There is no doubt these have been challenging times. Drastic changes to the economy have significantly affected businesses all over. Within the last year we dealt with record fuel prices, a financial crisis and, as a result, decreased consumer spending. This packed a double punch for those in transportation: higher operating costs followed by a decrease in business.
What does this mean today for those managing vehicles in the information management industry? It means finding a better way to operate—to cut costs—and ease the pressure on your bottom line. It means gaining the advantage that will see you through today and beyond.
Analyzing your operation—in terms of where it is today vs. where you want it to be tomorrow—can provide the advantage you are looking to achieve.
KNOWLEDGE IS KEY
Let’s face it—for businesses involved in transportation, it is incredibly difficult to squeeze out cost savings. Several years ago, more customers meant getting trucks on the road to service them. Now, whenever a truck leaves the building, we all want to know just one thing: How much extra will it cost us?
Surprisingly, very few of us can say how much. In fact, only 2 percent of transportation companies in the U.S. actually know what it costs to run their trucks per mile or per stop. Why? A lot of this "cost fog" is because of traditional industry practices—and the lack of an actionable transportation strategy.
We all know how it’s been done up to this point—as requests come in, they get sorted in piles or sticky notes and then are managed throughout the day. There’s no real planning in place other than on-the-fly match-ups between new requests and the closest driver. In short, we make decisions based on best guesses at the time—not through a strategy based on best data. What suffers is not just the bottom line numbers, but reliability and customer service. Clearly, there’s got to be a better way.
There is. At UPS Logistics Technologies, we advise those in the information management industry to employ route planning to stay profitable and to manage costs. The process employs strategic route planning, daily tactical route management and route execution and measurement.
By applying this methodology, along with the right software tools, you can significantly save in operating costs while improving service. In fact, many of our customers have saved as much as 15 percent in their routing operations costs during the first two years. Here’s how it can work for you.
PLAN FOR OPPORTUNITY
There’s no point in fishing without a reel. The same holds true if you’re attempting to develop a route plan without understanding your overall transportation strategy. Instead of looking at one route at a time, you need to gain a big-picture perspective of your entire fleet and the customers it serves.
A critical part of achieving this is establishing a baseline for achieving your strategic goals. This largely means reviewing your operational data from recent years for the insights you need to reach your future growth benchmarks. By entering your historical data into your software system, you quickly can arrive at a greater understanding of your operations, from route structure to volume and patterns.
Having this precise sense of your baseline, you then can begin to plan proactively to meet your yearly and longer-term goals. Growing your customer base, reducing fleet vehicles, managing volume fluctuations and reducing your cost to serve all can be analyzed in advance from a strategic perspective.
ROUTE FOR SUCCESS
After establishing a strategy that puts your tactical standard routes in place, you need to decide which daily routing approach is best for your business.
Standard routing provides a high level of consistent customer service as well as significant savings over manual routing. While this tactic supports all selling models, it’s still not the most cost-efficient approach; however, it does provide significant savings over manual routing.
Dynamic routing is highly efficient, offering the lowest long-term savings. Still the challenge here is change, developing routes based on strategy rather than on fixed criteria. With different start times, vehicles and drivers on routes every day, you must learn to work with volume fluctuations while meeting your delivery commitments.
The Human Factor A session at the PRISM International 2009 Annual Conference, which was May 6-9 in Daytona Beach, Fla., addressed the human resources issues related to route operations. Presenting at the session titled "Route Operations Part II: Driver Training and Bonuses," Tom Dumez, director of human resources for Kent Record Management, Grand Rapids, Mich., addressed the human resources issues related to drivers and how they affect a records storage operation’s bottom line. Dumez’s presentation stressed the importance of expressing the records storage company’s and the clients’ expectations to a firm’s drivers as well as providing drivers with adequate training. He also suggested that records storage companies employ a fair and consistent system by which to evaluate the performance of their drivers. In addition to a driver’s base pay, Dumez said incentives could be provided based on safety, performance or accuracy. When hiring drivers, Dumez said that not only should records centers perform the necessary background checks but also consider the personality of the driver, who regularly has critical interactions with clients. A candidate’s attitude and appearance should be taken into account as well, he added. Records centers should review their standard operating procedures with their drivers, including issues related to properly handling information, security, public safety and accidents, vehicle maintenance and security and appearance, Dumez said. He added that a common weakness in records centers’ training programs was a lack of goal setting. Dumez encouraged attendees to ask themselves if they were totally satisfied with the results their current systems have created and he urged attendees to change their systems to improve their results. He suggested attendees look at a few things or systems that were most in need of their attention. "Don’t be afraid to examine new systems simply because it goes against ‘what you have always done,’" Dumez said.
Which one makes the most sense? For many operations, it’s a blend of the two. Zone dynamic routing balances the best of standard and dynamic routing on a daily basis. By organizing your customers into zones, you can increase efficiency dynamically while ensuring drivers remain familiar with a given area and maintain a consistent service relationship with their customers. While it doesn’t achieve the same cost savings as purely dynamic routing, zone dynamic routing can help you realize an operational savings of 9 percent in just the first year.
MEASURE FOR RESULTS
"Measure twice, cut once," the old saying goes. In achieving exceptional routing efficiencies, measurement of your performance is essential—and the final (and continuous) step in our process.
To develop an effective means for performance measurement, you need to create a quantitative system to gather the kinds of information that best mark your company’s progress, from cost breakouts and miles driven to customer feedback. Such measures should be easy to understand—and focus on utilization, productivity and performance, the three most vital aspects of transportation operations.
The effectiveness of your performance measurement system depends on a number of factors, from deployment of the best software solutions to company-wide compliance. However, its successful implementation depends on four essential phases—plan, collect, analyze and implement.
The first phase is to create an operational plan, supported by the right software solutions, that is in sync with your industry and your customers and that can weigh strategic and tactical issues to deliver better driver management while reducing delivery costs.
The second phase, collecting the right data, involves your choices of the proper sources of such information, from driver manifests and time studies to new mobile technologies, such as handheld computers that record delivery performance, service times and route exceptions.
Third, how you analyze this data makes all the difference. Creating benchmarks such as service time validity and accuracy and correct customer data is key, as are performance metrics that account for actual vs. planned route statistics, resource allocation and more. In quantifying your results, remember to stay focused on utilization, productivity and performance.
Lastly, before you implement new processes based on your findings, make certain that you have the involvement and buy-in of senior management as well as your drivers and sales forces, which will in turn speed up company-wide compliance and the success of your initiative.
THE ROAD AHEAD
Routing efficiency analysis is a relatively new "science," but its impact is winning converts throughout the information management industry. By strengthening your focus on strategic route planning, developing a consistent routing approach and measuring your operational performance, you create an engine for operational excellence—one that will go the distance and fuel a healthy operation—regardless of the economy. n
Cyndi Brandt is the director of marketing at UPS Logistics Technologies (www.upslogisticstech.com), Baltimore, a UPS business unit that provides transportation and logistics solutions. She can be reached at cbrandt@ups.com.