Aptean Routing & Scheduling eBook: Is Your Private Fleet a Drain On Profits? (US)

Aptean Routing & Scheduling

Paragon Edition

Is Your Private Fleet a Drain on Company Profits?

Tips for turning an out-of-control cost center into a profit engine

Your Inefficient Fleet Is Both a Problem and an Opportunity

What’s that loud sucking sound?

It’s the profit being siphoned out of your business by an unlikely source—your private delivery fleet.

Sure, it’s always been a cost center, but it hasn’t typically been the biggest one. Today, customers’ Amazon-fueled appetites for faster, more frequent deliveries have driven last-mile delivery costs in the B2C sector to between 28% and a whopping 55% of the total cost of goods.

With delivery emerging as a competitive differentiator in the B2B sector, too, costs there will inevitably follow suit.

Consequently, product distribution and delivery operations are under unprecedented pressure to provide rapid, predictable services. Many businesses, frankly, are struggling to cope. Relying solely on old-fashioned, manual route-planning approaches, many fleet managers overcompensate, securing more drivers and vehicles than are actually needed—and draining company profits further in the process.

It’s ironic: the final mile is the most complex part of the supply chain, yet it’s the last to be optimized.

But here’s the good news. By automating route planning, companies can reduce private fleet costs by 10% to 30%. It’s hard to imagine another area of your business that could take such a quick and radical haircut— and actually work better as a result.

Let’s be clear: this is no easy, flip-the-switch answer. Changing well-entrenched logistics department practices is hard. Changing minds is even harder. We hope to convince you that it’s worth it.

How Did We Get Here?

In every industry, the last mile is becoming a more critical component of a company’s value proposition.

In the food service industry, restaurants and other catering businesses are rapidly moving away from thawing, cooking and serving frozen ingredients, and instead, dishing up fresh food. And it’s happening across the industry, not just in restaurants. As a result, food businesses need to replenish inventory far more frequently and ensure that freshness is maintained throughout the delivery cycle.

And in the clothing industry, a shopper failing to find the color and size of a garment in a brick-and-mortar store is rarely the end of the story. That shopper may expect the retailer to locate and ship the right size garment for store pickup or home delivery.

Either way, it’s the beginning of a next-day delivery challenge.

Across all industries, businesses have become allergic to inventory. They want smaller, more frequent shipments delivered just in time.

From the big box chains on down, retailers are demanding tighter delivery time windows—sometimes where there were no delivery windows at all.

Make no mistake, when it comes to delivery schedules, the days of being able to set it and forget it are gone.

Every single company responsible for getting physical goods to its customers must sit up and pay attention now. Delivery and route scheduling is either part of your competitive advantage or the reason your business will sink.

It’s an Expensive Mess

Delivery fleets are now on the front line of customer service and satisfaction.

But that’s not the problem. The problem is the way businesses are managing this very expensive cost center.

In a manual route planning environment, fleet operators rely on the subjective judgment of a route planner rather than on the hard data that will deliver actual route efficiency.

Without such data, an increase in orders and deliveries triggers hasty requests for new equipment.

When that happens, trucks are just the first cost domino to fall. More trucks mean more drivers. Which means you may have to offer higher wages to attract and retain the drivers you (think you) need.

You also need a bigger yard, more staff to administer payroll, maintenance, and on and on.

In our experience, across hundreds of private fleet evaluations, inefficient routing can inflate total fleet costs by 10%–30%.

According to the National Private Truck Council, the fully burdened cost of a truck mile is $2.80. For a 30-vehicle private delivery fleet, where each vehicle drives 50,000 miles a year, a 20% efficiency loss means $840,000 in lost profit annually.

If money were no object, your business could just spend the problem away. Few businesses can afford that.

Accepting a degree of built-in slack to keep up with higher delivery demands is taking a heavy financial toll.

It’s time to act.

“Before, we routed loads manually, and each of our warehouses routed and managed their own trucks to a small area. This process resulted in a lot of deadhead miles. The automated route planning system has allowed us to speed up deliveries (even with our product growth), use trucks more efficiently, and fill deadhead miles resulting in an annual six-figure saving since we started using the system.”

Bonnie Montgomery, ERP and Data Support Specialist, AgReliant Genetics LLC

Dispatch Operations Rely on OldSchool Methods

GPS tracking, sophisticated telematics, artificial intelligence…

Never before have transportation managers had such a range of technological innovations to help them move goods in the fastest, most efficient manner.

Still, for one of the fundamental requirements of efficient transportation—truck routing—the planning process across many businesses remains stuck in the past.

That means manual route plans developed with pen and paper or Excel spreadsheets. These plans are time-consuming to produce, utterly subjective, and woefully inefficient. They’re also why costs are going through the roof.

So what does manual route planning look like?

