Opinion: Optimize Routing and Assets

By Dave Beaudry
Director, Logistics Engineering and Consulting
AmeriQuest Transportation Services

This Opinion piece appears in the Nov. 16 print edition of Transport Topics. Click here to subscribe today.

When large, corporate-owned fleets such as U.S. Foodservice and Wal-Mart Transportation were pressured by their owners to meet environmental sustainability goals even during the current faltering economy, it made the news. But by taking a closer look at how they could pack more cargo on their trucks and design more efficient delivery routes, those two companies found they could cut fuel and emissions while reducing the number of vehicles needed.

There is a name for that process — route optimization — and because of its benefits to the bottom line, it’s gaining popularity not only with mega-fleets such as Wal-Mart’s but also among fleets with as few as five or six vehicles.

The timing may seem odd, but it actually makes sense: When business is booming, fleets usually are forced to react to growth. The current slow economy, on the other hand, offers the opportunity to examine established procedures and processes to find better ways to benefit fleets and customers alike.

Route optimization has gained momentum as its ability to improve efficiency is recognized. At its most basic level, the process involves finding a way to travel the fewest miles with the fewest vehicles while maintaining a high level of customer service. Indeed, route optimization often improves customer service dramatically by demanding more driver accountability.

For those who are aware of the route optimization process but not completely sure how it works, here is a quick overview:

A company’s current operational profile is populated with data collection: driver manifests, customer route listings, equipment lists, driver lists, etc. Ideally, these statistics would show variations daily, weekly and monthly. The information requested might include:

Numbers and types of vehicles.

Driver schedules.

Pickup-and-delivery orders.

Total weight of shipment and cubes.

Number of stops.

Restrictions on delivery windows.

Distance and time traveled.

Sequence of deliveries.

Time spent servicing customers.

After these data have been gathered, the next step is a utilization analysis that takes a closer look at how a company assigns work to drivers and which specific tractors, trailers and trucks are employed each day. This study is necessary to identify minimum requirements based on current routes to make the best use of assets. During this phase of the process, it becomes obvious when a company is paying for assets but not using them to full potential.

From there, the process drills down further to analyze the weekly average of loads, stops, loading and unloading time and miles driven for each truck and driver. In a systematic study of the flow of assets and activity, imbalances become clear: Is one driver working much more than another, or is one truck being driven an excessive number of miles? Getting answers to questions like these is the beauty of route optimization, enabling a company to stand back and get a real-time picture of the facts and figures.

Using a robust routing software tool, your staff or a consultant can determine the effectiveness of current route configurations and identify preferable route plans and asset allocation.

The goal is to lower the cost per mile and have a positive effect on the company’s bottom line. This process may involve tactics such as trimming a fleet by maximizing the loads on fewer vehicles or finding a more efficient route from point A to point B.

Other changes may involve the vehicle choice for certain routes. For example, a client may decide to go with a truck with lighter gross vehicle weight on one route, so with maximum capacity, fuel economy can be improved and miles traveled decreased. There also are benefits from the truck’s increased maneuverability, which in turn may reduce the driver’s travel time. Recommendations like these can produce typical savings of $1,400 on just one vehicle per week. Do the math for a fleet as small as 10 vehicles, and it’s evident that the return on investment for a route optimization study is significant.

Studying data such as the level of gross profit generated by delivering product to customers in some outlying areas may prove it’s more cost-efficient to outsource certain delivery routes to a common carrier. For example, a New York company with only a handful of customers in Ohio might profit by outsourcing those deliveries.

Route optimization is a complex process with benefits that can include but certainly aren’t limited to:

Lower fuel, tire and equipment costs.

Decreased nonproductive labor costs.

Improvements in timely deliveries.

Fewer complaints received by call centers.

The ability to plan profitable backhaul opportunities.

Coping with today’s economy has led to the growth of route optimization among fleets of all sizes, from large carriers with in-house staff to small and medium carriers that might benefit from the help of a consultant. It’s an idea whose time has come.

AmeriQuest Transportation Services, Cherry Hill, N.J., is a provider of comprehensive fleet management services.