There's no getting around it: there's great value in a software program that gets your delivery truck to its destination in the quickest and most cost-efficient manner. But route optimization means much more than just enabling fast deliveries. It can really help a company pare unnecessary services, routes and vehicles. After partnering with a routing and scheduling software provider, Glanbia, the global dairy business and nutritionals group, eliminated 106,000 kilometers a year from its operations in the Republic of Ireland. That's more than 99,000 miles, which adds up to a lot of fuel and wear and tear on vehicles. But the savings don't stop there.
The need to optimize its delivery operations became acute as the economic downturn of 2008-2009 began to impact consumer confidence and purchasing, says Denis Conway, the company's national logistics manager. That created difficulties for retailers and their suppliers, whose sales diminished considerably. Some stores closed, major retailers moved to central distribution models and the growth of discounters in the market began to take shape and impact the traditional retailer model.
At the same time, the cost of fuel began to rise, which was especially onerous for any company needing to make regular deliveries. It became obvious that Glanbia, like many others, had too many vehicles in its fleet, and its routing was not as efficient as it needed to be.
“The reality is that there was a reduction in our customer physical customer base,” Conway says. “Our routes became inefficient because we had more trucks on the road than we needed, and at the same time the cost of fuel was starting to rise.”
The manual routing and scheduling process was outdated, so Glanbia partnered with a provider who promised to optimize its transportation operations. (It wasn't long before Glanbia realized its partner wasn't delivering on its promises, so Plan B went into effect.) “We turned to Paragon Software Systems, says Conway.
Paragon had long experience providing route planning and scheduling solutions for grocery stores, food and beverage, retail and field service companies. It set to work right away on Glanbia's operations.
The drastic reduction in mileage racked up by Glanbia delivery vehicles didn't occur right away, Conway says. Paragon had to master the intricacies of Glanbia's business and its routing needs – not only the stores and end customers it needed to serve but taking into consideration such mundane things as time lost at rail crossings, school opening times, traffic congestion, and most importantly, the interaction between SAP and Paragon. Once the complete routing picture was formed, paring of routes could begin. Conway estimates that the system has reduced the annual number of routes by 10 percent. In addition, vehicle utilization was improved by 15 percent.
An added bonus, which is not to be discounted by stakeholders, is the overall reduction in CO2 emissions of more than 100 tons per year.
A closer look at Glanbia's transport challenge involves daily planning and optimizing of same-day direct-to-store deliveries that have a narrow two-hour (6 a.m. to 8 a.m.) delivery window, and Cold Box depot deliveries between 4 p.m. and 6 a.m. the following day.
There are two networks, Conway says, the dairy operation, which includes milk, and the chilled network, which moves cheese, yogurt, smoothie drinks and nutritionals.
The dairy operation runs six days a week. It supplies major retailers and Milk Agents who distribute Glanbia products from the Cold Box network. With more than 4,500 weekly deliveries across 136 routes, and contending with more than 250 individual delivery windows, Glanbia was keen to see how Paragon could improve the operation and improve efficiencies wherever possible, Conway says.
Having first set up the base case with information about depots, agents, hauliers and customers to model the current routes and costs, Glanbia was then able to try out various scenarios aimed at improving efficiencies. Several options were tested involving more flexible delivery times for Cold Box locations. The greatest efficiencies came from standardizing Cold Box time windows at a regional level, while combining Cold Box deliveries with time-constrained direct-to-store deliveries. As a result, routing efficiencies yielded a 15 percent gain in vehicle utilization, a 10 percent drop in loads per week – and the dramatic fuel reduction that equates to more than 100 tons of CO2 per year.
“It’s really important that we make the best use of our vehicle fleet and that loads are maximized and routes optimized,” says Paul Devlin, senior route planner for Glanbia's Consumer Foods Ireland division. “Paragon gives us the power to do that and, when used in conjunction with our SAP business software, has resulted in efficiency gains across our dairy product delivery operation which spans the entire Republic of Ireland.”
Conway describes the confluence of events during the recession as a “perfect storm” for the company. That's why it was mandatory to improve routing and scheduling. But the optimization of the fleet – a reduction of close to 40 percent over the space of five to six years – while very important, is not the only advantage that Glanbia has realized from the partnership.
“The system is not just a simple routing tool or transport management tool,” he says. “We use it for strategic planning as well. We can create scenarios of how our network could and should look if we were to make changes to the business model. There's a lot of strategic value to it.”
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