There are still ‘ripe’ opportunities to save Logistics costs. And one of these is in delivery route optimisation.
Save Logistics Costs through Delivery Route Optimisation
The ‘smart’ operators out there know this, but I’m constantly amazed at the number of organisations running large delivery transport fleets, that are yet to realise these opportunities.
Common issues with delivery fleets are these:
1. Wrong type of vehicle in terms of capacity and equipment. (Perhaps needs have changed over time?)
2. Wrong number of vehicles in the fleet.
3. Wrong ‘mix’ of vehicle types and sizes in the fleet.
4. Poor management of delivery time windows.
5. Poor shift planning.
6. Lack of understanding of the impact of drop density, order size and delivery frequency on costs.
7. Poor overall fleet utilisation in terms of time and capacity.
Think about your own delivery fleet for a moment. And ask your self these questions?
- What’s the overall capacity utilisation?
- What’s the time utilisation?
- What’s the cost per drop? (delivery)
- What’s the cost per unit?
If you can’t answer these questions easily, the good news is, you probably have some great opportunities for improvement. Perhaps delivery fleet optimisation hasn’t been high on the agenda? It might be time to take a look?
Maybe run some simple analysis on your utilisation and costs. As an example, do you realise that a ‘route trade’ drop cost can be as high as $30? What if you have orders being delivered that have a profit margin of under $30? Scary isn’t it? Feel free to email me or call me with your results and we’ll compare notes.
(Route trade deliveries are ‘high street’ deliveries and often involve small low value orders)
For members of our Supply Chain Leaders Academy, the good news is, that we’ll be covering this topic in detail with a practical exercise at the November school. So you’ll be able to identify and realise these opportunities yourselves.
It’s worth noting, that for any delivery operation involving more than half dozen vehicles, its well worth ‘modelling’ your deliveries in detail to optimise fleet operations. This is really hard to do manually. I know, I’ve tried it! Whilst studying at Cranfield University in the UK, I can well recall the various techniques we tried with maps and bits of string. Even complex spreadsheet models have their limitations.
The issue is the number of variables you have to contend with. This is not an exhaustive list. But things like:
- Customer location (street address)
- Traffic flows and road speeds.
- Vehicle size, capacity, speeds.
- Loading and unloading times per unit.
- Administration time at shift start, end and per drop.
- Customer access restrictions.
- Driver shift patterns.
- Fleet size and vehicle mix.
- Vehicle operating costs.
- Vehicle fixed costs.
The objective is to come up with fixed, or daily routes, that optimise the time and capacity of the fleet, to minimise costs. Whilst of course, meeting all the customer service requirements. Who would want to be a fleet scheduler!
Thankfully there are tools out there to help. These can help you review the operation and set up new routes, or they can even to be used on a daily basis to reschedule routes based on customer demand.
These tools are not new.
They’ve been around for decades.
But their level of sophistication and ease of use continues to improve over time.
They’re generally not that easy to use though and require a fair investment in time to learn and achieve competency, but for any serious fleet operator, these days such tools are an essential requirement.
We’ve used a few such tools over the last 20 years at Logistics Bureau as part of our Supply Chain Consulting toolkit. Some are better than others at certain tasks and are perhaps better for certain countries due to their mapping functionality. This screenshot is from a UK based product, that suited this project.
In Australia for example, we mainly use one of the leading Australian based software packages and maintain a trained and experienced user base to assist our clients with their fleet optimisation needs. In fact we have just upgraded our systems and staff training to the latest versions.
Anyway, back to the point of this post. If you have never seriously looked at your delivery fleet optimisation opportunities. You should! I guarantee that you are ‘leaving money on the table’….
And seriously, do feel free to share some of your fleet operating metrics and we’ll compare notes.
P.S. Feel free to comment below.
Or if you need some help, check out Transport Fleet Management and Design
