Delivery fleet operations eat up a huge chunk of transportation costs, whether you operate your own fleet or outsource delivery functions. In spite of this cost they have a huge role to play in overall customer service.
Yet many fleet operators and transport providers still do delivery route planning the old-fashioned way, using rudimentary tools such as Excel spreadsheets. That makes it very difficult to determine if an operation is harboring inefficiencies that are driving up costs.
This article provides six quick questions that will help you determine if your delivery route planning processes need a technology-aided overhaul.
Transportation Costs Growing Faster Than Revenue
Your transportation department has always been a cost center, but are costs spiraling out of control? In a rudimentary delivery route planning environment, business growth often triggers knee-jerk requests for new vehicles or more people, inflating total fleet costs far faster than business growth. Improving the planning process to reduce the number of planners, trucks, miles and drivers can stop the drain on profits.
Since every business is different, there’s no hard-and-fast guide about how many drivers, trucks or planners you need to fulfill delivery commitments. A food supplier delivering to 300 delis in Chicago first thing in the morning will have very different requirements than a company delivering agricultural products to farms once a month. However, every company can get important indicators of improvements (or declines) by monitoring transport costs over time, and measuring how they’re changing.
Crucial Delivery Efficiency, Performance Information Missing
Performance figures are harder to come by when you’re routing with basic tools, even though monitoring them is critical to your business. Senior executives need detailed, regular reports to assess the operation in terms of performance and costs. Yet even a simple question such as “How many of our deliveries were late last week?” can be hard to answer.
Key metrics to ascertain include:
- Service levels, in the form of percentage of on-time deliveries
- Cost per drop and miles per drop
- Number of drops per driver
You have a right to dig in and ask your transportation department or provider for these answers. Frankly, if you can’t get even the most basic information about your delivery performance, that’s a massive red flag.
Customers, Prospects Pressing for Later Order Cutoffs
If this is happening it could indicate that delivery route planning is taking too long. You may view your current timetable for processing orders/planning routes/picking products/loading trucks as an unchangeable reality of business. But with a more automated approach, it’s something you can and need to change if customers are complaining.
Lengthy delivery route planning cycles can create operational inefficiencies. Worse yet, customers and potential customers might choose to buy from a competitor who offers order cutoff times that are two hours later.
Don’t let the tail wag the dog. A slow route planning process should not dictate your customer service levels.
Drivers Complaining or Leaving
Are you paying for more driver hours because of unplanned delays? Are some complaining that the planner is favoring other drivers? Is emotion or favoritism creeping into the route allocation process? These are just some of the things that can happen when routes are planned with inadequate tools.
With the driver shortage biting ever harder, drivers are being offered higher salaries and large signing bonuses to move. There’s no question you want an operation that gives drivers fair, predictable, workable shifts that keep them happy. If your current operation is undermining this goal, it requires a careful look.
Route Planning in the Hands of 1-2 Staffers
For delivery route planning, many businesses continue to rely on one or two key individuals with vast knowledge of customer needs and the peculiarities of individual delivery destinations. But when they leave all that knowledge leaves walks out the door. This is a huge risk that businesses ignore, often until it’s too late. It might be time to start transferring all that information into an automated system where it can be accessed by everyone.
Impossible to Assess Cost to Serve Customers
Can you get a clear answer to the question: “How much would it cost if we agree to deliver to an existing customer four times a week instead of two?” Or “How much would it cost to take on this piece of new business?”
If you operate without route planning software, you probably can’t get these answers since delivery cost per drop and other “cost to serve” data is either sketchy or nonexistent. When an enthusiastic salesperson says “yes” to a customer request for twice-a-week delivery to a remote location, you need a check that will flag the decision as unprofitable. Not all new business is good business.
If one or more of the above signs are true for your company, it probably makes sense to explore ways to improve the efficiency of your routing and dispatching function. Good routing and scheduling software can take basic data and perform a route planning diagnosis, modeling the savings and performance improvements you could gain.
Advanced route optimization technology doesn’t only cut route planning time from hours to minutes. It also lets you spend time playing out all manner of what-if scenarios. You can use it to dig deep into how delivery operations impact profitability.
Lastly, here’s another question to ask. Most likely, every other operational function in your business is systemized: Accounting, payroll, warehouse management, order management. If your transportation operation isn’t, why not?
Will Salter is CEO of Paragon Software Systems