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Is Routing Optimization Software Worth the Money?

Chances are, rising transport costs are causing you concern. Increased customer demands, including more frequent deliveries made to tighter time windows and a need to more accurately communicate ETAs all add to increasing costs to serve customers. Then there’s the unpredictable price of fuel, and a driver shortage that’s pushing up driver compensation rates.

Specialized technology, including route optimization software, can help you better control and tame those rising costs, but there’s always time and money involved in implementing any new system. It’s fair to ask: is installing a routing optimization software system going to be worth the cost and hassle?

In our opinion, based on experience across 3,400 routing software installations, our customers would answer with an emphatic “yes,” and here’s why.

The big-picture view is that transportation operations that move from manual or unsophisticated planning to advanced routing optimization software can reduce transport costs by 10–30 percent. Whether your annual fleet operating costs are $1 million or $25 million, that’s quite a saving. In our experience, ROI on routing software is realized within 3 to 12 months. Further, the savings you gain are not “one-and-done.” Routing software is the gift that keeps on giving.

Let’s break it down and show you some of the ways those savings show up in your transport operations’ bottom line.

Lower fuel costs

Delivery schedules created by routing optimization software typically result in reduced miles and time driven to complete deliveries, and therefore less fuel consumed, plain and simple.

For instance, Paragon’s route optimization software always factors in parameters such as specified delivery windows, vehicle size restrictions, loading times and a driver’s available hours of service (HoS). Once all this data has been entered into your routing software, sophisticated algorithms produce super-efficient plans that take into account all your operational constraints while ensuring the most cost-effective routes for every driver, every day.

Increased productivity

Advanced routing optimization software automatically allocates deliveries to the most suitable trucks and the drivers with the right skills and hours of service available under HoS restrictions. This ensures that you are making the absolute best use of your vehicles each day, while maximizing the number of deliveries drivers can complete during their shift. You can do more with less, reducing costs and making it more economical to expand operations, if needed.

Automating your route planning process not only ensures vehicles are fully utilized on the outbound trip, you can also schedule backhauls and pickups of empty containers or packaging on the return leg. This maximizes vehicle utilization and driver productivity on every trip. It also removes the need for additional trips for pickups or expensive third-party costs.

More efficient use of your vehicles and drivers leads to a reduced need to use third-party delivery services and can really slim down those costs, in some cases reducing those to no outside provider costs at all. For example, Marigolds & Onions cut their use of third-party couriers by 50% in the first few months of going live.

If outside carriers are needed, advanced route optimization software can even plan third-party drivers and vehicles needed to complete the day’s transport plan. Flexible configuration settings enable you to prioritize your own fleet before paying for outside vehicles.

Reduced vehicle purchase and maintenance costs

If your fleet is travelling fewer miles and the number of drops per day increases, then it’s highly likely you will need fewer vehicles. Some customers find they can remove vehicles from their fleets, while others simply find that costs for maintenance and replacement vehicles are reduced in line with the reduction in mileage.

US food distributor Frozen Food Express reduced its pickup and delivery truck fleet by 10 percent after implementing Paragon’s routing software.

ROI on routing optimization software can be fast

A business case for investment in routing optimization software will obviously need to include a prediction of how quickly costs can be recovered. Typical ROI results from Paragon customer implementations include:

A better customer experience

While not strictly a transportation cost, customer satisfaction is an important KPI across your organization. More accurate arrival times, backed up by more frequent communication, contributes to increased levels of customer satisfaction, reduced inbound call volumes and higher customer retention rates. These all contribute to the bottom line.

Advanced routing optimization software also offers strategic modelling to aid in making business decisions. “What if” scenarios, such as changing the capacity of your vehicles, implementing different delivery days or adding new customer locations, can all be modeled, before implementation, so you can understand the financial impact of every decision.

The gift that keeps giving

Lastly, routing optimization software allows for a continuous improvement loop, where information gathered from drivers, customers, planners and telematics systems can be fed back into the software to make tomorrow’s route plans even more efficient than today’s.

Overall, it is important to remember all of these savings will continue year on year, so the lifetime boost to the bottom line created by routing software could be enormous. That’s why CFOs and transport managers alike should be confident that buying route optimization software is most definitely worth it.

Want to know more about route optimization software? We’ve put together the ultimate guide including what benefits and ROI you can expect. Read it here: The Ultimate Guide to Route Optimization.

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