In many supply chains, small costs can often go unnoticed either because the activity is perceived to have little impact or the impact is not tracked effectively. With supply chains being largely composed of many small repetitive tasks, steps that don’t add value can become very costly to an organization over time.
With the vast array of variables involved in trucking distribution, precise planning can help avoid unexpected events which add increased costs to your organization. When planning routes, factors including traffic, delivery times and the sequence of stops must be considered to fully optimize a route.
Below are some everyday examples of the types of costs that can occur in truck distribution and ways they can be avoided.
Using roads that are heavily congested can quickly add to the cost of a route if this happens on a regular basis. If a driver is unnecessarily stuck in traffic for 15 minutes every day (6 days a week) this can add up to $4,290 per truck on an annual basis (assuming an industry average rate of $55 per hour). To reduce time spent in traffic, it is important to identify where and at what times your routes are being affected by traffic either by getting feedback from your driver or analysing the telemetry in the truck. You can then model these constraints into alternative routes to understand if they are feasible and if they will reduce costs. For example, a slightly longer route may still be beneficial as time can be saved en route to the next delivery location.
If delivery times are not properly planned in advance, a truck may have to wait for a dock door to be available before unloading can start. The cost of waiting times can vary greatly depending on the number of deliveries per route and the volume of deliveries that a location receives. If, on an average day a truck driver spends a total of 20 minutes waiting, in one year that cost could add up to $7,800 assuming a $75 hourly rate. Although this cost can often be billed back to the shipper, the competitiveness of the entire supply chain is still impacted. To help mitigate this cost, you can work with your delivery locations to build a schedule that works for both parties to help to reduce waiting times. Some warehouses already have the capability to communicate with inbound trucks and can dynamically allocate dock doors based on an estimated time of arrival. Systems like this provide higher flexibility at warehouses with many dock doors and high levels of traffic.
Route sequencing is especially important in scenarios where routes dynamically change daily. A route may have 15 to 20 stops making it difficult to manually plan the optimal route for each truck. In a situation where little planning is done, a driver may end up driving additional distances in order to deliver product to every location on the route. If a truck were to drive for an extra 10 minutes on average every day, that cost could be $2,860 annually, if the hourly rate were $55 per hour. To optimize the sequencing of a route, the total distance travelled must be minimized. In addition, factors including traffic and delivery time windows must be included to determine the real cost of the route.
Optimizing routes also helps to improve your network as a whole. If you reduce the time it takes to do 15 drops on a route, then you may be able to increase your drops to 17 per route moving forward. If you can do this on enough routes, you could potentially reduce the number of trucks needed by having less routes, or take on more business with your existing assets. The importance of small cost savings is also magnified at an overall network level where savings are multiplied by the size of a fleet and can lead to a significant impact to the bottom line of an organization.