Well, at small-to-medium-sized businesses, it means a route planner (or sometimes more than one) gathers customers’ paper orders, arranges delivery stops from first to last after eyeballing a map, and hands over stacks of orders to drivers to deliver in sequence.

Some slightly more sophisticated operations may use home-grown spreadsheets that perform automated checks on factors such as whether all orders can fit on the truck or whether drivers can finish the route before Hours of Service limits kick in.

But these spreadsheets are still rudimentary planning tools whose effectiveness is almost entirely dependent on the skills of the individuals who created them—and the diligence of those who update them.

Manual planning also means your routing operation is losing valuable information. A driver or route planner might know, anecdotally, that it takes 45 minutes to deliver to a particular customer because that location is always slow, but if that knowledge hasn’t been documented and entered into a reliable data system, the information is close to useless.

It’s crucial to extract that data out of people’s minds so that it’s held in the system to form a baseline set of data your business can use to measure progress.

“We had too much manpower to accomplish what we needed to do.

Using basic tools like Microsoft Streets, it took literally a team in every city we deliver to. We were growing rapidly and knew we had to look for a better solution.”

Greg Matheis, Logistics Manager, Green Bean Delivery

A Human Is Not a Computer

However agile your primary route planner is, you are effectively asking a human brain to do the work of a fairly powerful computer.

Even if a human could mentally swap around delivery times and routes and drivers and trucks, it’s impossible to think three, four, or more steps in advance. Particularly when there are so many factors involved.

Even with only one distribution center (DC) delivering to a hundred customers with ten trucks, you’re already looking at thousands of permutations.

And that assumes you have one standard-sized product to deliver.

When you add in:

› Multiple distribution points

› Multi-tripping/multi dispatch

› Different vehicle types

› Multi-temperature capacity

› Driver skills

› Shift patterns and Hours of Service restrictions

› Time windows

› Driver availability

› Stop duration/service time

› Changes in delivery volumes during peak periods

› Suitability of vehicles for delivery locations

› Customer service levels

› New customers

…the complexity, even for a relatively small business, becomes almost unimaginable.

That’s why route planners who are trying to keep all the variables in their heads become swamped. To eliminate the risk of missed deliveries, they play it safe and add extra resources and equipment— just in case.

“When it came to adopting route planning software, cost savings was our singular objective. With our corporate team, we work with location managers to create engineered ‘master’ routes on a periodic basis given customer changes and volumes changes. Our operating locations have been provided with a daily routing tool. As a result, they can make fact-based decisions, rather than only using their individual market knowledge while looking at a green screen with a list of orders.”

Brad Adams, VP/Logistics, Dairy Farmers of America

The Good News Is, You Can Save a Bundle

The solution to the inefficiency of manual routing is route optimization software.

From route options to historic traffic conditions to actual unloading times by location, the software enables fast analysis of the many variables that impact route efficiency.

Result: better routes planned in minutes, not hours.

The ROI timeframes on this technology will vary and are shortest for businesses with larger fleets. Typically, businesses moving from a manual to an optimized routing environment can reduce fleet costs 10%-30%, and see payback within 12 months—some as fast as three months.

Hard and measurable benefits:

› Optimize use of all resources, including planners, drivers, tractors, trailers and straight trucks

› Reduce fuel costs

› Reduce planning time

› Take on more work without increasing the number of drivers

› Adhere to KPIs with more predictable delivery times

› Eliminate fines associated with non-compliance with Hours of Service rules for drivers, now measured with mandatory Electronic Logging Devices (ELDs)

› Reduce inbound calls to the customer services team

› Push back order cut off time times to allow customers to place their requests later in the day

› Achieve more predictable routing schedules, providing drivers with consistent finish times and customers with more accurate ETAs

› Create picklists that the warehouse can use to load the truck in sequence to reduce unloading time at customer locations

Less quantifiable, soft benefits:

› Smooth workloads across schedules through enhanced day-ofdelivery allocation

› Provide drivers with realistic and achievable workloads

› Provide convenient and accurate delivery windows

› Inform locations of delivery time windows

› Improve strategic planning by modeling what-if scenarios

› Increase satisfaction among customers, who now trust your delivery schedules

› Improve visibility and KPI reporting

› Reduce reliability on a single planner by automating the planning process

› Improve visibility of the cost to serve each customer

› Reduce paperwork and eliminate human error

Planting the Seeds of

Savings

Houston-area Weatherford Farms uses seven company-owned trucks to deliver plants within a 150-mile radius. For many years, route planning for deliveries was performed by a single, veteran driver taking more than three hours to plan those routes. By automating the route planning process, the company performs daily route planning in 30 minutes or less. The result is a much more efficient routing process, helping the business provide better customer service, maximizing vehicle utilization and reducing transportation costs.

