Logistics: Optimizing the route to market
June 15, 2008
For some beverage distributors, navigating the streets to make deliveries is an art, especially for drivers who have worked routes for years and know their territories inside and out. But with today’s high fuel costs, optimizing routes can require a bit of science as well. Routing solutions providers can help determine everything from which products should go on which trucks to the most efficient way to get from account to account, and even monitor driving habits to encourage fuel efficiency.
“The ongoing challenge for wholesale distributors is to boost sales and reduce costs,” says Michael Brown, marketing director at bMobile Technology, Boise, Idaho. “As fuel costs continue to rise like a helium balloon, their impact on overall delivery costs is more significant. This paradigm has escalated the importance of controlling delivery costs.”
Parts of the beverage industry have been slower to transition to routing technology, says Dan Buttarazzi, director of marketing for MicroAnalytics, Arlington, Va. But interest has been at an all-time high this year due to higher operating costs across the board. “As costs go up, the need to run more efficient routes is there,” he says.
“We’re seeing across sectors, including consumer goods delivery, an increased or renewed focus on the vehicle itself, on making sure that vehicle is being used efficiently, making sure it’s being driven efficiently, making sure it’s not being abused in any way,” adds Jeff Sibio, director of industry marketing, transportation and logistics at Intermec, Everett, Wash. “When you look at what your most expensive assets and resources are in any kind of delivery operation, it’s generally your labor force and your vehicle. So when you can start optimizing the use of that resource and optimizing the use of that asset, it’s very impactful to your bottom line.”
To tackle those issues, bMobile plans to add a new RouteMizer route optimization package to its Route Manager version 8.0 later this year. In addition to reducing fuel costs, RouteMizer is designed to minimize the number of miles driven; optimize loads by weight or unit to consolidate deliveries; distribute driver work loads by time, number of stops and miles driven; synchronize route schedules with customer needs and time constraints; and create routes based on optimum traffic flow and changing traffic conditions.
“Reducing route mileage and thus fuel consumption is the initial reason most distributors seek optimization technology,” Brown says. “In reality, many optimization systems deliver a host of benefits far beyond the basic shortest-distance mapping service.”
The ability to integrate all of those factors creates greater efficiency across the entire distribution process, Intermec’s Sibio says. His company partners with software providers in a number of specialty areas to create handheld solutions that can incorporate everything from GPS navigation to in-store merchandising.
“When you think about doing beverage delivery, or any kind of delivery to stores or to distribution centers, there’s really a lot of nuances about time â€” when I can get in there, when I can’t get in there, when they accept deliveries â€” all of these different nuances that very dynamically change the way the route is optimized,” Sibio says. “That’s why these applications are gaining a lot of interest in the industry â€” because they can take all these different nuances and start putting together a more complete picture of what the driver should be doing.”
One of Intermec’s partners that provides GPS navigation is ALK Technologies, Princeton, N.J., with its Co-Pilot application. According to Sibio, ALK has reported a 5 to 15 percent increase in productivity and efficiency from fleets that incorporate turn-by-turn navigation. Intermec then has the ability to add that kind of navigation to a handheld like its CN3 mobile computer, which also incorporates sales and merchandising communication. The Windows Mobile 5.0-based computer has standard WiFi, Bluetooth, WWAN voice and data service, as well as network-independent GPS receiver. The system allows distributors to implement GPS navigation into the same computer they use for tracking and reporting sales in the store.
Truly optimized routing begins long before a driver gets in the truck, says Larry Beutel, principal advisor at Salient Corp., Horseheads, N.Y. He recommends distributors take a close look at their accounts, how they are being serviced and whether or not that matches up with how often they actually require service.
“One of the aspects is, ‘When I stop my truck, is it a worthwhile stop? Am I delivering enough quantity of product? Am I generating enough revenue to offset the cost of making that stop?’” he says.
Products such as Salient’s MarginMinder, which typically are thought of as sales and merchandising solutions, can assist with route optimization by determining whether or not it is advantageous to service certain accounts at particular times.
“We allow people to see the statistics of that in a variety of different ways so they can determine whether they are stopping too often at a particular stop, which would be identified by a low-quantity, low-revenue, low-margin stop, Beutel says. “And then that initiates a lot of ideas on what you need to do to fix that.”
In addition, that type of solution can be used to increase efficiency in truck loading and avoid what Beutel calls the “taxi factor.” “You load a case of soft drinks or beer onto a truck and if it comes back, all it’s done is been driven around all day. That’s a waste of space on the truck,” he says, pointing out that such a scenario lowers productivity and increases the weight of the truck, thus reducing fuel efficiency.
Cyndi Brandt, marketing manager at UPS Logistics Technologies, Towson, Md., says that kind of in-depth examination of customers and their real vs. assumed delivery needs is leading many distribution companies to consider dynamic routing, or in some cases, a combination of dynamic and standard routing. Standard routing places each customer on a specific route. A dynamic routing solution allows the company to put all of the day’s orders into the system and come up with the most efficient delivery routes based on that day’s orders, even if it means a different truck will service the account on a certain day.
“With beverages, it’s pretty much static â€” they’re pretty much going there all the time,” Brandt says. “But with some folks, we’ve seen them move to a more dynamic premise in that they’re starting to say, ‘My A customers are really important; I’m going to make sure they’re on a [standard] route. But my B and C customers, I’m going to route them dynamically.”
