: 8 primary packages (cases) go on a pallet. The pallet is a standard pallet 48in X 40in . These cases are stacked in three tiers on the pallet, so essentially the height of a packed pallet is 48in.
Level III: Let us assume that our pallets can be double stacked in the trailer. 60 of these pallets are shipped on a 53 feet trailer. The inner dimensions of the trailer are 630 in X 110in X 102 in.
Now let us calculate the Load factors for the three levels described above.
Level I: Volume available in a primary pack= 22.8in X 17.8in X 21.8in= 8,847.31 cubic inches. Total volume of 20 widgets is 6,000 cubic inches. The load factor therefore is 6,000/8,847.31 = 67.8%.
Level II: Each primary package has a volume of 23in X 18in X 22in= 9108 cubic inches. So the volume for 8 primary packs (cases)= 8X 9108 = 72,864 cubic inches. Assuming that the height of our pallet can’t exceed 45 inches, the available volume in a pallet is 48in X 40in X 45in = 86,400. The load factor therefore is 72,864/86,400= 84.3%.
Level III: Now, let us assume that we ship 80 of these pallets (after double stacking) in a 53feet trailer. The total volume available in a 53 feet trailer is 630 in X 110in X 102 in=7,068,000 cubic inches. The volume occupied by 66 pallets is 80 X 72,864 in = 5,829,120 cubic inches. The load factor is 5,829,120/7,068,000 =82.4%
Now let us look at the load factors we have calculated above. If we are looking at just the Load factor number at the vehicle level, the utilization seems to be good at 82.4%. However, if you look at the load factor at packaging level, the load factor is 67.8%. This clearly indicates that there is an issue with our primary packaging and there is a packaging optimization initiative required. Bumping the load factor up at this level may lead to an opportunity to reduce the number of loads that you ship to your customer.
Having this hierarchical view allows you to zero in exactly at the level that requires your attention. In real world, you will have multiple parts/products and each will have their own packaging data. If you don’t already have a packaging optimization solution that then ties to a vehicle optimization solution, you should look into developing this capability.
Disclaimer: This is a personal blog site and views and perspectives expressed here are solely my own and do not express the views or opinions of my employer.