Route Optimization: Big ROI for Fleet-Based Business Owners
One tactic that helps cut fuel and other transportation costs and is growing in popularity is called route optimization. It’s an approach being employed by the mega-fleets of major national retailers all the way down to HVAC businesses with fleets as small as five or six vehicles. It’s gaining in momentum because of its ability to not only cut costs but also improve customer service at the same time.
Route optimization links the professional experiences of a consulting firm with sophisticated software to improve a company’s routing efficiency while saving on bottom-line costs that include fuel, equipment, maintenance, and labor. The process involves finding a way to travel the fewest miles with the fewest vehicles while still delivering quality service to the customer.
Route optimization routinely reduces fleet expenses by 10 to 25 percent, no matter what the size of the fleet. A smaller fleet might take longer to realize the savings, but the savings will come nonetheless. The return-on-investment of the already reasonably priced consulting service is remarkable. AmeriQuest Transportation Services, a leading provider of fleet management services, has studies that show that, on average, the savings for just one truck in one week in terms of operating costs could be $1,400. For a fleet of 10 vehicles, the ROI can be substantial.
How does the route optimization process work? First, an HVAC company contacts a consultant that provides these services and is then asked to gather information such as driver manifests, customer route listings, equipment lists, etc. Smaller companies typically may devote about eight hours to gathering input for a route optimization analysis, working with a consultant. The average cost of an analysis is $2,000, although it can range from a few hundred to several thousand dollars, according to the size and complexity of the fleet. Other information requested may include:
• Number and types of vehicles
• Driver schedules
• Distance and time traveled
• Number of service calls
• Sequence of service calls
• Peak travel times
• Typical traffic flow in service areas
The next step is handled by the transportation consulting firm, which does a utilization analysis that takes a closer look at how a company assigns work to employees and which specific vehicles are assigned for what tasks. This study is necessary to identify minimum requirements based on current routes to make the best use of assets. At this time, it becomes obvious when a company is retaining assets but not using them to their full potential.
SINGLE FAMILY OR APARTMENT?Sometimes small details can make a difference. Are the service calls being made to single-family homes or to multi-family units or in large, multi-story apartment complexes? Are there a fair number of calls made for emergency service? By studying the flow of vehicles and activity, it becomes clear where there are imbalances. It enables a company to stand back and take a clear look at the facts and figures.
Next, using a robust routing software tool like that used by a fleet services company like AmeriQuest can determine the effectiveness of the current route configurations and identify preferable route plans and asset allocations. It could call for a trimming of the fleet by maximizing trips per vehicle or finding a more efficient route from Point A to Point B or even a change from one type of truck to a lighter, more maneuverable truck. For example, increased maneuverability can translate into reduced driving time. Another change can involve selling one vehicle and replacing it with a leased vehicle when it’s expected to be used less often than others.
This is where the knowledge and experience of the consultant comes in. There are software programs available that can be purchased to plot more efficient routes, but there are no programs that can incorporate the human element, the one that understands that flexibility is key to running an efficient fleet and that each client’s needs are different. Standalone software could never duplicate the real-world experience that seasoned transportation professionals can bring to the table during a process like route optimization.
Route optimization is a complex process with benefits that can include:
• Lower fuel, tire, and equipment costs.
• Decreased nonproductive labor cost.
• Improvement in timely service calls.
• Fewer complaints to handle at the home office.
• Reduction in emissions, contributing to a company’s “green” profile.
If there has been a silver lining to the downturn in the economy, it’s that the slightly slower work schedule enables fleet-based businesses to stand back and take a hard look at how they are dispatching, routing, and manning their trucks. With the need to create efficiencies and cut costs - and the presence of such an obvious solution - it’s no wonder route optimization is growing in popularity among companies of every size. It’s an idea whose time has come.
Publication date: 01/18/2010