In addition, many companies are reconsidering how often they need to deliver to certain customers. A low-volume customer, for example, may be served just as well with deliveries two days a week as they were with three.
“If you can reduce the mileage and reduce the amount of time people are on the road, we can make a significant impact on the bottom line,” Brant says.
UPS Logistics’ Territory Planner is able to examine a company’s historical sales data, and then build optimized standard routes, based on the company’s parameters. Its Roadnet tool can then be used to create dynamic routes.
“If you have 10 stops and only seven people ordered, you don’t want to send a driver out with a 10-stop route. You want to send them with a seven-stop route,” Brandt says. “If you deliver beer to a catering company and they have an event this weekend and they order four times what they normally order, that whole route could be out of sync. This is an automated tool that lets you balance the case count or workload between stops and routes.”
MicroAnalytics’ TruckStops Routing and Scheduling Software also is designed to create optimized routes based on sales parameters. It is intended for companies running five or more trucks and can handle both static and dynamic routing. The software can be linked to Microsoft MapPoint and PCMiler to provide turn-by-turn directions, and it can export optimized routes to GPS systems.
“The ultimate goal is to cut down on the number of miles each truck is going to be doing, along with trying to avoid any overtime that you’re going to have to put in for a driver,” Buttarazzi says. He adds that, depending on the operation, the software may find ways to combine deliveries on fewer trucks, allowing the distribution company to run fewer trucks overall.
“Obviously, you’re cutting down on miles and saving on fuel and overtime and making the customer happy because you’re making time windows,” he says. “But one of the hidden benefits that we don’t stress enough is the effect on the environment. You took a truck out of circulation, you’re running more efficient routes, you’re putting less pollutants in the air, and believe it or not, that does weigh on peoples’ decisions. Everyone is looking at ways to become a little bit greener, and running more efficient routes is one way of doing that.”
While not a routing application per se, MicroAnalytics also offers OptiSite Distribution Planning Software that can be used to help companies determine the best locations for new distribution facilities based on customer location and delivery routes. By the same token, if a company is looking to consolidate operations, the system can determine which existing warehouses may be able to absorb extra routes if a facility is taken off line.
A watchful eye
In these days of high oil prices, bad driving habits that seem relatively harmless can prove costly at the gas pump. Reducing the amount of time spent idling in traffic or at delivery stops, or avoiding hard braking can improve fuel mileage, and distribution companies are investing in technology that allows them to see where those improvements can be made.
“We’re seeing a very noticeable uptick in the interest level around vehicle telematics,” says Intermec’s Sibio. “We’ve got a lot of partners that are doing in-cab boxes for telematic data collection … What they do is they provide solutions that collect information about the truck itself and help you run a more efficient fleet.”
“Companies are looking at ways of tracking their trucks online to make sure that they’re staying on the routes that were planned for them,” says MicroAnalytics’ Buttarazzi. “They’ll plan their route using TruckStops and then with the GPS capabilities of today, they can track those trucks, making sure those drivers are staying on their routes and meeting the time windows associated with it.”
UPS Logistics’ Brandt says her company also is seeing increased interest in wireless dispatch and tracking. “We always say the plan is only as good as the execution,” she says. Product such as UPS’ Mobile Cast can be used to monitor that execution, tracking a truck’s movement while it is making deliveries.
While the practice might sound Big Brother-ish, experts say the information can be used to create corporate goals and reward employees for good practices.
“A lot of fleets will set goals for fuel economy and goals for idle reduction,” Sibio says. “What they’ll do is say, ‘If you get your fuel economy above this average, we’re going to give you a bonus or a day off … It’s about, ‘How can we work together as a company, an employee and an operator of equipment, to act more efficiently, and how does that benefit both of us.’”
Route optimization technology can save distributors money in fuel, labor and maintenance â€” and according to suppliers, it can pay for itself quickly. “In general terms, we’re talking about return on investment models that completely reimburse the company for the initial investment in terms of months, not years,” says Jeff Sibio, director of industry marketing, transportation and logistics, at Everett, Wash.-based Intermec. Here are some tips for picking the technology that’s right for your company:
1. Size matters. “You want to make sure you get a commercial [GPS] system that is prepared to handle truck routes,” Sibio says. “If the device is an off-the-shelf consumer model and you try to use it in a vehicle that’s a little bit taller, a little bit wider â€” a commercial vehicle â€” the likelihood is that it’s going to put you in a very precarious position pretty quickly … What happens is they’ll put you in places that are restricted from trucks.” A truck-specific model will keep drivers off restricted roads and prevent them from getting stuck in difficult-to-maneuver areas.
2. Is it user-friendly? When choosing technology, keep in mind the employees that will be using the system on a daily basis. How easy will it be for them to get the system up and running, and how easy will it be to operate?
3. Is it customer-friendly? Retailers often have strict time windows for delivery. If a routing system cannot account for those restrictions, it will be far less valuable for retail delivery. “If you’re delivering to a convenience store and they can only accept you between 8 and 10 in the morning, that’s a pretty big factor that’s being overlooked,” says Dan Buttarazzi, director of marketing for MicroAnalytics, Arlington, Va.
4. Compatibility. Routing technology also should be compatible with your company’s database systems, Buttarazzi says.
5. Industry knowledge. Does the company you’re buying from know the beverage industry? Cyndi Brandt, marketing manager at UPS Logistics Technologies, Towson, Md., says people who know the nuances of beverage distribution will be better able to install the appropriate system and have better customer support.