As more of the economy comes back online, distribution-oriented companies find their business in one of the following situations: volumes are up but costs have risen faster or, volumes are down considerably, and they don’t appear to be coming back any time soon. In both cases, the objective is to right-size distribution operations to drive down costs and dramatically improve productivity. Now is the time for distribution companies to look hard at their current fleet strategies, tactics and use of technology to make a step change in operational performance. Here are two ways fleet operators can make a difference.
- Network reroute. Whether demand is up or down, when there is change, the distribution network gets quickly out of balance and does not run optimally or cost-effectively. Fleet operators need to reset their distribution network and even consider changing their distribution policies. Reroutes are different than daily route planning and have the potential to deliver much more productivity because they are about fundamental change. In daily route planning, the strategies, policies and even the territories, frequencies and routes are already defined. The goal of daily route planning is to do the best with those restrictions already in place. In a reroute, all restrictions can be treated as variables. Policies, practices, capacity etc. are flexed to see what new or changed routing strategy and tactics will best address the change in demand. This approach applies to not only those fleets that run static or master routes, but also to dynamic routes because reroutes are about the policies and practices that dictate the daily routing parameters. Reroutes will also be important because, as demand changes and distributors look at new markets, they will need to use the solution to help predict the costs and capacity required to move forward.
- Dynamic route planning. Far too many distribution-oriented companies have relied on fixed or master routes. With today’s volatile demand and the need to dramatically reduce operating costs, fleet operators need to challenge the assumptions that have kept them from adopting dynamic routing. Dynamic route planning will be a critical strategy going forward, as it produces greater productivity because it is not constrained by fixed territories, sequences or demand assumptions. The biggest challenges to making this change typically comes from the sales force as they are concerned that customers expect a fixed visit schedule or want the driver to be familiar with the customer. With today’s cost pressures, these assumptions need to be challenged and, in the dynamic route planning case, CFOs could end up being biggest advocate for change once they see how much can be saved through its adoption. Dynamic route planning doesn’t mean that key customers cannot have fixed deliveries. Instead, key customers can serve as “anchors” for the rest of the customers. Dynamic route planning should also make planners more productive. In today’s fluid demand environment, planners and schedulers are struggling to constantly adjust the “fixed” routes, which results in lost productivity and poor customer service. Dynamic route planning is better suited for this kind of demand and allows planners to become more proactive, focusing on the exceptions and continuous improvement. In addition, social distancing has severely curtailed customer interaction at the delivery location. Distributors need to find other ways to engage customer such as notifications during and after the delivery cycle.
There is no “business as usual” for distribution-oriented companies and their route planning and customer service strategies, tactics and technologies. Dramatic improvement in productivity will be the top of the business agenda for distributors who want to emerge stronger from the pandemic. Instead, fleet operators need to take the lead to show the value that network reroutes and dynamic route planning can bring to the bottom line. In these challenging times, the “C-suite” will be more willing to adopt new strategies, tactics and technologies. Use this opportunity to take fleet performance to the next level. How is your company transforming fleet operations? Let me know.
As Executive Vice President, Marketing and Services, Chris Jones (CJones@descartes.com) is primarily responsible for Descartes marketing activities and implementation of Descartes’ solutions. Chris has over 30 years of experience in the supply chain market, including the last 10 years as a part of the Descartes leadership team. Prior to Descartes, he has held a variety of senior management positions in other organizations including: Senior Vice President at The Aberdeen Group’s Value Chain Research division, Executive Vice President of Marketing and Corporate Development for SynQuest and Vice President and Research Director for Enterprise Resource Planning Solutions at The Gartner Group and Associate Director Operations & Technology for Kraft Foods.