Most of us responsible for managing a business P&L are keen to avoid expenditure. We need to see a really strong business case for investment from the teams around us before we move forward. Route planning software is no different.
Maybe you, or your team, have thought about implementing route planning software in the past and rejected the idea because you are pretty sure that most deliveries arrive as planned every day. Or the size of your managed fleet makes you comfortable that one or two employees can take care of planning and dispatching delivery vehicles and drivers without sophisticated algorithms. Or perhaps your delivery routes are comfortably predictable – same routes, same days, same orders, same customers. Or, dare we mention it, uncertainty caused by Brexit or other issues beyond your control might be making you reluctant to invest.
This is short-sighted. If you’re not taking advantage of the benefits of routing software, the chances are you’re throwing money out the window. It’s also likely you could improve your customer service levels, too.
There is virtually no size of fleet or delivery route operation that cannot benefit directly and financially from this technology in multiple ways. Some of the costs of doing nothing are obvious, but some might surprise you.
Here’s a breakdown of where you’re losing out.
Sure, you can save money by not shelling out for software this year, but what if you’re meanwhile spending tens of thousands of GBP more than you need on unnecessary miles driven? It seems a lot but it won’t take long for your operation to reach this staggering amount.
Every mile a 38 tonne artic drives costs an estimated £1.72, according to UK publication Motor Transport. That means that a fleet of 10 vehicles could burn through £1.48m in a year in fuel if they each drive an average of 80,000 miles a year. Imagine if this example fleet reduced excess mileage by just 500 miles per truck per month, that’s a saving of £111,000. Inefficient routing means you’re burning cash you don’t need to spend on fuel, vehicles, drivers, insurance, HR, maintenance… the list is long. Wasted miles are disturbingly common in the transport industry.
Let’s look at a couple of examples of businesses that got their arms around this problem. The UK’s largest used book retailer, World of Books, cut their average January mileage by 27,000 miles by introducing software-calculated routes. Glanbia plc, an international nutritional ingredients and cheese group headquartered in Ireland, saved 16 per cent in delivery costs and got ROI on the software within six months of implementation.
Here’s another place you’re most likely losing money — drivers. Drivers are in short supply right now. Earlier this year, the RHA estimated a shortage of more than 55,000 drivers in the UK alone.
Option One: Keep paying out “signing up” bonuses and offering higher salaries, to attract scarce drivers. Then bear the costs of replacing them a few months later because you can’t give them predictable home times or schedules. While you’re at it, why don’t you continue paying for drivers to idle for two hours to avoid a second trip on their shift because it’s easier than comparing your planned versus actual routes? Option Two: Invest in routing software, once, and make all these issues go away, all while using (and paying) exactly the number of drivers you actually need.
Here’s another advantage. When the allocation of drivers to vehicles and routes is in the hands of a computer – not a person – nobody gets to choose favorites. Advanced routing software incorporates drivers’ actual availability, including holiday schedules and home-time preferences, and even preferred break times or lunch stops. All this adds up to happier drivers who perform well and stick around.
According to the Harvard Business Review (HBR), acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. On the other hand, HBR quotes research that shows increasing customer retention rates by 5% increases profits by 25% to 95%. Which side of that equation do you want to find yourself?
Of course, everyone wants to keep customers happy. But customers across the board are increasingly demanding more regular deliveries made to tighter time windows. Striving to stay on the ball all day, every day, brings the risk of inflating the cost to serve them beyond the point of profit. Further, missed or late deliveries can cost you dearly – not least in lost repeat business. If your orders are not arriving on schedule, you’re almost certainly wasting money paying customer service staff to repeatedly answer the same question – where is my order – and potentially paying drivers to make second attempts at delivery.
By producing efficient, accurate plans that are achievable in the real world, delivery route planning software keeps costs down and on-time deliveries up. Frozen Food Express, one of the largest temperature-controlled Less than Load (LTL) operators in the US, increased on-time delivery by 12 per cent in six months after implementing route planning software.
Okay, it’s not like you’re sitting on your hands when it comes to trimming the fat from your delivery operations. But how do you know where to cut and what knock-on consequences it might have? If you make changes without careful prior research, you’re likely to wait months to see if they work, only to find they have cost you money and not yielded the results you hoped for. It makes a lot more financial sense to buy routing software and use it, not just operationally, but strategically to model changes and see the implications before spending a penny.
Route planning software allows you to answer unlimited what-if questions about making strategic or tactical changes before committing a single penny to changing anything.
What if you changed your delivery routes? What if you changed the size or type of delivery vehicle in your fleet? What if you moved your order cut-off times? What if you moved your distribution centre(s), or opened a new one?
Food distributor Blakemore Logistics and leading bakery food-on-the-go retailer Greggs have both used Paragon’s route planning software strategically to great effect. Greggs removed 900 miles a week from their Scottish operation, while Blakemore Logistics uses the tool to model the impact of a wide range of potential business changes, for example changing the size of vehicles, or which SPAR stores should be served from each distribution centre factoring in associated costs, environmental impact and delivery performance.
It’s pretty standard to think of your transport department simply as a cost centre, and it’s all too easy to let those costs spiral out of control. In a rudimentary route-planning environment, business growth often triggers knee-jerk requests for new vehicles or more people, inflating total fleet costs far faster than the new business warrants. Even without growth, the bill can creep up, as inefficiencies persist and swell.
Working on a 3 year business plan? Why not spend now and cut your costs sooner rather than later? Implementing advanced delivery route planning software can reduce fleet operations costs by 10 to 20 per cent, and stop you losing cash right now by getting escalating costs firmly and permanently under control.
Now that you know the cost of doing nothing, why would you continue losing out?
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