Route Optimization and Your Bottom Line
Route Optimization and Your Bottom Line
By Stephan Karczag Vice President - Cheetah Software Systems
Monday October 31, 2005 — 8:00 am ET
The soaring price of fuel is bad news for the entire transportation industry, and with recent prices for crude oil topping $68 a barrel, the days of $3 per gallon fuel appear to be here to stay. So what are the options?
Raising shipping rates is a possibility many are considering. But with competition so tight these days, even a small price increase could cost you your long-term customers. It could also divert new business to your rivals, if they resist the temptation to increase their rates.
A better alternative is automation. Modern route optimization techniques can shave off miles while increasing efficiency and profits.
As a case in point, take "Acme Trucking," a large less-than-truckload carrier headquartered in Pennsylvania and serving the mid-Atlantic area. Under its old dispatching system, Acme struggled to gather pickup and delivery data. Manual tracking techniques relied largely on dispatcher experience. Inevitably, this led to errors in route planning and major inefficiencies, with freight having to be handled multiple times.
Acme realized it needed a faster, more reliable way to gather P&D data and improve its route planning, so its executives decided to automate the entire route planning and forecasting process.
As a result, the miles driven by just one of the company's service centers fell by 6%, while at the same time, the number of stops per day increased by 6%. Eliminating poor route planning, inaccurate data and wrong addresses and directions meant drivers could visit more customers in less time, and at the same time cut fuel consumption considerably.
At that same Acme service center, drivers averaged 6 miles per gallon, so the 6% reduction in fuel purchases at the post-Hurricane Katrina rate of $3 per gallon represented a $4,650 per month saving in fuel costs - almost $56,000 a year.
Fuel aside, fewer miles translate into less wear and tear. Factor in a 6% drop in the maintenance budget and the amount saved soars even higher.
The significance of these savings, of course, is that they drop directly to the bottom line.
But that is just the beginning of the benefits of automated route optimization. In addition to reduced mileage, the service center experienced improved stop productivity - nearly one additional stop per day per driver. Acme does not disclose its revenues, but if you use an industry standard of $110 per bill, with two stops per bill and 15 stops per day per driver, it could mean an extra $50 a day per truck, or a healthy $450,000 in revenue per year - with the same or fewer drivers and equipment.