All You Need To Know About Fleet Routing In Logistics
By Komal Puri | January 15, 2024
What is fleet routing?
Fleet routing involves optimizing routes for a fleet of vehicles to reach destinations efficiently and cost-effectively. It plays a critical role in ensuring timely and secure deliveries, whether for last-mile, mid-mile, or long-haul, impacting the overall performance and logistics costs.
Given the prevalent challenges like driver shortages and the ongoing demand for swift deliveries, effective fleet management is critical. Efficient routing operations form the core of successful fleet management, enabling businesses to maximize resource utilization, minimize fuel consumption, reduce travel time, and control operational costs.
Importance of Fleet Routing for Cost Optimization
Let us take a quick look at some statistics around the e-commerce industry.
- 50-60% of the total delivery cost is attributed to the last-mile.
- 25% of customers are willing to pay extra for same-day deliveries.
- 64% of shoppers expect their orders to be delivered in under 2 days.
All these indicate that the speed of deliveries is a key focus area that businesses need to pay attention to. To achieve such delivery speeds, they need to optimize their fleet size, manage their availability and set up their routing operations with tight control.
In addition to this, the range of driver wages is around $15-$20 an hour in the United States. With increasing driver shortages, it is only natural to expect this number to rise.
This means that within the hours they are available, their productivity needs to be maximized without violating labor laws. The only way to achieve this is through effective fleet routing. With efficient fleet operations in place, businesses can see an impact of about 30-40% of the total delivery cost. Considering the scale of operations that businesses operate in, this will run to the tune of millions of dollars.
How Fleet Routing Works
Fleet Routing: An Overview
Let us break down the steps involved in a typical scenario. A clear perspective on this helps us further identify operational areas that have scope for improvement
1. Collection of Delivery Requests
It is likely that delivery requests come in from multiple sources. Consolidating them across multiple sources is key to ensuring that no channel or customer orders slip through the cracks. A fault line at this stage jeopardizes not just the entire flow of operations but also has an impact on the cost and customer experience.
2. Route Planning Algorithm
Once the orders are aggregated and ready for dispatch, dispatch managers need to plan routes. While planning routes, it is important to consider several key factors that include distance, travel time, and constraints, optimizing routes for green fleet or pedestrians. A high-level set of considerations at this stage are:
- Geographical Information: This involves taking into consideration the locations of the vehicles, customer destinations, and any other relevant geographical information.
- Traffic Conditions: Real-time traffic data can significantly impact delivery SLAs. It is important to avoid congested routes, minimizing travel time and fuel consumption.
- Vehicle Capacity: Depending on the number of orders and size, vehicle capacities need to be managed.
- Delivery Windows: For scenarios where customers have a time-window preference for their deliveries, it's crucial to factor them to meet customer expectations. Another use-case for this is two-men and furniture deliveries where vehicle movements are allowed in very specific time windows.
- Environmental Considerations: In some scenarios, one needs to take environmental factors into account, aiming to reduce carbon emissions and promote sustainable practices.
3. Assignment of Deliveries to Vehicles
Following route planning, a critical step involves assigning the routes to the appropriate vehicles. While part of this is resolved during the initial route planning phase, the actual assignment of drivers occurs here. This is particularly crucial in special cases, such as two-person deliveries or the transportation of appliances requiring immediate installation. Skill mapping among the available pool of drivers is essential during this assignment stage, ensuring that unique scenarios - such as assembling furniture, installing appliances etc. are addressed effectively and tasks are allocated to drivers with the necessary expertise.
4. Real-time Monitoring and Adjustments
As deliveries unfold, the assigned fleet is monitored in real-time through a versatile mobile app. This app facilitates instantaneous tracking of status, communication during transit, and more. This is especially vital for hyperlocal deliveries.
Fleet Routing Cost Analysis
A. Factors Influencing Fleet Routing Costs
Here is a look at the different costs that are associated with routing.
- Fuel Consumption: Whether vehicles rely on fossil fuels or electricity, there is an operational cost associated with their use. This also varies on account of fuel price fluctuations. Nonetheless, it represents a continuous and recurring expense that must be considered when managing routing operations.
- Labor Costs: In the United States, last-mile delivery labor costs range from $15 to $20 per hour. This can increase during peak seasons. When establishing baseline labor costs, it is essential to consider the impact of the gig economy on these figures.
