Centralized Routing Fuels Cost Reductions

A few weeks ago, I wrote about my experience at the Descartes user conference in West Palm Beach, FL. Like any good conference, the sessions were interesting, engaging, and informative; like I’ve said in the past, one of my favorite parts of these conferences is learning from practitioners. And this year’s conference was no exception. One particular session stood out to me – Arne Carlson, Director of Transportation at Clean Harbors.

Founded in 1980, Clean Harbors is North America’s leading provider of environmental, energy, and industrial services. The company operates four businesses: technical service, industrial and field services, oil and gas field services, and Safety-Kleen. Arne oversees transportation for Safety-Kleen, which provides used oil collection, recycling and re-refining, parts washing, and other environmental services for the small quantity generator market.

One of the big challenges for Safety-Kleen was in how they routed their trucks on a daily basis. There was no consistent message or process, as every branch would route their trucks differently. The drivers would essentially design their own routes based on their daily tickets that had come in. A big part of Arne’s job was to change this outdated method for routing, and centralize operations. The main driver was cost reduction; centralizing routing could reduce 200 people in various capacities to 30-35.

Safety-Kleen has 200 branches all routing trucks differently. The initial phase of the process had 100 of the 200 branches switch over to centralized routing. The biggest challenge the company faced was getting buy-in from local operations. Additionally, they had no established key performance indicators (KPIs) in place to measure success against. To establish a baseline measure, Safety-Kleen set up KPIs to track route quality and cost reduction. These KPIs included cost per stop, cost per mile, revenue per stop, on-time performance, and many others. Once a baseline of these metrics was established, the company could compare the baseline of centralized routing and their performance in the months after.

This was a big part for getting buy-in from the local operators. Once they were able to see the cost reductions and service improvements made, it was difficult to not get behind the idea of centralizing routing. From a service standpoint, centralized routing made a huge impact for customers. Before, Safety-Kleen was able to tell a customer what week they would be by to pick up the used oil; after implementing centralized routing, the company could give a timeframe within a specific day. This made planning much easier for their customers. It also improved customer service significantly.

The centralization of routing was implemented 18 months ago. In that time, half of the branches are now using centralized routing. The company has hired 35 additional people in a variety of roles, including routers (who handle all orders and routes for 4-7 branches), planners (who help with network optimization), and call coordinators (who proactively contact customers). On-time performance has improved 78 percent, but is still at a level that the company deems to be too low. But, that is a significant improvement over 18 months. From a cost reduction standpoint, the finance team approved the KPIs put in place, and the company was able to start fully measuring their productivity. In the first year, revenue and gallons per mile have improved 19%. On top of that, the total first year cost reductions are nearly $6 million.

While it was not the easiest process to put in place, Safety-Kleen is seeing the benefits of centralizing their routing operations. The company was sure that centralized routing and standard operating procedures would drive efficiencies for the company, as well as accountability for each individual branch. The individual branches could see that they were not operating to their full potential. The centralized routing has improved service levels and resulted in significant cost reductions. As the company moves forward over the next 18 months to roll out the plan to the other 100 branches, the cost savings should only increase.