Reducing Transportation Costs by 19%—The Third Option of "Medium-Lot Shipping"

Reading this article will provide hints for solving challenges such as:
● Being turned away by common carriers and forced to continue using expensive chartered trucks
● Staff time being consumed by arranging chartered trucks, putting pressure on core operations
● Wanting to lower transportation costs while maintaining service levels

1. Summary

This article introduces a transportation cost reduction case study at a distribution center that handles logistics for home appliance and air conditioning manufacturers.

Chronic pickup refusals by common carriers led to an increase in switches to chartered trucks. As a result, a dual challenge emerged: not only did transportation costs balloon, but the dispatch staff's arrangement workload became overwhelmed.

Therefore, our company independently designed and built a new delivery method called "Medium-Lot Shipping" that sits "right between common carrier shipping and chartered shipping."
We handled everything from developing new transportation providers to reaching rate agreements with sales companies, achieving the following results.

2. Background: Structural Challenges Facing the Logistics Industry

In recent years, the logistics industry has been facing complex challenges. Due to the impact of work-style reforms driven by
driver shortages and the "2024 Problem," it has become difficult for common carriers to accept shipments that take time to load and unload or have low loading efficiency as they did in the past.
Particularly for shipments with large volumes per delivery destination, driver detention time increases, leading to a rising trend in pickup refusals.

Meanwhile, on the shipper side, amidst persistent upward pressure on logistics costs, companies are being forced to respond to the contradictory demand of "lowering costs while maintaining service levels."

Under these circumstances, the issue of forced switching from common carrier shipping to chartered shipping has become a common headache for many shippers and logistics managers.

3. Challenges on the Ground: Unstoppable Pickup Refusals by Common Carriers

The setting for this case study is a distribution center handling logistics for home appliances and air conditioning equipment in the Kyushu region. Processing 3,000 shipping orders per day and shipping 500 cubic meters of products, the site staff began reporting the following at one point:

"Common carriers are asking us to change to other delivery methods because pickup is difficult, and cases of switching to chartered trucks are increasing. The work of consulting with sales companies and transportation providers and making arrangements is piling up, and we can't keep up."

▮ When we confirmed the reality with numbers, the severity of the situation was clear!
Comparing the period when the phenomenon began to the time before, although the total number of shipments remained almost flat (105%), the volume increased to 121%. Looking at it by delivery method, while common carrier shipping decreased by more than 20% in both number of shipments (78%) and volume (80%), chartered shipping increased significantly to 138% in number of shipments and 157% in volume.
Shipments refused by common carriers were flowing directly into chartered shipping—the gut feeling on the ground was backed up by data.

▮ Why do common carriers refuse pickups?
When we interviewed drivers from five common carrier companies, the most frequent answer was "the total volume per delivery destination is large" (46%).
Specifically, they stated that for shipments of 2 cubic meters or more, there is a possibility they cannot be fully loaded onto the vehicle, and the time taken for loading and unloading affects the schedule for other delivery destinations.
If this situation is left as is, chartered shipping costs will continue to balloon, and the staff's arrangement workload will continue to increase. We judged that dealing with it through existing delivery methods had reached its limit and began considering a fundamental solution.

4. Solution: Independently Designing the Third Option of "Medium-Lot Shipping"

(1) Why couldn't existing delivery methods solve the problem?
Direct delivery, relay delivery, and mass retailer delivery all carried the risk of disrupting existing fixed routes if an additional 2–4 m³ of cargo was accepted. Searching for new carriers under conditions similar to standard route shipping would only repeat the same problem.
As long as we thought within the framework of existing concepts, we could not find a solution—the team in charge decided tosearch for transport companies with 'new conditions never seen before'.

(2) The framework of the 'Medium-Lot Shipping' we designed
When we organized the orders that were being refused for pickup, common conditions became apparent.
• The delivery area is wide, covering the entire Kyushu region
• Cargo volume of 2–4 m³ per delivery destination
• Delivery destinations vary by day (unspecified)
• Occurs stably every day

Based on these conditions, the new concept we set was'In exchange for guaranteeing a stable daily volume, have them accept it at a metered rate that is higher than route shipping rates but lower than full-charter rates'.
Although the unit price is higher than route shipping for the shipper, by preventing the switch to full-charter shipping,total costs go down—this logic is the core of the new scheme.

