Order-to-shipment planning - Allocate costs

If you regularly use Turvo’s Order-to-shipment planning (O2SP) feature and regularly combine multiple orders into a single shipment or split a single order into multiple shipments, Turvo’s cost allocation feature can automatically calculate and allocate your billable customer costs from each order to the shipment(s). When enabled, the cost allocation feature determines the billable customer costs associated based on your preferred factor such as the weight, volume, and the distance traveled to more accurately bill customers and determine margins for your shipments.

An Admin-level user can configure the preferred allocation methods for your tenant, and the allocated costs are calculated and applied automatically to shipments.

In this article, you will learn more about:

• Configure cost allocation rules
• Creating and checking allocated costs
• Cost allocation methods
  • By shipment calculations
  • By weight calculations
  • By weight & distance calculations
  • By volume & distance calculations
  • Adjusting for accessorials and service costs
• Triggering allocation recalculation
• Further reading

Understanding cost allocation directions

Cost allocation can occur in three directions during and after creating a shipment from an order: 

Order-to-shipment cost allocation

Order-to-shipment cost allocation focuses on billable customer costs, so that you can more accurately calculate the customer’s billable cost and your margin on the shipment. The billable costs for all customer orders are applied to the shipment following set logic so that, if one or more orders are split across multiple shipments, each shipment has a billable cost for each customer that is proportional to their order.

This allocation occurs during the initial O2SP, when you manually create a shipment from an order, or when a customer cost item is added to an order that was planned into a shipment or group of shipments.

Admin-level users and above can enable order-to-shipment allocation and set your tenant’s preferred logic for this direction of allocation via the Admin console > Rules > Customer > Configurations > Cost section.

When activated, an Allocated costs subsection appears in the Shipment > Details > Customers > Costs section, listing the billable order costs that have been allocated to the shipment to calculate its margin.

Order-to-order cost consolidation

This allocation uses the same settings for order-to-shipment allocation, set in the Admin console > Rules > Customer > Configurations > Cost section. If you have enabled order-to-shipment allocation, order-to-order consolidation automatically occurs when appropriate.

Order-to-order consolidation occurs during O2SP when items from two or more orders with the same customer are planned into a single shipment. This consolidation combines the data for all of the customer’s order cost items so that they can be copied to a single section in the Customers block of the shipment. 

Note: This prevents the shipment from having two separate sections for the same customer in the Customers block. If you are utilizing O2SP but do not have order-to-shipment cost allocation enabled, your shipment may have two sections for the same customer.

Shipment-to-order cost allocation

Shipment-to-order cost allocation focuses on payable carrier costs, so that you can more accurately calculate the carrier costs that apply to an order and your margin on the customer order. 

This allocation occurs during the initial O2SP, when you manually create a shipment from an order, or when a carrier cost item is added to a shipment that was planned from an order or a group of order.

Admin-level users and above can enable order-to-shipment allocation and set your tenant’s preferred logic for this direction of allocation via the Admin console > Rules > Order > Configurations > Cost allocation section.

When activated, a dedicated Allocated costs section appears in your orders’ Details tab, listing the payable carrier costs that have been allocated to the order to calculate its margin.

Configuring cost allocation rules

A user with Admin-level privileges or above can configure your tenant’s rules for cost allocation by following the steps below:

1. Navigate to the Admin console by clicking on your profile icon in the top right corner of your dashboard and select Admin console from the drop-down menu.

2. Click the Rules card.

Configuring order-to-shipment cost allocation preferences

3. On the Rules page, click the Customer header in the column to the left, if not already selected.

4. Click the Cost segment header under the Configurations section to view the cost allocation rule settings.
5. Click the Configure billable cost allocation method to activate cost allocation for billable customer costs from customer orders to their associated shipments.
   1. Note: This toggle is OFF by default.
6. Once turned to the ON position, select one of the four radio buttons below to set how billable customer order costs are allocated:
   1. By shipment, allocate equally to all associated shipments: Split the customer’s order costs evenly across all shipments, regardless of the weight, volume, or distance.
   2. By weight: Allocate the customer order costs to each shipment relative to the weight of each order’s items.
   3. By weight and distance: Allocate the orders’ customer costs to each shipment relative to the total weight of items related to the order and the distance traveled by the carrier from the order’s pickup location to its delivery location.
   4. By volume and distance: Allocate the orders’ customer costs to each shipment relative to the total volume of items related to the order and the distance traveled by the carrier from the order’s pickup location to its delivery location.

7. Once you’ve completed your configuration, click SAVE.

Note: After any changes are made in Rules, an Update rules? pop-up appears. Since changing your tenant’s rules affects users throughout your tenant, you need to confirm that you want to make the changes.

You also have the option to force all users to refresh their tenant, in order for the changes to apply. We recommend that you refresh your browser or log out and log back in to your tenant once your changes are complete for them to take effect for you as well.

