Automated routing, carrier diversification, data can benefit bottom line
Automation, data and the use of regional carriers can help shippers to reduce costs, improve efficiency and increase profits, according to recent white papers from logistics technology providers.
An Omnitracs white paper shows companies are continuously looking to improve shipping efficiency while cutting costs to improve profitability. Economic factors and rising fuel costs have led shippers to reevaluate their territories, routes, stops and facility locations. This has revealed backtracking and out-of-the-way stops.
Route-based shipping can help to reduce costs and improve productivity in the distribution and service industry, according to the paper. This shipping method can automate strategic planning and lead to reduced miles, lower operational costs and properly-used vehicles and drivers. This method also can improve customer service, refine distribution operations and increase profits.
A top priority is to set up new customers in existing route territories, according to Omnitracs. Companies want to serve new customers while maintaining existing ones. Redefining routes is key to achieve this; however, companies that rely on manual rerouting can find this burdensome. Automated rerouting can save time and money, the paper shows.
Mergers and acquisitions have become more common, and as a result, distributors and service organizations have an increased amount of overlapping territories and branches. Each stop comes with a cost, and determining the routes and stops that generate the most and least revenue is important for companies. Many shippers have delivered to the same accounts and the same routes for years and have not set a priority on reevaluating those routes to ensure they remain the most cost-effective and efficient. Evaluating each route and accounting for new customers, territories and branches can help to determine the routes on which the accounts should be placed and the days of the week they should receive delivery.
Route planning to determine the day customers should receive delivery can be difficult if completed manually and without the necessary data, according to Omnitracs. Shipping managers must consider customer demands, efficiency and cost. However, the day a customer wants delivery might not be the most efficient and cost-effective day to deliver. Managing these exceptions is often where distribution companies break even or lose money.
Planning for smaller accounts that are geographically out of place can be time-consuming. Managers must determine the days and frequency an account should receive delivery. The more the routing is structured, the higher the profit increase. Smaller companies in rural areas might receive delivery once a week, while larger customers receive delivery five days a week. A key step in the rerouting process is to balance employee satisfaction with customer service.
Many companies understand balancing the driver and back-office experience with customer satisfaction, the paper shows. Putting a priority on driver satisfaction is important amid high driver turnover. Yet, customer satisfaction is significant as customers keep the business growing.
Meanwhile, manual rerouting can take hours daily for months at a time, and errors still can happen. This way of operating means drivers are driving more hours for less money while the back-office staff is completing manual rerouting instead of other important tasks. And, customers are not receiving their deliveries as quickly as they are used to get them.
According to a Sifted white paper, customers are disappointed by delayed deliveries. Amazon set a high bar on delivery expectations. Even if customers don’t need a shipment quickly, they expect the delivery to be completed fast. However, cutting shipping times and paying for next-day service are expensive for shippers.
Factors that can cause shipping operations to be inefficient include using the wrong size boxes and limiting the carriers that shippers use. Shippers might be paying for services they don’t need, such as next-day shipping. They might face fees and surcharges that are unknown to them or receive an invoice with terms like handling charges or service fees. Oversize charges for packages larger than the carrier’s allotted dimensions could vary during transit, and as a result, shippers could be charged multiple times for the same package. Also, an invoice might include fuel surcharges, which fluctuate with fuel cost. And, peak season, winter and weekend charges should be factored into one’s shipping strategy.
Working with regional carriers might be a solution. According to a 2020 Parcel Media survey, 25% of respondents said the quality of service was the top reason for using regional carriers, up from 5.4% in 2019.
Shippers with multiple distribution centers can benefit from using regional carriers that operate within the shippers’ distribution territories, according to Sifted. Their rates might be up to 40% less than national carriers because they have lower operating costs. And, regional carriers usually have fewer fees and surcharges, the Sifted paper shows.
Disadvantages to using regional carriers include not having the technology, resources or reach to handle longer and more complex routes. As a result, diversifying is important for shippers to achieve benefits from each carrier.
Data can show where shippers can improve service. The Amazon effect is real, the paper shows, but shippers should not assume they need to pay for one-day or two-day service. Diversifying carriers can help shippers to receive the fastest delivery times for the price.
Some carriers have suspended their service guarantees for a year now, and whether they will be restored is uncertain, according to Sifted. Shippers must take control of transit times to meet customer shipping policies. Shipping data can show where shipments go most often, which service types are best and the carriers that meet the desired delivery times. Shippers might have their packages delivered on time but at a high cost. Those who are shipping from areas close to the point of origin might have deliveries completed in one or two days, making paying for next-day or two-day service unnecessary.
Data showing the on-time performance by carrier and service type can be tracked to determine how it affects profits. It can be used to find ways to be more efficient and help save money. Having visibility into one’s supply chain allows shippers to control and correct unnecessary spending and delays.