Outdated or manual processes, rising gas prices, increased demand on companies to ship more SKUs, and meeting ever more demanding service-level agreements are just a handful of reasons there is room for operational improvement in routing.
Whether the goal is to make better use of personnel and trucks, open new markets and opportunities, improve the customer experience, better forecast the impacts of new customers, or simply reduce the dollars spent on fuel and maintenance, efforts to lower distribution costs and improve the customer experience must begin at the strategic level with the proper planning and allocation of resources that have already been paid for.
A good first step is to look at how routing is currently being done.
Taking a Good, Hard Look in the Mirror
Just because routes have been planned and run the same way for years doesn't mean there isn't room for improvement. Even a fleet as small as five trucks delivering 10 stops each faces billions of possible answers to the best plan for execution.
Many companies have had the same drivers driving the same routes for years without ever factoring in variables such as traffic, time of day, delivery time windows, gas costs, and more. In some cases, a specific route may have been mapped correctly - but for the most part existing routes have been created based on driver input or at most, one or two of the variables above, and could be improved.
Making very small changes to routes, even updating them by a few miles each day to be more direct, will make an enormous impact on an organization when the combined affect from each of its drivers is examined. Consider the example of a home health clinic where each of its 300 nurses are driving 4 to 5 miles out of their way each day because they are not taking the most direct route possible. This represents 1,200 miles of wasted driving in a single day, or nearly a half million miles in a year (438,000). Suddenly, these 4 or 5 miles per driver per day are costing the organization more than $50,000 each year.
I've been seeing more and more companies looking to improve the ways they handle delivery routing and geographic resource planning - maximizing flow, balancing delivery loads and getting real-time information that can be quickly acted upon to heighten efficiencies and lower costs.
Having a good plan is the first step to executing on a good plan. Many organizations find that utilizing the right routing and planning technologies is crucial to improving operational efficiencies, and in turn reducing costs.
The Direct and Indirect Benefits of Optimization
As the cost of everything from gas prices to labor increase, companies need to locate savings opportunities that are easy to implement and can be consistent and sustainable. Ultimately, planning and optimizing routes better is a way to improve the bottom line.
In terms of the factors for which companies need to account in charting a route optimization approach, the main ones are "costs" or "time" - but quite honestly, this changes depending on the company and customers involved. If we take the example of the home health aid/nursing service again, when planning out their routes, the most important factor would be time. They need to be there as planned for their scheduled appointments. Other people plan around scheduled appointments, and if the nurses kept missing appointments or were late, the company would lose customers.
Another example where time would be most important comes from the food logistics industry. Deliveries of fresh produce and meat need to be made in certain windows for a several reasons: so the food remains fresh, to ensure that there is room at the restaurant or grocer for the food to be unloaded and to meet the timing required for restaurants and catering operation. Too early and there's no room; too late and the food will have gone bad or missed the scheduled pre-customer prep/shelving.
The opposite of those examples would be optimizing garbage pickup routes. There, the most important factor can be miles or gas costs as time isn't as constricting a factor - customers don't care what time of day you get there, just that you are not there too early in the morning and you get there to pick up the garbage.
Beyond the fact that route optimization helps companies identify ways to cut expenses, there is also an unanticipated benefit in terms of insight into an organization's overall operations. This includes knowing how much was being spent on gas, where and when clusters of delivery activity exist, or what times of day the majority of work is done.
Aside from the direct benefits of route optimization, there is also an important indirect benefit"”improved customer service. By gaining visibility into the supply chain and using technology to improve it, delivery times are increasingly predictable, improving the customer experience. No longer do things arrive too early or too late - items are delivered exactly when they should be.
Another indirect benefit is the ability to be proactive about changes to the customer network or delivery environment. The addition of subtraction of a key chain or very large customer can have dramatic effects on the total delivery operation. The right route optimization tool can help businesses plan for the impacts of these game-changing events, and even provide the ability to assist in the placement of new dispatching and fulfillment centers. The right tool, properly utilized is a force multiplier for businesses seeking to not only run the most effective and efficient routes but also to be proactive about changes to their operating environment.
When strategically deployed, the use of route planning and optimization technology can be a game-changer. Organizations that do not leverage the latest route optimization and planning technologies will miss the opportunities to improve operational efficiencies, reduce costs, and scale to the changing needs of their customers and industry.
When done correctly, optimizing and automating the flow of tasks across the supply chain makes the entire shipping and delivery process run smoother with fewer errors - and at the same time, provides visibility across the flow. This visibility enables management to review any step of the supply chain to identify and resolve issues, improve efficiencies, maximize flow and continually balance loads across the fleet.
Keywords: transportation management, on-time delivery, logistics management, truck transportation, motor freight, logistics & supply chain
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