Configuring shipment-to-order cost allocation preferences

3. On the Rules page, click the Order header in the column to the left, if not already selected.
4. Click the Cost allocation method to activate cost allocation for payable carrier costs from shipments back to their associated customer orders.
   1. Note: This toggle is OFF by default.

5. Once turned to the ON position, select one of the four radio buttons below to set how billable customer order costs are allocated:
   1. By order: Split the carrier’s shipment costs evenly across all orders, regardless of the weight, volume, or distance.
   2. By weight: Allocate the carrier’s shipment costs to each order relative to the weight of each order’s items.
   3. By weight and distance: Allocate the carrier’s shipment costs to each order relative to the total weight of items related to the order and the distance traveled by the carrier from the order’s pickup location to its delivery location.
   4. By volume and distance: Allocate the carrier’s shipment costs to each order relative to the total volume of the items in each order and the distance traveled by the carrier from the order’s pickup location to its delivery location.
6. Once you’ve completed your configuration, click SAVE.

Note: The same Update rules? pop-up detailed above appears after clicking SAVE. Click YES to confirm your changes.

Check order-to-shipment allocated costs

To check the billable order costs that have been allocated to a shipment:

1. Open the shipment. Either search for the order using the global search bar, or navigate to Shipments from the left navigation bar and locate the shipment.
2. Click into the shipment, and then click the Details tab.
3. Under the Customers block, click the Costs segment in that customer’s respective section.
   1. Note: If a shipment contains items from multiple customers’ orders, each customer has their own section that can be expanded by clicking the header with the customer’s name.
4. In the Costs segment, allocated costs are shown under the Allocated costs heading, listed under the order number.
   1. If the customer has multiple orders associated with the shipment, the allocated costs for each order are hidden. Click More details to expand the list for each order to see the individual allocated costs.

4. 2. Each cost item includes a percentage, which indicates the percentage of the customer’s order costs that were allocated to the shipment.
      1. For example, if all of the order’s costs were allocated to the shipment, 100% is displayed. If 20% of the customer’s costs on the order were allocated to the shipment, 20% is displayed.
      2. Note: Hover your cursor over the question mark next to the percentage on the cost item to see details on the cost allocation.

5. The total allocated costs are included, alongside any accessorials or services added for the customer, in the Billable total field at the bottom.

Checking shipment-to-order allocated costs

To check the payable shipment costs that have been allocated to an order:

1. Open the order. Either search for the order using the global search bar, or navigate to Orders from the left navigation bar and locate the order.
2. Click into the order, and then click the Details tab. 
3. Click the Allocated cost section header to expand the section.

Item vs. Cost line views

Use the Item view/Cost line view toggle at the top of the section for different views of the allocated order costs. Allocated costs in each view are organized into subsections for each shipment associated with the order. Click the More details button on each shipment to see the allocated cost details for that shipment:

• Item view: Displays how the physical items from the order are split up between the shipments associated with the order.
  • Item: The name of the order's item being transported.
  • Weight: The total net weight of the order's items in each shipment.
  • Distance: The distance the order item traveled from pickup location to the delivery location on the shipment.
  • Allocated cost: The total cost allocated to the order from the shipment for the item. This is used to calculate your margin on the order.
  • Allocated inv cost: The total allocated carrier cost invoiced to the customer for the item.

• Cost line view: Displays the carrier costs allocated from the shipment to the order, such as accessorials, freight, fuel, service, and other cost types.
  • Cost: The type of cost item that was allocated to the order.
  • Rate Qualifier: The rate qualifier type associated with the cost line item (if applicable).
    • Note: This field only appears if enabled for your tenant. See our article on Customizing EDI codes for rate qualifier types on your tenant to learn more.
  • Location: The location associated with the cost line item (if applicable).
  • Factor: The percentage of the payable carrier cost on the shipment that apply to the order based on the cost allocation rules in effect.
  • Amount: The total amount of the payable carrier cost on the shipment.
  • Allocated cost: The total amount payable carrier costs allocated from the shipment to the order (Factor multiplied by Amount).

Under the Cost line view, if a shipment has multiple line items with the same cost type and location, these items are rolled up into a single line item. 

Note: If the allocated costs shown in the order do not equal the shipment’s total carrier costs, then Turvo adds the difference to the cost line item on the order with the highest value. 

Hover your cursor over the question mark next to the percentage on the cost item to see details on the cost allocation.

Click RE-CALCULATE if you have recently updated the costs on either the order or the associated shipments and want to update the allocated costs.

Cost allocation calculations

Turvo calculates allocated costs based on the parameters detailed below.

Note: These descriptions are based on order-to-shipment allocation. If shipment-to-order allocation is enabled, the carrier costs for the shipment found via these calculations are allocated back to the appropriate order(s) to provide the proper margin for the customer order.

