Dynamic Rate Structuring for Shipping Carriers
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Solution Overview
Problem
Conventional rate structuring systems for shipping carriers use pre-defined geographical areas, such as zip codes, which fail to account for varying delivery costs and profits, leading to less profitable and costly deliveries due to averaged rate structures across entire postal or zip codes.
Innovation Solution
A rate structuring system that uses real-time observed characteristics of service points within a geographical area to calculate cost and profit data, allowing for dynamic rate adjustments based on these calculations to optimize profitability.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If conventional rate structuring systems use pre-defined geographical areas (zip codes) with averaged rate structures, then the system complexity is reduced and ease of operation is improved, but manufacturing precision (rate accuracy) deteriorates and profitability decreases
Solution Approach 1:
The patent segments geographical areas into smaller delivery zones based on actual delivery characteristics rather than using large zip code areas. This segmentation allows for more precise rate calculation at the service point level while maintaining system manageability through automated zone creation and assignment.
Solution Approach 2:
The patent implements local quality by applying different rate structures to different service points within the same geographical area based on their specific delivery characteristics. Each service point receives a customized rate structure reflecting its actual cost profile, rather than applying a uniform rate across the entire zip code area.
2Ease of manufacture
If rate structures are averaged across entire postal or zip codes, then device complexity is reduced and ease of manufacture is improved, but productivity (profitability) deteriorates
Solution Approach 1:
The patent introduces dynamics by continuously monitoring actual delivery costs at each service point and adjusting rate structures accordingly. The system dynamically updates service point assignments and rate calculations based on real-time cost data, allowing profitability to improve without requiring complex manual rate structure creation.
Solution Approach 2:
The patent implements feedback mechanisms where actual delivery costs are tracked and fed back into the rate structure system. This feedback loop allows the system to automatically adjust rates and service point assignments to optimize profitability, with the feedback driving continuous improvement without increasing operational complexity.
3Manufacturing precision
If granular service point level rate adjustments are implemented, then manufacturing precision (rate accuracy) is improved and profitability increases, but device complexity increases and ease of operation deteriorates
Solution Approach 1:
The patent enables self-service by allowing the system to automatically create delivery zones, assign service points, and calculate optimal rates without manual intervention. The automated zone creation and service point assignment processes eliminate the need for complex manual rate structure development while maintaining high precision at the service point level.
Solution Approach 2:
The patent utilizes parameter changes by automatically adjusting rate parameters based on delivery characteristics such as distance, access difficulty, and delivery frequency. The system dynamically modifies rate parameters for each service point based on observed performance data, achieving precision without manual complexity through automated parameter optimization.
4Ease of operation
If uniform rate structures are applied to all packages within a zip code, then ease of operation is improved, but loss of information about individual package delivery costs occurs
Solution Approach 1:
The patent adds another dimension to rate structuring by incorporating service point-specific characteristics into the rate calculation. Instead of a single-dimensional zip code-based rate structure, the system uses multi-dimensional factors including service point location, delivery characteristics, and actual cost data to determine rates, preserving detailed cost information while maintaining operational simplicity through automated calculation.
Data Source
AI summary
Various embodiments provide a rate structuring system for determining a rate adjustment for at least one service point within a geographical area. In certain embodiments, the system comprises one or more computer processors configured to: receive service point data comprising one or more real-time observed characteristics associated with delivery of at least one package to one or more of said at least one service points within said geographical area; retrieve rate data; calculate at least one of cost data and profit data for each service point associated with said received service point data; compare said calculated cost/profit data against one or more parameters; and in response to at least a portion of said calculated data differing from said one or more parameters, generate rate adjustment instructions, said instructions being configured for implementation of an adjustment to said rate data. Associated computer program products and computer implemented methods are also provided.