The larger your business, the more complicated your delivery territories are likely to be—which is saying something, because even if you're just running a few trucks you can easily get overwhelmed by the complexity of territory optimization.
Historically, this has been an almost intractable problem. Territory planners had few choices for optimizing their sales and/or delivery and service networks outside of manual planning or cumbersome legacy solutions. The result? Slow, painful optimization and planning processes that many businesses would avoid at all cost.
The logic of “if it ain’t broke, don’t fix it” might apply to some things in the world of logistics, but it definitely doesn’t apply to your territories. The more your customer mix, fleet, transportation network, demand profile, and even cost factors like the price of fuel and maintenance evolve, the more imperative it is that your territories are updated to match. When you keep running the same trucks to the same regions regardless of changing conditions, you miss out on cost savings and potentially run certain stops at a loss.
Luckily, modern technology has made it much easier than ever before to solve these problems. Where it might once have taken a matter of weeks to make updates to your territories using spreadsheets, whiteboards, and elbow grease, AI-powered territory optimization software lets you speed up the process and remove a huge amount of the guesswork.
The best territory optimization software solutions will do this by running thousands of routing scenarios in seconds to make sure that your territories are configured in a way that ensures successful execution for sales, service, and delivery routes. Rather than making a change to your existing territory plan and hoping for the best, you can immediately visualize the delta and see how the proposed change would impact your costs and service levels based on your projected order volumes.
Speed is the real key here. Slower processes are more prone to stagnation, which means you often get stuck with territories that could be much more cost efficient. But when it only takes a few moments to try out a potential territory plan and compare it to the existing one, you can update as often as needed, rather than as often as you can manage.
Like they say, "frequency is freedom.” When you can update your territory plans frequently and efficiently, you can improve the service levels that you offer to customers, stay adaptable and flexible, and ultimately save costs.
Here’s how:
Any time something changes in your network—say, you add a few new customers to the mix or open up a new distribution center—your routes and territories become less efficient by default. Why? Because you’re fundamentally stretching an existing plan out of shape to cover changing needs.
When you have territory optimization software that lets you actually update those territories to reflect changes in your network, you can cut out that inefficiency and manage it on an ongoing basis.
More than that, by leveraging a territory planning tool that automatically generates route plans as part of the territory planning process, you can ensure not just a close alignment between your needs and your plan, but also efficient routes across the board.
This is where the AI-powered component becomes extremely important: AI gives you the ability to optimize routes and ensure accurate ETAs significantly more quickly than you could ever achieve by hand or with a legacy solution.
We’ve mentioned this point already, but it’s so important that we’re not afraid to belabor the point. The right territory optimization software enables you to plan new territories so quickly that it becomes a non-event. Rather than rolling out new territory plans for your sales, service, or delivery teams two or three times a year, you can do it on a regular basis. That way, you’re always running routes that are purpose-built for your actual needs.
One of the most impactful ways that the right software does this is by combining territory planning and route planning into one process. The fastest territory optimization process in the world is only going to be so helpful if you then have to export those territories into a separate solution to turn them into routes.
By contrast, if your territories automatically translate into routes that are actually workable for your field teams, you can confidently roll them out without the laborious extra step of planning and optimizing routes as well.
One of the biggest issues that we see with the old way of territory planning is that there’s a complete lack of visibility into why territories are set up the way they are, how expensive each stop in a given territory is to make, and how much revenue your different field teams account for.
A modern territory optimization software solution turns this on its head and makes visibility and transparency the default. Rather than a scenario where all the answers live in the head of the person making the territory planning decisions, any user can jump in and immediately visualize what your current territories look like.
From a single screen, you can see the makeup of your territories, the breakdown of revenue by territory, cost-to-serve, and how the territories translate into routes. This prevents territory planning and management from becoming a silo, and it gives you the power to make data-driven decisions without spending hours hunting for information.
One of the words that should have jumped out at you in the last sections was “silo.” It’s the last thing you want for your territory management, but it’s an incredibly common fate in most businesses—precisely because the process of territory optimization is so byzantine.
This results in scenarios where your territories don’t translate neatly into routes (which is problematic enough on its own), but it can also result in a disconnect between your field operations and your other logistics processes.
Let’s take the last mile as an example: If your territories are in a silo, how do you connect them to last mile customer communications? It’s a real challenge, and the result is often that customers don’t know about service changes until they’re already impacted by them.
By contrast, an integrated territory optimization process enables you to streamline territory management and customer delivery experience. You can automatically send out notifications to customers impacted by changes in territory and route plans, and you can keep them posted on the day of delivery to ensure that they’re ready to receive whatever services or deliveries you're offering them.
The end result is a more streamlined, integrated process that builds on existing efficiencies to ensure smarter, better, more cost-effective logistics operations over time.
All of the benefits that we’ve sketched out above ultimately filter down to one all-important impact of the right territory optimization software: lower cost-to-serve across the board.
When your territories are actually optimized on a regular basis, you have a better fit between demand and field operations, denser and more efficient routes, and improved visibility and integration—all of which helps you visualize your costs and optimize them significantly.
Even if we just look at the integration of delivery routes and territories, it’s easy to see how you can leverage a closer connection there in order to drive fewer miles per stop (resulting in a reduction in fuel and labor costs). By the same token, less time spent routing straightforwardly translates into reduced labor costs.
In a competitive landscape where cost pressures are inescapable, it’s hard to overstate how important this is.
With AI-powered territory optimization software, you can improve every aspect of the territory planning and management process. The result? Reduced costs, more agile processes, and customers who are that much happier receiving more consistent levels of service.
Of course, to get all the benefits that we sketched out above, it’s important to choose the right software. If you’re wondering exactly what that software should look like and how it will integrate with the rest of your technology stack, reach out to one of our experts today—we’d love to walk you through it.