- Vehicle Maintenance: Expect annual maintenance, wear-and-tear, and accident-related repairs when managing a fleet. These costs are inevitable and bring with them a temporary downtime due to unavailability during the repair process.
B. Strategies to Minimize Fleet Routing Expenses
Here are some ways how businesses can minimize expenses while routing fleet:
- Fuel-efficient Routes: Planning routes with advanced route optimization capabilities can enable businesses to lay out least cost routes. This can help them save miles traveled and reduce associated fuel spending. Little nuances such as taking a slightly longer route as compared to a congested one where more fuel is spent in idling can bring about a significant difference to fuel costs.
- Predictive Maintenance Programs: Lack of streamlined maintenance programmes can result in unplanned downtime disrupting your fleet operations. This can be prevented by scheduling maintenance programmes so that the fleet can be operated smoothly without wear and tear. This also ensures fuel efficiency to a reasonable extent due to a well-maintained fleet.
- Leveraging Tribal Knowledge of Drivers: Drivers typically have an increased degree of awareness in familiar areas. This tribal knowledge could be put to use while planning routes. This can make effective use of their bandwidth thereby helping accomplish more deliveries due to increased awareness of routes.
- Address Standardization: Ensuring standardized address formats and valid addresses while planning routes for your fleet can help save time and fuel spent looking for the delivery location. Removing ambiguity with the right set of technology such as reverse geocoding etc. can help a long way in cutting fleet routing costs.
Fleet Routing: A Case Study Company Profile
A leading express delivery company was facing operational challenges with managing fleet operations. With a large scale of operations in the range of ~1 billion shipments per day across 70,000 pickup points every day, the complexities were manifold.
An operational challenge that logistics firms encountered was the need for a large number of dispatchers/planners for daily operations, and reliance on manual modes of operation. In addition, there was a lack of load visibility from pick-up stops and ineffective truck planning. This led to high operational costs due to inadequate visibility and a lack of effective planning.
With FarEye’s advanced fleet routing solution with AI/ML capabilities, they dynamically created routes for minimal distance per stop and high vehicle capacity utilization (97-98%). The routing engine had loop optimization and real-time dynamic routing capabilities that enabled them to assign new-pickups automatically .FarEye’s solution also allowed easy integration of new business models with its embedded BPM engine and low-code or no-code functionality.
Results & Benefits
After deploying FarEye, they saw a 60% reduction in the need for vehicles with effective capacity optimization. They also accomplished their usual order volumes with 70% less planners and dispatchers, thereby achieving a significant milestone in productivity of staff. There was also a 40% reduction in drivers needed that resulted in significant savings. These resulted in noteworthy cost savings and improved overall operational efficiency.
Fleet Route Optimization Techniques
A. Technology Solutions
The field of route optimization technology has advanced considerably. A range of tools, spanning from basic to advanced AI/ML-based solutions, is now available, catering to various use-cases and requirements.
- Route Optimization Software Tools: Selecting the right route planning tools involves considerations like order volume, geographic coverage, fleet size, and delivery types (e.g., same-day, same-hour, next day, scheduled). Additionally, some tools can seamlessly integrate with multiple existing systems through secure API connections, providing a convenient plug-and-play solution.
- GPS Tracking Systems: Tools for real-time fleet tracking are effective in proactively identifying bottlenecks, setting up interventions, and ensuring complete adherence to planned routes. This approach proves effective in following optimized routes, resulting in zero deviations, leading to reduced fuel costs, and improved fleet utilization
B. Data-driven Decision Making
By digging into volumes of transactional data, businesses can derive patterns and insights crucial for determining fleet size, availability, utilization, and route operations. This is of particular relevance in managing demand spikes and peak holiday seasons, guiding strategic decisions in these critical aspects of operational planning.
- Utilizing Historical Data: Examining historical data provides insights into delivery volumes based on time, location, and other factors. This analysis is highly effective for identifying demand spikes, discerning sub-geographies with surging order volumes, and extracting other such key insights. These can feed into business decisions related to fleet provisioning and routing optimization.
- Real-time Traffic Analysis: Incorporating real-time traffic data during route planning enables the creation of uncongested routes. This helps in reducing vehicle idle times, improving fuel efficiency, and expediting deliveries. It also enables dispatchers to dynamically reroute or manage ad-hoc orders in real-time.
