Deciding Against Investing in Route Planning Software is Costing You Money

Maybe you’ve thought about implementing route planning software and rejected the idea. Or the size of your managed fleet makes you comfortable that one or two workers can take care of planning and dispatching delivery vehicles and drivers without sophisticated algorithms. Or perhaps your delivery routes are comfortably predictable – same routes, same days, same orders, same customers. Or, heck, you just don’t have the money right now – the budget got eaten up by new equipment or hires.

This is tunnel vision. If you’re not taking advantage of the benefits of routing software, the chances are you’re throwing money out the window. You’re probably giving your customers sub-par service, too.

There is virtually no size of fleet or delivery route operation that cannot benefit directly and financially from this technology in multiple ways. Some of the costs of doing nothing are obvious, but some might surprise you.

Here’s a breakdown of where you’re losing out.

Burning cash, year after year

Sure, you can save money by not shelling out for software this year, but what if you’re meanwhile spending $40k more than you need on unnecessary truck miles driven? It seems a lot but it won’t take long for your operation to reach this staggering amount.

Every mile a truck drives costs an estimated $2.72, according to the NPTC. That means you could burn through $40K in a year just from having all of your trucks together drive as little as 300 unnecessary miles per week. Inefficient routing means you’re burning cash you don’t need to spend on fuel, vehicles, drivers, insurance, HR, maintenance… the list is long. Wasted miles are disturbingly common in the transportation industry. Frankly, America needs to go on a truck-mile diet.

So how much can you save? Take a couple of examples of businesses that got their arms around this problem. Big pharma firm AAH Pharmaceuticals gained a transportation cost reduction of over $1 million per year by introducing software-calculated routes at three of its largest DCs. Glanbia plc, an international nutritional ingredients and cheese group headquartered in Ireland, saved 16 percent in delivery costs and got ROI on the software within six months of implementation.

Driver utilization and retention

Here’s another place you’re most likely losing money — drivers. Drivers are in short supply right now. And in the US, there’s a near-100 percent annual turnover.

Option One: Keep paying out welcome bonuses and offering higher salaries, to attract scarce drivers. Then bear the costs of replacing them only months later because you can’t give them predictable home times or schedules. While you’re at it, why don’t you continue paying for drivers to idle for two hours to avoid a second trip on their shift because it’s easier than comparing your planned versus actual routes? Option Two: Invest in routing software, once, and make all these issues go away, all while using (and paying) exactly the number of drivers you actually need.

Here’s another advantage. When the allocation of drivers to vehicles and routes is in the hands of a computer – not a person – nobody gets to play favorites. Advanced routing software incorporates drivers’ actual availability, including vacation schedules and home-time preferences, and even preferred break times or lunch stops. All this adds up to happier drivers who perform well and stick around.

Customer service – missed or late deliveries

According to the Harvard Business Review (HBR), acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. On the other hand, HBR quotes research that shows increasing customer retention rates by 5% increases profits by 25% to 95%. Which side of that equation do you want to find yourself?

Of course, everyone wants to keep customers happy. But customers across the board are increasingly demanding more regular deliveries made to tighter time windows. Striving to stay on the ball all day, every day, brings the risk of inflating the cost to serve them beyond the point of profit. Further, missed or late deliveries can cost you dearly – not least in lost repeat business. If your orders are not arriving on schedule, you’re almost certainly wasting money paying customer service staff to repeatedly answer the same question – where is my order – and potentially paying drivers to make second attempts at delivery.

By producing efficient, accurate plans that are achievable in the real world, delivery route planning software keeps costs down and on-time deliveries up. Frozen Food Express, one of the largest temperature-controlled LTL operators in the US, increased on-time delivery by 12 percent in six months after implementing delivery route planning software.

Change without prior research can be costly

Okay, it’s not like you’re sitting on your hands when it comes to trimming the fat from your delivery operations. But how do you know where to cut and what knock-on consequences it might have? If you make changes without careful prior research, you’re likely to wait months to see if they work, only to find they have cost you money and not yielded the results you hoped for. It makes a lot more financial sense to buy routing software and use it, not just operationally, but strategically to model changes and see the implications before spending a cent.

Route planning software allows you to answer unlimited what-if questions about making strategic or tactical changes before committing a single dollar to changing anything.

What if you changed your delivery routes? What if you changed the size or type of trucks in your fleet? What if you moved your order cut-off times? What if you moved your distribution center(s), or opened a new one?

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.

Stop the bleed

It’s pretty standard to think of your transportation department simply as a cost center, and it’s all too easy to let those costs spiral out of control. In a rudimentary route-planning environment, business growth often triggers knee-jerk requests for new vehicles or more people, inflating total fleet costs far faster than the new business warrants. Even without growth, the bill can creep up, as inefficiencies persist and swell.

Working on a 3 year business plan? Why not spend now and cut your costs sooner rather than later?

Implementing advanced delivery route planning software can reduce fleet operations costs by 10 to 30 percent, and stop you bleeding cash right now by getting escalating costs firmly and permanently under control.

Now that you know the cost of doing nothing, why would you continue losing out?