12
Oct
Cut the costs of your entire business
We often notice slightly misleading stories about GPS logistics software in the media, but we are under no illusions that although GPS can be of help in many instances, such as assisting truck drivers or analysing completed work, the main focus of logistics will always be about moving goods from A to B and the efficiency of that process can be increased to a significant degree even without GPS.
Goods transportation in many companies today is determined according to the habits and experience of a logistics manager. They know the well-established routes both used daily for regular rounds and for reaching new destinations.
This method has several advantages, such as using proven tools and decision-making models, yet there are some deficiencies best remedied by employing modern technology; technology that can save the entire company (not only the vehicle fleet) up to one quarter if its labour and equipment costs.
How does this system work?
By collating all existing information regarding the vehicles, orders and roads, it is possible to calculate the optimal routes for the entire fleet. Management can then be sure that company vehicles are always being used in the most efficient manner and the employees are performing the tasks they are supposed to be doing. That leaves the logistics manager free to deal with special cases. At the same time, the company will no longer be dependent on a single individual, with the risk that if anything happens to them, or if they are poached by a competitor, all their precious know-how will be lost to the company. Technology concentrates logistical knowledge and makes it available to a range of employees and provides a knowledge-base for trainee logistics staff.
For such software to operate efficiently requires information on three important areas:
- Vehicles – their cargo capacity, special features (such as freezer or crane), maximum allowed working time, location of their garage, etc.
- Orders – volume, locations of loading and unloading and the time allocated, the time spent loading goods, necessary special features, etc.
- Road network
It is important to understand that, although the goal of the optimisation algorithm might seem to be simply to reduce vehicle mileage, it is capable of far more. Travelled mileage is indeed one of the most clearly distinguishable expense types, yet it is not the only one.
The optimisation algorithm does not only optimise mileage, but the costs of the entire transportation process. For that reason, we must view the money within a number of parameters, such as:
- Cost of a travelled kilometre
- Cost of a minute in travelling mode
- Cost of a minute in waiting mode
- Cost of a minute of loading operations
- Cost of involving another vehicle in the transportation process
- The effect of the volume of transported goods on the cost of kilometres travelled (a heavier vehicle consumes more fuel)
If we feed all this information into the planning system, it will quickly compute the route sheets for drivers so as to minimise all resources required.
Here is a simplified example that will illustrate the principle: if the cost of one hour of operating a vehicle is €1/h and the cost of a kilometre travelled is also €1/km and if the cost of loading time is €1000 per minute, then it is obvious that the goods must be delivered ensuring the time spent loading is kept to an absolute minimum whatever the distance travelled or the time taken.
In practice we have seen that the introduction of this system has allowed a company to service all its loading points, travelling 20 per cent fewer kilometres, using 10 per cent fewer vehicles and staying within the established limits of working time – all at the same time.
How can that be achieved?
Of course, a large part of the savings can be attributed to a large number of details which ordinarily escape our attention, yet there is also at least one aspect where we should adjust our perception of routes and lines travelled by vehicles to deliver goods.
To reiterate, the optimisation algorithm does not optimise the tracked route travelled by a single vehicle, but the entire transportation process of the company, which means that if Tallinn is the departure point for many deliveries of goods in different directions, then, in order to reduce the mileage travelled by nine vehicles by 30 per cent, a single vehicle might travel three times that distance, yet the company will still save twenty per cent of its costs. Such combinations are usually not discovered by human planners, since they are not what one would expect nor do they even seem reasonable at first glance. However, the technology is designed to discover even unsought options and will present them as planned and tracked routes together with an estimation of costs, including money and other resources.
Of course, this system cannot be fully implemented overnight and requires concerted effort from the entire company, not primarily in the form of direct monetary investments, but in conducting time-consuming trials and instructing the team.
However, the result is worth the effort, since in the end you will:
- ensure the sustainability of the company even if the people in charge of planning operations should suddenly fall ill or leave, since the know-how is no longer contained in the heads of individuals, but is shared in the system serving the entire company;
- save up to a quarter of the entire transportation cost.