C. Benefits of Fleet Route Optimization
While the advantages of fleet route optimization are numerous, its profound impact is most notable in three key aspects:
- Time Savings: Effective routing accelerates the dispatching process significantly, reducing the number of dispatchers to oversee delivery operations. In addition, it also reduces dispatching time by approximately 30-40%, by enabling faster assignment of orders to drivers. This enables drivers to leave dispatch centers quickly, allowing them more time in the field for increased deliveries.
- Fuel Efficiency: The fluctuating nature of fuel prices is a key concern for delivery-centric businesses. It has a profound impact on the cost of deliveries. Yet, with adept route planning and optimization, miles can be reduced, leading to increase in cost savings through reduced fuel consumption. As mentioned earlier, factoring real-time traffic conditions in route planning also contributes to improved fuel efficiency.
- Enhanced Customer Satisfaction: Efficient routing increases on-time delivery performance. It also gives businesses the leverage needed to offer expedited services and more options to their customers. This has an impact on customer satisfaction and boosts brand loyalty.
Best Practices for Effective Fleet Routing
A. Regular Training Programs
Enhancing the awareness of dispatchers and ground staff is a key step in ensuring successful execution of tools and techniques. Setting up regular training programs is a sureshot way to achieve this. As improvements are made to the tool, these ongoing programs can help in driving adoption that can provide a significant competitive edge.
B. Continuous Monitoring and Analysis
Benchmarking route performance and setting up recurring monitoring and analysis guarantees key learnings. They can help businesses predict emerging requirements and consider potential upgrades to their technology to stay ahead of time.
C. Adaptability to Changing Conditions
Adapting to shifting market conditions, such as demand surges or disruptions in the global supply chain affecting product availability is key to retaining competitive advantage. It also impacts operational expenditure & cost of deliveries. Ensuring that appropriate adjustments are made to route planning operations to accommodate these constraints enables businesses to respond swiftly to these macro changes.
How FarEye Can Help
With FarEye Route, you can dynamically plan routes in real-time based on slots and preferences chosen by customers. This enables you to be a customer-first organization. The multi-constraint auto-routing solution is powered by a proprietary AI-powered algorithm that considers factors like real-time traffic conditions, vehicle types (including EV trucks, green fleet), and driver affinity, enabling efficient routing.
- FarEye Route offers a range of features, including:
- Customer-driven flexibility with preferred delivery slots and route planning based on consumer preferences.
- Consideration of multiple constraints for optimized route planning.
- Enhanced address accuracy using Machine Learning, providing precise suggestions for addresses.
- Real-time order allocation for efficient management of ad-hoc orders.
- Strategic vehicle allocation and improved fleet capacity management.
- Implementation of a green fleet for sustainability.
Further, the loop optimization engine enables swift creation of dynamic routes, enabling you to minimize distance per stop and optimize vehicle capacity utilization even at high volumes (e.g. 50,000 orders with 10+ constraints in approximately 10 minutes).
Some key benefits of using FarEye Route include:
- Improved delivery accuracy through accurate time-slot predictions.
- Reduction in miles traveled & idling times.
- Proactive identification of challenging delivery locations using intelligent geocoding.
- Enhanced fleet productivity.
- Improved compliance with Service Level Agreements (SLA).
- Reduced route planning times and expedited dispatching.
- Positive impact towards sustainability goals.
Several companies are leveraging FarEye Route to manage routing operations for next-day, same-day, big & bulky, and hyperlocal deliveries. A few of them include Gordon Foods(USA), SuperIndo and Thailand’s leading express courier delivery company
In a dynamic market with increasing customer expectations and amidst intense competition, efficient routing stands out as a key differentiator influencing all operational aspects. It also directly affects customer experience. With cutting-edge solutions like FarEye Route, you join a league of companies making a significant impact on customer satisfaction while achieving heightened operational efficiency. Consult with our experts to unlock the full potential of your fleet routing operations.
Komal Puri is a seasoned professional in the logistics and supply chain industry. As the Senior Director of Marketing and a subject matter expert at FarEye, she has been instrumental in shaping the industry narrative for the past decade. Her expertise and insights have earned her numerous awards and recognition. Komal’s writings reflect her deep understanding of the industry, offering valuable insights and thought leadership.