(3) Developing new transport companies: The 'real barrier' we realized after being repeatedly refused
Initially, we approached multiple transport companies, but the responses were not favorable.
• Some vehicles cannot be fully loaded with 2–4 m³
• They could handle it if the delivery destination were fixed, but they cannot guarantee reliable delivery if it is unspecified
• The entire Kyushu region is too wide a delivery range

Here, the team in charge had an important realization. It was thatthe problem was not just the 'size of the cargo volume,' but the combination of 'a wide area covering all of Kyushu' and 'unspecified multiple delivery destinations'.
Based on this analysis, we narrowed down our targets to 'transport companies with a large number of vehicles and a delivery area covering a wide range of Kyushu' and re-approached them. As a result, we reached an agreement with a transport company that gave a positive response, saying, 'The pricing is attractive, and we can take on the challenge with our delivery network.'

(4) Careful explanation and consensus building with sales companies
The understanding and agreement of the sales company, which is the shipper, are essential for introducing new delivery methods. We presented cost simulations before and after introduction using performance data and explained the following three benefits.
①Reduction in transport costs: Reduce low-load-factor full-charter shipments and improve the cost structure
②Work-style reform: Reduce the switching to full-charter shipments and arrangement tasks, reducing the burden on dispatchers
③
Improvement in transport quality: Reduce the risk of delivery delays due to remaining cargo at route terminalsBy carefully explaining the paradoxical proposal that 'unit prices will rise, but total costs will fall' with data, we gained the understanding and agreement of the sales company.



(5) Redesigning internal operationsIn parallel with the agreement with transport and sales companies, we also reviewed operations within the distribution center.
• Named the new delivery method
'Medium-Lot Shipping' and standardized it within the company• Reviewed the vehicle berth schedule and set Medium-Lot Shipping before the pickup of existing relay delivery shipments. Secured additional space by 'double-rotating' the berths
• Built an operational flow that utilizes the dispatch management system to automatically identify and sort 2–4 m³ orders
From the start of the study,

we started trial operations in just 4 months

and then transitioned to full-scale operation.

5. Concrete effects: A three-way benefit for cost, operations, and quality

A major feature of this case is that it achieved not only cost reduction but also a reduction in the burden on staff (work-style reform) and an improvement in transport quality at the same time.

6. Horizontal expansion and application potential: Effective for such companies and issues

The 'Medium-Lot Shipping' approach this time is particularly effective for companies and logistics managers in the following situations:
• Manufacturing/Maker-related companies that handle large-sized products (home appliances, air conditioning, OA equipment, etc.)
• Chronic occurrence of route shipping pickup refusals or
leftover cargo• Increase in full-charter shipment arrangements, leading to
strained staff operations• Having
delivery needs of 'higher than route shipping, but cheaper than full-charter shipping'• Expecting
a certain amount of stable volume every day in a specific delivery areaAlthough the design changes depending on the size of the volume and the width of the area, the idea of 'designing a third option that breaks away from the two-choice dilemma of existing means' can be applied to logistics issues in various industries and scales.

7. Summary: Filling the 'blank zone' of logistics becomes a competitive advantage

Route shipping refuses, and full-charter shipping is too expensive—many logistics managers are troubled by this 'blank zone'.
What this case demonstrated is an approach to problem-solving that'does not get caught in the framework of existing delivery means, but designs a new mechanism based on data and on-site interviews'.
When developing new transport companies, the key to success was not just 'finding a company that will accept it cheaply,' butdigging into the essence of 'why it is refused' and designing conditions that are rational for both parties.

In addition, project management that moves the three parties—transport company, sales company, and center operations—simultaneously, and the ability to explain costs using data were also important elements that supported this improvement.

At our company, we have accumulated know-how in 'organizing logistics issues from multiple perspectives and involving all stakeholders to solve them'.
Why not consider with us a logistics improvement that achieves a three-way benefit of cost, quality, and operational efficiency?

8. Inquiries

If you are experiencing similar issues with your deliveries, would like to consult on cost reduction or operational efficiency, or wish to optimize your logistics, please feel free to contact us.
We are happy to accept inquiries via our contact form.

📩 Contact Form：
　  [https://forms.cloud.microsoft/r/AhaEAjizXW]

　Questions in the comments section are also welcome. We would be happy to exchange information with others in the logistics, manufacturing, or wholesale industries who are facing similar challenges.

Furthermore, for details on the logistics solutions, services, network, and technology provided by MD Logis, please visit our official website.

🏢 Website:[https://www.mdlogis.co.jp/]

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