Efficient Fleet Routing: The Gift That Keeps Giving

Implementing route planning and scheduling software that improves fleet routing operations saves you money, and keeps saving you money.

Most companies focus on the immediate ROI of buying this technology, which is typically within a year and can be as fast as three months. But it’s easy to under-estimate, or even ignore, the value of the softer and less obvious benefits that continue to impact your bottom line over a long period.

The quick-payback, measurable savings from optimizing fleet routing

When calculating ROI on an investment in route planning and scheduling software that optimizes fleet routing, the math will focus on things like:

• Reducing miles, and the related fuel costs and maintenance.
• Taking vehicles off the road, or avoiding new equipment purchases since you are maximizing fleet efficiency.
• Increasing the efficiency of your operations and customer service levels by enabling more drops per driver.
• Reducing time required for planning from hours to minutes.
• Reducing paperwork and eliminating human error in planning.

ROI measures are typically compared against a 3–5 year amortization schedule for paying off the software. But it’s important to understand the lifetime value of the software. The savings related to the points above keep repeating, year after year.

It’s comparable to a home investment to improve overall home insulation. Naturally, you want to see savings in your heating and air-conditioning bill over the first few years that effectively pay off the cost of the work. But you keep getting lower bills long after. Similarly, software that optimizes fleet routing is the gift that keeps giving, with initial savings repeated for many years.

The softer benefits that are real, but less obvious

Route planning and scheduling software delivers many other benefits to fleet routing operations that may not necessarily be factored into an ROI calculation. Here are a few:

• Improved customer service in the form of shorter time-windows or more predictable delivery times. Frozen Food Express, one of the largest temperature-controlled LTL operators in the US, increased on-time delivery by 12% in 6 months after implementation. There’s clearly revenue upside associated with this type of improvement, but often it’s not traced back to the software.
• Push back order cut-off time times to allow orders to be placed later in the day. This is made possible by a faster planning process. Companies can say “yes” to orders (and revenue) that they may have been pushing to the next day.
• Reduction in inbound calls to the customer service team regarding late or missed deliveries. When your orders arrive on schedule as planned, your people spend less time dealing with unhappy customers on the phone and you avoid the inevitable revenue attrition. Forbes magazine reported in 2016 that US businesses lose $62 billion per year through poor customer service, up $20 billion since 2013.
• Happier drivers. Drivers appreciate route plans that are fair and result in predictable finish times that get them home for dinner. With driver turnover rates hovering at around 90% and new drivers harder (and more expensive) to find, holding on to the good drivers you have is critical to your financial health.
• Better visibility to actual performance. Fleet managers, CFOs and CEOs enjoy a much-enhanced ability to monitor and manage essential business KPIs through the more detailed and accurate reporting that fleet route optimization software makes possible.

The strategic benefits of routing software that offer significant, long-term payback

While it may not be what prompted you to buy route planning and scheduling software, the intelligence gleaned from the system can inform major business decisions that could generate six- and seven-figure savings. These strategic business decisions often go well beyond the scope of “fleet management.”

For instance, fleet route optimization allows you to play out the potential consequences of changes to your delivery network before pulling the trigger (and spending the money) to enact them. These include changing the DC from which you serve a customer or region, or trying out ideas about consolidating delivery days in a region.

Route planning and scheduling software can also give dollars-and-cents answers to questions like: “How much will it cost to take on this potential new business?” or “What happens if I build or buy a new warehouse in this location or that location?”

Here’s an example: After using Paragon Software Systems’ software for 15 years, UK supermarket giant, TESCO, used it to conduct an efficiency study to see if they were servicing stores from the right DCs. With Paragon support staff’s help, TESCO rejigged its distribution network to make more sense, driving out more than $2 million in costs.

Route planning and scheduling optimization: consider the lifetime value

Most companies amortize a purchase such as this over 3-5 years. But there is a significant lifetime value to owning the software. You may not be able to whip out a calculator and determine this value now, but it’s very real.

The savings made in the first year of implementing software to improve your fleet routing operations are just the beginning.