# WKS FTL Distance Cost Optimization for North America

This posting describes the new “Destination-Based Distance Cost” available with TM 9.0. This functionallity was developed to address a gap in the FTL distance cost calculation in the North American market. The standard distance cost calculation prior to 9.0 was implicitly “Route-Based”. With 9.0, there is a new setting on the means of transport cost setting in the cost profile within the planning profile. The new field is called “Distance Cost Basis From Lane”. This setting has the following two values:

• Route-Based Distance Cost (calculates distance cost leg-by-leg with no possiblity to consider minimum cost)
• Destination-Based Distance Cost (calculates distance cost for total distance of complete routing times the distance cost for the lane from source location to final destination also considering the new minimum cost field on the lane)

Let’s take the following example.

Freight Unit     Source Location     Destination Location

FU1                  SP1                        C1

FU2                  SP1                        C2

Lanes

Lane 1: SP1 -> C1 with \$1/mi and \$500 minmum (see screen below, the minimum cost is the new field from 9.0)

Lane 2: SP1 -> C2 with \$2/mi and \$400 minimum

Lane 3: C1 -> C2 with \$3/mi and \$300 minimum (this lane is required for Route-Based, but not Destination-Based)

Distances

SP1 -> C1 = 500 mi

SP1 -> C2 = 500 mi

C1 -> C2 = 200mi

Route-Based Calculation

Routing 1: SP1->C1->C2 = (500mi * \$1/mi) + (200mi * \$3/mi) = \$1,100 (selected routing based on cost)

Routing 2: SP1->C2->C1 = (500mi * \$2/mi) + (200mi * \$3/mi) = \$1,600

Destination-Based Calculation

Routing 1: SP1->C1->C2 = (700mi * \$2/mi) = \$1,400

Routing 2: SP1->C2->C1 = (700mi * \$1/mi)  = \$700  (selected routing based on cost)

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• Hello Michael,

I have question regarding the Destination-Based Distance Cost. If my source and destination are in zones and the zone is connected with a lane and I maintain the Means of Transport cost on the lane, will the optimizer still consider the lane level costs while calculating planning costs? IMO, i believe it should, but TM 9.0 documentation mentions the below, so not sure. Please help.

Destination-based distance costs (SAP TM 110_EN; Topic: Planning Costs; Page 531)

Destination-based distance costs are determined using a calculation logic that

adds up the distances between the source and target locations, including all

distances between transshipment locations, and multiplies the result by a cost

factor. This cost factor is part of the direct transportation lane between the source

location and target location and is based on the geographical location of the

destination. The probability that the destination location of a transportation is the

source location of the next transportation determines the value of the cost factor.

"You must have defined a direct transportation lane between the source

location and the target location before the system can take this

calculation logic for distance costs into account in the VSR optimization

run."

Thanks

Sai