Hidden Costs

Going the legacy route can be an expensive mistake.

By Robert Oliver

It’s hard to resist “free.” Many organizations already have route planning tools in place. Others may have transportation management systems (TMS), which often offer low-cost or free routing capabilities. This gives rise to questions such as: Why spend money on a new system when you already have one in place? Why pay for a system when you can implement one that you have a free or low-cost license for? Why fix something that isn’t broken?

These are good questions. And in fact, depending on the situation, the right answer might be to stick with or implement a legacy route planning tool. But in many cases, going the legacy route can be an extremely expensive mistake.

Typical Legacy Routing Tools

Historically, the process for generating routes for shipments would begin with first getting the data into a standard spreadsheet format supported by the tool, then launching the software and loading the spreadsheet of shipments. The next step would be to execute a routing session, which typically generates manifests for each truck route and shows the shipments and sequence of deliveries for each. This might be really fast or really slow – perhaps even a struggle to complete with enough time left to load the trucks.

Then you review the resulting routes and address impracticalities within the plan. Often times planners likely then have to manually adjust the plan to fix issues. Perhaps a truck without a lift-gate is planned for a customer without a dock, or routes are planned that violate hours-of-service regulations or are overloaded by weight or volume. Or the route ignores driver skills requirements (like being able to install a dishwasher for a white glove delivery). Then the manifests are printed and handed off to the loading dock, where they are adjusted again (often via pencil and paper) to reflect how the trucks were loaded. Then the modified manifests are given to the drivers.

You can already see some inefficiencies in this process. And it doesn’t end there. For instance, the next order of business is to dispatch the routes, communicate with customers if a delivery window is going to be missed and handle new orders for pickups that arrive during the day. What route should be diverted to make a given pickup?

Planning Costs

As noted above, often older tools generate routes that don’t meet all the company goals or the constraints of the shipments. The result is that your planners have to “fix” the routes built by the tool. This takes a lot of time. And since the routes may end up being changed significantly, whatever efficiency the routing tool created in those routes is diminished as the plan is altered. These “soft costs” can be hard to quantify, but they’re real and do add up.

Planned Route Costs

So just how good are these route plans the legacy system is producing – even if the plan requires little or no adjustments by planners? The answer varies from “not great” to “pretty bad.” It turns out that most legacy systems are based on simple static routes, such as geographic areas defined by postal codes.

If a shipment is going to this area, it goes on this truck. These static routes don’t take into account the actual daily shipment locations and the static areas often aren’t revised to reflect new customer shipping patterns. Other legacy packages will use rules of thumb for generating routes – they’re quick but inefficient.

Customer Satisfaction Costs

Perhaps the hardest to measure, but also one of the most important costs is in customer satisfaction. Are you able to meet the committed pickup or delivery time windows or appointments? Are the customer’s open, closing and lunch hours taken into account? Are you “throwing extra drivers” at the problem to meet these commitments? Do you keep customers informed when a route is running late?

And what about other requirements like making sure you send the driver or installer with the right qualifications with the right equipment, like a lift-gate equipped truck for customers without a loading dock, or a small vehicle for an inner-city location with tight spaces.

Indirect Driver Costs

Are your highly optimal routes being executed by your drivers as planned? Sometimes a driver will have completely valid reasons for altering the planned route. Bridges can be suddenly closed, for example, if a boat hits the foundation or moving drawbridge.

Significant delays or detours can add up quickly. You need to have visibility into the original route plan and monitor execution via real-time updates on route progress. Driver turnover costs can be significant – the United States is experiencing a shortage of drivers, for instance. Ensuring drivers get desired shifts, providing driver bidding options, making sure drivers return home at the desired time and other driver satisfaction areas can be of significant value.

Business Management Costs

How much effort does it take for you to stay on top of things such as execution costs, on-time pickups and deliveries and meeting goals and KPIs? How do you know when things are or are not going well or according to plan?

With most legacy tools, you can’t see what is happening now. If a route is running late or there are pickups or deliveries scheduled on that route that may miss customer commitment windows, there’s no way to know quickly.

The Way Forward

In a lot of instances, it pays to look beyond your legacy planning tool. To thrive in an increasingly competitive business environment, you need to have immediate access to every proposed route plan and changes to the plan. You have to know the estimated KPIs that can be achieved with this proposed plan or that plan revision.

And just as important is your ability to modify the plan anytime, so that your business goals can still be met even when circumstances change. As you begin to recognize how all the hidden costs add up, is inaction an option?

Robert Oliver is a senior solution architect for the North American Logistics Group at Quintiq, a Dassault Systèmes brand. He is an IT industry veteran with over 30 years’ experience. His specialties include professional services, enterprise software and SaaS. Robert holds a BBA in computer and information science from Temple University.