Routing and Scheduling Software: Where the Savings Come From
October 15, 2020
Implementing advanced routing and scheduling software can save you 10-30% in delivery transportation costs but where do those savings actually come from?
Here’s a breakdown of the main places you’ll trim costs.
Optimize use of all resources including drivers, vehicles and fuel
Routing and scheduling software uses computer algorithms to work out how to complete the maximum number of deliveries, on time, using the minimum time and miles driven. This route optimization process typically reduces fleet operating costs by 10-30%. Areas for savings include:
- Reduced driver-hours. Suppose you have 50 drivers working the maximum 70 hours allowed under hours-of-service (HoS) restrictions, per week — each earning an average of $19.85 per hour — that’s nearly $60,000 in overhead each week. Even with a modest reduction in driver hours of 10%, you could be saving more than $350,000 per year. Alternatively, you can take on more work without increasing the number of drivers.
- Fewer trucks. The average new Class 8 truck was sold at a price of about $117,430 in 2018 according to Statista.com. So, how much does it cost to put a new delivery truck on the road? Just one new tractor/trailer combo, which will run for an estimated five years, can cost about $160,000. If you can reduce a 50-truck fleet by 20%, you’re looking at savings of $1.6 million over that period.
- Reduced maintenance and fuel costs. These costs go down as the number of trucks and miles needed for completing deliveries decreases. The American Transportation Research Institute (ATRI) calculates the average cost of a truck mile at $1.82. If you know your annual fleet miles, a simple calculation will show you how much you’ll save if you trim 10% or more from your current miles driven.
Other places you’ll save
Some of the benefits of routing and scheduling software that go straight to the bottom line may not seem obvious. Here are a few:
- Improve driver retention. Truck drivers are increasingly being persuaded to switch firms, and the average cost of hiring a new driver is $8,200, according to TheTruckersReport.com. Drivers often leave because of what they perceive as unfair route allocations that strand them far from home at the end of a shift or leave them stuck at an overcrowded delivery site earning nothing. When you generate routes using routing and scheduling software algorithms, you can be sure that route allocation is fair, achievable and unbiased. The software also automatically takes into account drivers’ vacation, medical appointments and even their preferences regarding where they end a shift. All of this makes drivers feel valued, happier and less likely to leave.
- Avoid fines. Routing and scheduling software aids in compliance with hours-of-service rules for drivers. These are now measured with mandatory electronic logging devices (ELDs) and strictly enforced. The average fine for violating the daily driving limit is $7,322, and exceeding the weekly limit is typically $4,787 according to KeepTruckin.com. These costs should be eliminated with reliably accurate route plans that keep drivers within their HoS limits.
- Reduce planning costs. Route planning done without routing and scheduling software takes a lot longer. The difference is typically hours compared to minutes using this technology. The software also offers the opportunity to centralize route planning, instead of spreading it out across multiple distribution centers.
One large home improvement retailer was using part-time route planners to dispatch trucks in each of its 80 stores. After the company automated and centralized planning, only two people were needed to complete all route planning work across the network. The average route planner earns an annual salary of $44,877 according to Glassdoor.com. Once software is taking care of crunching myriad route possibilities, many of our customers redeploy planners to do what humans do best — solve problems and look for strategic improvements, generating other savings.
- Reduce incoming customer service inquiries. With routing and scheduling software improving your on-time delivery performance, you’ll be handling fewer incoming customer service queries than you currently do. A typical “where’s-my-stuff?” call to customer service costs $7–$13 per interaction. Add in the ability to proactively send customers ETA messages via email or SMS, or even allow customers to track a driver in real time via an electronic proof of delivery system, and you can expect to see customer service queries drop by 50% or more. These savings go straight to the bottom line. There are clear financial benefits to improving customer service, not least that acquiring a new customer can cost five times more than retaining an existing customer. Increasing customer retention by 5% can increase profits from 25-95% according to OutboundEngine.com.
The benefits go on
We like to say that routing and scheduling software is the gift that keeps giving. The system gathers and utilizes detailed data about your delivery operations and performance, generating a positive and continuous feedback loop that leads to never-ending improvements in efficiency. The data also boosts the ability for businesses to make better strategic decisions by asking what-if questions, for example about whether to take on a new customer, or open or close a distribution center.
These and more invisible benefits will add even more to the bottom-line results in a way that transforms delivery from a pure cost center into an engine of business excellence. And savings.
For more information about how you can save 10-30% of your transportation costs, contact a Paragon from Aptean team member today.