Thursday, 12 December 2013

Courier selection logic: How to decide the right courier company for your shipment - part-2

Please do read out previous post on the same Courier selection logic: How to decide the right courier company for your shipment - part-1. In this post we will discuss the missing piece - the logic and the architecture as well. The crux of the logic is trade off on  Cost- the cost of shipment, time - SLA on the number of days to deliver, Ratings - the quality of service.

Preliminaries

  • Tie ups: At this point you have tie ups with multiple courier companies. Each company data, their terms and conditions are entered in the database. These details are used in calculating the shipment cost and SLA.
  • The shipment cost: Getting the cost of shipment
  • The Rating:  For each courier company you will assign some rating. In the beginning you assign same rating to all and gradually you change the rating depending on the quality of delivery. It is measure of quality of shipment. 
  • The DNA of  your company - the polices on which the trade off decision to be taken.

The Shipment cost

 
A software/code/function which takes the courier company name, and shipment details like size, weight, destination zip code, etc.. as input and returns the estimated cost of shipment.  This cost is function of shipment details, and the courier company terms and conditions (which pulls from the database which you have entered during setup).

The DNA of your company


In the process of assigning correct courier company, the trade of decision on cost, time, rating should be taken. This will be based on your DNA of your company,  and defines it as well. It should be aligned with your company goals, mission.

Analytical logic (not the DNA)

  • If the company XYZ and ABC are having the same time SLA and rating, but XYZ cost for shipment is low, then it is natural to choose XYZ for shipment due to less cost
  • If the company XYZ and ABC are having the same cost and time SLA, but XYZ  rating is good, then it is natural to choose XYZ for shipment as good rating means good quality
  •  If the company XYZ and ABC are having the same cost and rating, but XYZ  time SLA is very low, is natural to choose XYZ for shipment as it delivers fast.

 The decisions which defines your DNA

  • What if company XYZ costs less to ship but having bad SLA - takes more time to deliver compared to company ABC (assuming rating is same)?  If you choose XYZ then your are saving a lot, but the longer delay frustrates the customer. If you choose ABC then your trying to be more customer centric even it costs more to you. 
  • The same case when the cost is low but rating is bad.
  • Assuming the cost is constant, what you choose between SLA or rating is difficult decision. You will eventually learn by your experience.

 

The Ratings

Lets say the courier company XYZ and ABC delivered 1000 shipments each. There are 300 customer complaints on 1000 deliveries of company XYZ, whereas there are only 50 customer complaints on 1000 delivery of company ABC. Now you say who is better - the simple answer is  ABC, because of their quality of service compared to XYZ. You can have inbuilt system of ratings which act as punishment and reward. The next time for a shipment say XYZ and ABC have same cost, time SLA then you will choose ABC because of their good rating. It is internal ratings that you give which helps in selection of  courier company. This should not be public or exposed out side. Do read and understand ebay merchant rating system as it will give you good insight into this field. salehoo blog, hubpages blog, ebay blog.

 

The Logic - Algorithm

  1. Get list of all your  courier companies.
  2. Get the filtered list of companies which are willing to ship your package. Please read our previous post on the same. Examples: The companies which do not deliver at the customer service area, or which do not deliver electronic items (where as customer ordered some electronic items)
  3. For each company in the final filtered list get the time SLA, and price, ratings.
  4. Take decision based on analytical reasoning or based on your DNA mentioned above.
             

How to begin for startup

These simple steps for  courier selection step by step are below. First you start with 2-3 courier companies and slowly over the period of time you expand. The numbers mentioned below  are for your understanding, in reality they may change.
  1. You have less than 50 orders per day: handles manually
  2. You have around 100 orders per day:  manage by Excel sheet
  3. You have around 500 orders per day: You first build a system which takes shipment details and give you the filtered list of courier companies which are willing to deliver your package. You make manuall selection
  4. You have around  1000 orders per day: Now the system display feature list, and price as well. you make manual decision based on Analytical logic and DNA
  5. You have more than 1000 orders per day: Every thing is automatic.

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