How to Beat Rising Fleet Operating Costs: Notes from The Journal of Commerce’s Technology Innovation Jam
Category: Routing and Scheduling
Last month I had the privilege of presenting at The Journal of Commerce (JoC) Technology Innovation Jam, a Shark Tank-style event within the JOC’s annual Inland Distribution Conference in Oak Brook, Ill.
In order to shine, the competitors were invited to show how they identified, addressed and solved real-world problems for shippers.
It wasn’t hard for me and my colleague, Mark Massey, our North America Support Manager, to talk about the problems we solve at Paragon. In fact, we brought a piece of equipment on stage to demonstrate as clearly as possible how shippers are suffering from rising fleet operating costs. Mark operated an office shredder, through which he fed fake $100 bills. He wasn’t just trying to amuse the audience (although we did get some good laughs). He was trying to show in the clearest way possible that inefficiencies in truck routing add to fleet operating costs, and shred shipper profits for real.
The folks at the JoC asked us to identify real-world problems and explain how we solve them. Our message was simple: fleet operating costs are spiraling out of control due to recent business and regulatory changes. Companies that fail to optimize their truck routes are feeding the profit shredder with every excess mile they run. So what’s driving the urgency to reduce delivery time and miles?
- Increased complexity of delivery operations. Shippers are being forced to deliver faster and more frequently, hitting tighter and tighter time windows; what we call the “Amazon Effect.” Many shippers respond to these demands by piling on more equipment, more drivers, and more route miles – adding even further profit-sucking costs.
- Escalating fuel costs. These have gone up 23% in the last year.
- The driver shortage. Driver-related costs represent 43% of total fleet operating costs – your largest cost bucket (source: American Transportation Research Institute). And with drivers in short supply, it’s costing more to recruit and keep them. When routes are inefficient, you need more drivers.
- Pressure to go green. More miles equals more fuel equals greater carbon emissions. Anyone with an eye for the environmental impact of the trucking industry has reason for concern. According to United States Environmental Protection Agency (EPA) estimates, light-, medium- and heavy-duty trucks account for 41 percent of transportation’s 27 percent contribution to total U.S. Greenhouse gas emissions.
These pressures are about as “real world” as you can get. Unfortunately, many transport operations are not equipped to respond.
The Profit Shredder was our way of demonstrating the down-side of using a manual approach to routing and scheduling, or using software that simply isn’t designed to manage the dizzying number of variables involved in multi-stop truck routes. Old-school route planning approaches:
- add time and miles to daily truck routes,
- disappoint customers due to missed and late deliveries
- increase spending on equipment and drivers
- inflate fleet operating costs
Real-world problems, solved
By contrast, using automated routing and scheduling saves 10-30 percent on fleet operating costs, allows fleet managers to fully maximize use of assets – including limited drivers and expensive trucks – and minimize fuel costs. For example, for a large US frozen food carrier Paragon reduced the company’s pick-up and delivery truck fleet by a full 10 percent. At the UK’s largest supermarket chain, Tesco, Paragon software helped reduce empty running by 12 percent, and the company calculated it saved 150,000 miles each week. Read more about how we have solved shippers routing inefficiency problems here.
Routing and scheduling software does more than make better routes. Our state-of-the-art Paragon Live modules integrate Paragon’s routing and scheduling software with more than 40 different telematics systems, allowing customers to compare planned versus actual routes in real time. This facilitates proactive alerts to customers or customer service representatives regarding any operational problems or delays.
The JoC panel asked us why we’re different from other routing software solutions. The answer is that Paragon has been fine-tuning its software and algorithms for nearly 30 years, in response to customers’ changing requirements. We have 3,400 active system installations in 60 countries. As a best-of-breed solution provider, we differ from larger, one-stop-shop software companies in that we concentrate solely on doing one thing exceptionally well – efficient vehicle routing. Each year, 33% of our revenue is reinvested in software development.
The JoC also asked us to talk about where our technology is headed. We talked through three different points here.
(1) Based on customer demand, much of the focus will be around greater visibility of transport operations. We predict shippers will increasingly crave reliable information about in-process deliveries that they can pass on to their customers, and we’re ideally positioned to serve that need.
(2) It is becoming increasingly crucial for the shipping department to provide better internal reporting and analysis on business-critical KPIs. Gathering real-time data about deliveries opens the possibility of harnessing artificial intelligence, big data, machine learning and data analytics.
(3) We are helping our customers respond to demands for a more responsive point-of-delivery experience, via developments in our electronic Proof of Delivery system, which allows live customer service interactions during the delivery process, via mobile devices.
Shippers that adopt route planning and execution software can transform the transport department into a streamlined operation that offers improved visibility at every step, internally and externally. This is becoming a competitive must-have rather than a desirable bonus.
While we didn’t take the prize at the JoC’s Innovation Jam, we certainly valued the opportunity to mix with a savvy group of our peers in the industry, and to join with them in exploring how best to solve the problems facing the inland freight industry today, and into the future. Thanks to Eric Johnson, JoC’s Senior Technology Editor, and his team for a memorable and enjoyable conference.