By shipment/by order calculations

If your cost allocation rules are set to By shipment, then the customer’s order costs are split evenly between all shipments associated with the customer’s order(s).

Note: For shipment-to-order allocation, the setting is called By order and splits carrier shipments costs evenly between all orders associated with the shipment.

For example, if your customer costs on the order are $1500, and the order is split across three shipments, $500 in billable customer costs is applied to the Details > Customers > [CUSTOMER] > Costs segment on each shipment.

By weight calculations

If your cost allocation rules are set to By weight, then Turvo finds the percentage of the total weight of each order’s items in each shipment. That percentage is used to create the allocated costs on the shipment.

Note: The Weight and Weight unit fields for each item in each order needs to be configured for the By weight cost allocation to work.

For example, if the billable customer cost allocation rules are set to By weight and two shipments is created from an order with a total weight of 3500 lbs and a total customer cost of $4500:

• If Shipment A contains 1200 lbs (34.3% of the total shipment weight), then 34.3% of the customer order costs are applied as the allocated shipment cost, totaling $1543.50.
• Shipment B contains 2300 lbs (65.7% of the total shipment weight), then 65.7% of the customer order costs are applied as the allocated shipment cost, totaling $2956.50.

By weight & distance calculations

In some cases, the items in the shipments may have drastically different weights and travel drastically different distances. In these cases, setting your cost allocation rules to By weight & distance may be your best choice.

With this configuration, Turvo applies a formula that finds the total weight for each order’s items in each shipment and the distance traveled from each shipment’s original pickup location to its final delivery location to create Weight and Distance factors. These factors are then applied to a formula to find the order’s Total factor on the shipment cost. The Total factor is applied as a percentage of the order’s cost to find the total allocated customer cost applied to the shipment.

The Total factor equation is 𝒕 = (𝒛 + 𝒄)/2, using the following variables:

• 𝒛: The Weight factor of the order’s costs within the shipment, found by calculating 𝒛 = 𝒙 / 𝒚
  • 𝒙: The combined weight of an order’s items in the shipment.
  • 𝒚: The total weight of all items in the order across all associated shipments.
• 𝒄: The Distance factor of order’s costs within the shipment, found by calculating 𝒄 = 𝒂 / 𝒃
  • 𝒂: The distance traveled in the shipment.
  • 𝒃: The combined distance traveled in all shipments associated with the order.
• 𝒕: The Total factor for the order’s costs within the shipment.

The order’s allocated cost on the shipment is created and applied by multiplying the Total factor value by the total order costs.

By volume & distance calculations

The By volume & distance option in the billable customer cost allocation rules uses the same  Total factor equation found in the By weight & distance option, 𝒕 = (𝒛 + 𝒄)/2, described in the section above. However, rather than finding the Weight factor for each order in the shipment, a Volume factor is found instead using the following equation:

• 𝒛: The Volume factor of the order’s costs within the shipment, found by calculating 𝒛 = 𝒙 / 𝒚
  • 𝒙: The combined volume of an order’s items in the shipment.
  • 𝒚: The total volume of all items in the order across all associated shipments.

Adjusting for accessorials and service costs

Before Turvo can allocate costs for the order across multiple shipments, it must determine if any accessorial or service cost items are assigned directly to a stop on the order. If there are, then that cost item must be applied to that customer’s costs associated with that stop.

All costs have a Location field where the cost can be associated with a specific location in the shipment route.

If any location-specific or order-specific accessorials are added to the shipment, Turvo will disregard them from the initial calculation for the cost allocation. After the basic allocation is calculated, then any extra costs are added back to the respective customer’s costs on the shipment.

Triggering allocation recalculation

If a shipment has allocated customer costs applied, Turvo automatically recalculates the cost allocation when one the following events occur:

• A new shipment is added connected to the order(s) or an existing shipment is removed or canceled.
• An order is added to the shipments or an existing order is removed or canceled from the shipments.
• A cost item is added to, edited, or removed from one of the orders or shipments used to create allocated costs.
  • Protip: Depending on your configurations for automatic rating for billable customer orders and the contract items you have in place for your customers, Turvo can also convert payable carrier costs on shipments into billable customer costs on the transportation order(s) the shipment was created from. See our article on Automatically adding carrier payable shipment costs as customer billable costs on associated orders to learn more.
• The weight of the items in an order is updated, if the cost allocation is calculated By weight or By weight and distance.
• The volume of the items in an order is updated, if the cost allocation is calculated By volume and distance.
• The distance on the route is updated, if the cost allocation is calculated By weight and distance or By volume and distance.

Learn more about Turvo’s Admin console, Order-to-shipment planning, and order details in the articles listed below.

• Self-service tenant configuration: How to set up your Admin console 
• Order-to-shipment planning