Route Optimization: How It Reduces Operating Costs

The supply chain issues and other challenges that most delivery organizations face these days can feel like a perfect storm. Businesses are dealing with rising transportation costs, high attrition among drivers, driver shortages, increased delivery volumes, and growing consumer demands. All these pressures are driving operational costs up in a way that can start to seem fairly dire. 

Luckily, modern technology (such as route optimization software) can help companies control and lower costs more effectively. Many businesses are concerned that technological solutions like a route planning solution entails shelling out money and time in implementing its use.

But routing software is a worthwhile investment. Why? Because it can help cut operating costs significantly.

Minimizing Operating Costs with Route Optimization

Below are ways route optimization can help reduce operating costs:

Reduced Human Error

Customers’ demand for fast shipping and increased delivery frequencies puts a lot of pressure on companies to deliver as fast as possible. Unfortunately, high order volumes and shorter delivery windows cause planners, dispatchers, and drivers alike to set unrealistic ETAs, forget stops, etc. This often results in delivery delays or incorrect deliveries.

Delays and incorrect deliveries can obviously affect a company's bottom line in the long-run. With the help of an advanced route planner, though, you can reduce errors by eliminating manual route planning.

Reduced Manual Labor

Traditional route planning is inefficient and requires many labor hours. Route planners have to spend many hours a day plotting routes manually using maps. And despite the many hours they dedicate, they still can't compete with the computing abilities of modern software. 

There are many factors to consider in finding the most efficient routes. These include route length, service times, traffic patterns, customer preferred delivery windows, and much more. Human planners simply cannot factor in all these variables.

Drivers are also affected by the inefficiencies brought by manual route planning. This is especially true if they have to drive long distances unnecessarily or spend considerable time navigating through highly congested roads.

On the other hand, sophisticated route optimization software can find the best routes in just a few clicks. Planners only need to input all the variables, and the system can quickly provide route plans, driver/vehicle assignments, and delivery schedules. This kind of software can offer routes that are up to 35 percent shorter than what manual planning provides. 

Some routing software can also take traffic conditions into consideration in real time. This means the software can account for traffic considerations per location, any time of the day and any day of the week.

But be aware: not all delivery routing software is created equal. A scalable SaaS solution will offer rapid route calculations no matter how many trucks and stops you enter. In comparison, on-prem solutions (and even some cloud-based ones) start to hit run-time issues after a certain number of trucks. 

Lower Fuel Costs

Fuel expense is the biggest contributor to a fleet's overall transportation costs. A routing tool reduces fuel expenses significantly since drivers are driving fewer miles. Plus, excessive idling is also minimized by the software as it accounts for traffic conditions. The reduction of idling time also cuts fuel wastage significantly.

Better Resource Utilization

Utilizing assets inefficiently increases overhead costs. Failing to distribute work among drivers and assign vehicles in the most time- and cost-effective manner results in high operating costs for fleet managers. A route planning system that assigns deliveries to the most suited drivers and vehicles for each order can be extremely beneficial. It allows fleet managers to increase their orders per day while utilizing the company's human resources and assets more effectively.

Minimized Vehicle Purchase

Some companies tend to think that acquiring new vehicles is the best way to accommodate high delivery volumes and meet shorter delivery windows. But buying new assets if you don’t have to can be risky. In many cases, optimizing routes is the best way of addressing higher delivery tasks and higher delivery time frames. If you can get more deliveries done per day, you can scale up to meet capacity more easily without increasing your capital commitments. 

Lower Vehicle Maintenance Costs

Fewer miles and less time on the roads results in slower wear and tear on delivery vehicles. Plus, minimal idling of vehicles also reduces the need for frequent preventive maintenance and repairs. The upshot is that your total cost of ownership on trucks goes down, and your ROI goes up.

Reduced Redelivery Costs

The right routing tool can enable consistently accurate ETAs. This can smooth out your operations and ultimately save you money.

This might not sound like an obvious driver of reduced costs. However, the ability to ensure on-time deliveries for virtually all orders can have a significant, direct impact on your last mile logistics operation costs. How? By decreasing the need for expensive redelivery attempts. 

Simply put, the odds of delivery failure decrease significantly when you promise a particular delivery time and then fulfill that promise. Since the customer knows when to expect the truck, they’re more likely to be there to accept delivery the first time. Each redelivery attempt can essentially double the delivery cost, so it’s easy to imagine how quickly the value of accurate ETAs adds up.

How Route Optimization Software Increases Brand Loyalty

A route optimization system brings many benefits that can cut a fleet owner's operating costs. But that's not all it has to offer.

These days, consumers are demanding more from businesses with last mile delivery operations. Amazon's trailblazing ways reshaped customers' expectations as most now demand faster shipping than ever before. Consumers are no longer satisfied with the three to five business day shipping option. These days, many expect same-day or next-day deliveries.

Luckily, routing software helps companies meet new consumer expectations. Optimizing routes with the help of the right solution allows businesses to provide accurate ETAs and meet them. An advanced solution can even offer customers real-time alerts on their expected deliveries.

Companies that can meet these expectations will have more loyal patrons and new customers. Price and products are no longer what differentiates brands— they’ve been replaced by delivery experience.

Many shoppers say they are unlikely to order again from a business that failed to give them an excellent delivery service experience. And given the growing amount of e-commerce spending, it will be easy for consumers to find another brand to patronize. Simply put, your ability to provide a great delivery experience directly impacts your bottom line over time. 

Profitability Is Possible

Fleet owners and managers have daunting tasks ahead of them. They need to find a way to keep operating costs low despite the many challenges facing their operations. At the same time, they also have to meet consumer demands to ensure long-term growth.

Route optimization software is key to reducing fuel and vehicle repair costs, providing better asset utilization, and increasing productivity. In this way, you can also more effectively meet consumers’ desire for fast and reliable order delivery. Simply put, route optimization is a tool that can increase a business’ profitability.