Logistics companies and those shipping a lot of items are wise to consider their drivers’ routes. Even if the companies properly manage their warehouses and picking and packing operations, they need to get the goods into the customers’ hands in a timely and cost-effective manner. Otherwise they risk losing customer business and shrinking profit margins, both of which impact the bottom line.
In fact, the largest portion of supply chain costs are typically in last mile delivery. A 2018 survey showed that last mile delivery accounted for 41% of total supply chain costs, versus 13% of costs attributed to warehousing. One way to mitigate this scenario is to use route optimization.
What is route optimization?
Route optimization is a route planning technique that uses artificial intelligence to determine the most efficient routes that fleet operations can take. That includes adding all the waypoints into the mix, to give drivers a route optimization plan, optimizing both time and fuel, while ensuring delivery efficiency. This is often done with a route optimization solution. This type of routing plan can be used with only one driver, or the fleet manager can use it to manage a larger fleet of drivers.
Route planning software can incorporate multiple factors into the route planner, so it’s not just focusing on the shortest route between two locations. This optimization software can adjust for factors like driver availability and schedules, multiple stops, customer expectations, delivery window times, available driver hours, vehicle capacity (both volume and weight), and regulatory issues like how many hours a driver can be on the road at one time. The optimized route plan can also take traffic congestion into account, or the type of roads and turns involved. If the planned route is a little longer in mileage by taking the highway, it might make up for that by using less congested paths that are easier than using surface roads that have stoplights, stop signs, and slower speed limits.
A route optimization tool can scale easily, whereas a manual process is much more difficult for each additional driver or customer stop. Instead, routing optimization software can quickly change to accommodate more waypoints or a driver swap if someone is out sick, or they need specific certifications to complete a delivery.
What are the benefits of routing?
There are many benefits of route optimization, including reducing operational costs for your business. Here’s a look at 10 more:
- Fuel cost: A route optimizer can lower fuel cost, which along with driver wages has been shown to account for almost 60% of the total operational cost per trucking mile. Fuel consumption can decrease using the optimal route by using highway miles instead of surface streets with starts and stops, and finding the most efficient route using an algorithm instead of guessing.
- Revenue per driver: In optimizing delivery routes, driver scheduling can be more tightly controlled based on the planned route and anticipated hours. Lowering fuel and labor costs means increased revenues per driver.
- Driver scheduling: With route optimization technology, the fleet managers can ensure that the proper number of drivers are scheduled, accounting for delivery numbers that don’t exceed government regulations for how long drivers can be behind the wheel.
- Office-based savings: Fleet management that uses a route optimization solution can create efficiencies in the office setting as well. By using a route planning software program instead of manual route planning, the manager can focus on other management issues, cost savings and customer service, rather than spending time poring over and reworking schedules, especially when something changes.
- Maintenance costs: Effective route optimization can save on vehicle maintenance costs. The vehicles are driven fewer hours with less wasted mileage. That results in less wear and tear, in addition to lower fuel costs.
- Safer driving: The route planning software can be configured to use fewer left turns or u-turns, as those turns tend to be more dangerous than driving straight or making right turns. If you have a route plan in advance, the driver can focus on the road and not on making decisions about the next stop or which route to use for the destination. A survey done by AAA Foundation for Traffic Safety showed that about 78% of U.S. drivers admitted to driving recklessly in at least one incidence. It’s not hard to imagine that a professional driver in the vehicle all day, would make even more reckless driving decisions.
- Route monitoring: Fleet management can monitor the delivery business in real time, answering customer questions and managing operations and drivers. The dispatchers can be assured that the drivers are not exceeding speed limits or taking inappropriate breaks, by following the real-time GPS and maps displaying the routes.
- Customer service: With greater on-time delivery rates, customers will gain satisfaction and loyalty to the company. Dispatchers can also share real-time updates with customers when they have a question or when there is a delay.
- Reducing human error: Using a route management service reduces the chances of making errors, as opposed to manual route management, especially if the route is complex or there are a lot of factors to consider. Fleet management can instead spend their time troubleshooting other issues or improving customer experience in other ways.
- Institutional knowledge: No company wants to lose a staff member who has institutional knowledge. But losing a fleet manager or dispatcher who single-handedly handles the delivery operation scheduling is scary. With a route optimization tool, not only does optimized delivery routing reduce the transportation cost and usually provide the shortest route, but the operation doesn’t rest on a single human who may get sick or leave for another company.
How do you optimize a delivery route?
There are several ways to develop an optimized route. It can be through a route solution or a manual one. Using routing software is going to provide the greatest efficiency in planning, and allow the fleet managers to easily change the plan to include any new factors. Some of the factors involved in optimizing routes include:
- Driver availability
- Driver hours available per government regulations
- Vehicle availability
- Vehicle type and capacity in both weight and volume
- Customer expectations
- Delivery windows for product acceptance
Even using delivery management software, the plan can use dynamic routing or standard routing. Dynamic routing uses current conditions like traffic to create an optimal route based on the situation at the time. The routing may change even as the driver is driving. This is different from standard routing which relies more on manual operations for the delivery operation, creating one route and not deviating from it.
What is route optimization in logistics?
In logistics, using an effective route optimization tool can make a huge difference, whether using short-haul or long-haul routes. Those shipping long distance are often maintaining large fleets with different types of vehicles. Trucking continues to have difficulty finding enough drivers. Employee turnover is a big issue, as are overtime costs. Ensuring that the driver is not only happy but following regulations for the hours spent behind the wheel and getting the proper breaks, is imperative.
Routing software helps fleet managers handle these logistics issues. The work can be distributed properly across the fleet and across drivers to ensure the drivers are maintaining a good balance, while also lowering transportation cost and keeping track of the vehicles on the road. Customers already expect real-time updates, which can be provided when using routing software and GPS. The dispatcher can stay on top of any long-haul and last mile delivery problems, alerting the customer and understanding any redirected travel as a result. Whether the delivery operation is making one stop or multiple stops, the carrier can retain visibility. The dispatcher can often get a view with one dynamic map of all vehicle locations, or drill down into the route of one specific truck. This helps if a truck breaks down or needs assistance. A second can be quickly sent to meet them and mitigate any delivery timing problems.
Visibility into invoice errors
While route optimization is one automation tool that helps save shippers money, a parcel and freight invoice audit recovery program can as well. A tool like Shipware’s runs in the background with no client intervention needed. The carrier invoices are reviewed by the AI-assisted program, identifying any potential credits for service failures, billing errors or incorrect address corrections, for example. Shipware clients usually save 1% to 9% of total invoices when using this tool, and there is no up-front cost. All fees are based on a percentage of savings, so there is no payment unless savings are realized.
The clients’ eligible refunds are automatically claimed and directly deposited into the client’s account, with no work by the shipper. How? The Shipware system automatically uploads invoices into the system using a quick and easy connection. The audits occur automatically in the background, with Shipware following up on eligible refund amounts.
Automation, whether using a route optimization tool or an invoice recovery tool, are ways to maximize your staff time while gaining efficiencies in your operations. These tools save shippers and logistics companies much more money than they cost to use. Processes which used to be manual are often better handled through automation. This allows personnel to focus on areas of business that are better suited to human interaction and innovation. Automation can make small tweaks that humans often can’t see, whether for effective route optimization or for finding small errors in invoices. These add up, and improve both the bottom line and the work environment.
To learn more about invoice audit recovery programs with no obligation, contact us online.