Less Miles, More Cleaning

Hagopian Cleaning Services in Michigan is America’s 2nd largest cleaner and restorer of carpet and upholstery. The company uses 27 vans to service 40,000 homes a year, with an average of 200 work orders a day. Business was growing, but the company knew its manual route planning approach meant its fleet and work teams were far less efficient than they could be. After deploying routing and scheduling software, Hagopian has seen a 10% reduction in fleet miles, a $7,500 annual fuel cost reduction and hundreds of thousands of dollars saved, cumulatively, in salary and benefits.

Streamlining Specialist

Food Delivery

Chicago-based V&V Supremo uses ten trucks to make 400 deliveries of Mexican dairy, meat and corn products every week in the Chicago area, as well as to retail customers throughout the US. Since implementing Aptean Routing & Scheduling Paragon Edition, V&V Supremo has fulfilled more orders with fewer trucks. An immediate benefit was being able to combine Monday and Tuesday deliveries into a single day while maintaining customer satisfaction. V&V Supremo also uses Aptean’s software for decision support, modeling what-if scenarios to help plan a profitable future.

Catering to Tight Time Windows

Marigolds & Onions, one of the principal catering companies in the Toronto area, typically has a 15-minute time window to deliver catered food and drinks to clients. A five-minute delay means a failed delivery. Growth in demand and customer expectations meant a manual planning process was no longer suitable to ensure the company always delivered on time. Using routing and scheduling software, the company has increased the number of deliveries completed on each route, resulting in fuel reductions of 7-9%. It has also reduced the use of thirdparty couriers by 50% and cut delivery labor by 20%, saving over $15,000 per month.

The Power of “What If…”

Beyond the day-to-day efficiencies gained from automated planning, routing and scheduling software also lets you calculate the cost and service implications of business changes—before you make them. This is an advantage that can’t be ignored.

Let’s say you’re considering the addition of a new distribution center. Route optimization software lets you quickly and easily determine what the knock-on effects would be over time.

Instead of having to carry out trials, collect data and potentially incur additional costs, you can work it all out without spending a dime. It’s simply a matter of plugging new variables into your existing route data and running the planning algorithm.

One of the significant advantages of implementing this technology is that the software becomes a powerful tool in making broader business decisions.

Imagine being able to ask any number of “what if” questions to determine the actual bottom-line costs of specific strategies.

What if you shifted the delivery schedule of an important customer?

What if you began using larger trailers? What if you established a minimum order quantity for delivery?

The benefits of route optimization software go well beyond shaving time off a delivery route. The technology can drive six- and sevenfigure savings, empowering your transportation team members.

“When we go into a district and propose a change, we now have calculations that can tell us how much we save in fuel, manpower, trucks, and we can attach a cost to that.”

Christie Thornton, Fleet Coordinator, Pizza Wholesale of Lexington, Inc.

If the Advantages Are Clear, What’s the Hold-Up?

Despite the advantages to implementing a route optimization software system, change is change.

Resistance is not uncommon, particularly among transportation team members who don’t see the current dispatch process as “broken.”

If delivery operations are already running in a state of barely manageable over-drive, the idea of pausing to research and install a new software system that will change the way things are done can be daunting.

And beyond that, transportation managers confronted with a proposal to adopt routing and scheduling software may feel their jobs are threatened.

Selling the investment to your teammates and superiors can also be challenging. If the dedicated fleet department is already seen as an escalating cost center, investing more money can be a hard sell, despite the attractive ROI.

But the truth is, optimizing routing and scheduling processes presents an opportunity for the company. For everyone in the company. For all-around stronger results.

In our experience, the primary barrier is inertia. There’s comfort in “the way we’ve always done it”—particularly when orders are being processed and deliveries are being made without major glitches or irate customer phone calls.

One of the challenges is in clearly identifying the problem in the first place. Delivery route plans that are inefficient or otherwise problematic don’t announce themselves with alarm bells and flashing neon lights. They are typically an invisible component of a busy operating environment where things seem to be going pretty well.

The First Step to Finding Your Hidden Profits: Take a Test Run

Perhaps the most compelling argument for adopting route optimization technology can be found when you get a clear sense of what it would actually do for your company.

If you’re serious about assessing the health of your private fleet operations, take the first step. Call an expert. Call Aptean.

We’ll gladly take sample delivery data from your company’s existing operations and demonstrate what could happen if you automated route planning and scheduling. We can use our software to model what optimized routes would look like in real life.

The exercise not only uncovers potential savings but also pinpoints the primary drivers of inefficiency, as well as clearly showing the outcomes of a new approach.

The world is changing fast, and the bar for service has been raised. Your delivery fleet must now meet ever-increasing expectations for faster, precisely timed deliveries—and do it without breaking the bank.

The technology and know-how exist to help you get the most out of every fleet-mile you run. Automated routing is a proven, beneficial technology that can help mine the savings potential hidden in your private fleet—your company’s last, great, untapped profit center.