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Reaching the Next Level through Fleet Optimization

Originally published August 29, 2011

Introduction

Freight is improving, or at least, capacity remains tight enough to seem that way. It’s time to make hay while the sun is shining, right? We all hope so. But how do you maximize your potential within your own operation? That’s a loaded question. A proven way to get more out of your existing operation is optimization. There are several areas of opportunity for optimization within a fleet, and two of the most proven applications are planning optimization and fuel optimization.

Planning Optimization

If your one of your primary daily operational challenges is matching loads and capacity, then this is definitely for you. Whether your business has irregular truckloads, less than truckload (LTL), or even local cartage, planning optimization can effectively drive efficiency in your operation. The planners in your operation have a big job, and there are a myriad of variables that influence the planning process. Planners are often intelligent, analytical problem solvers, but they are only as good as the information they have to make daily operational decisions. To make matters more challenging, those decisions are real-time, point-of-impact decisions that often need to be made expeditiously.

Planning optimization can help with several aspects of the planning process. First, an optimizer can process all of the freight and available power characteristics in a matter of minutes and generate a mathematical solution geared to maximize asset utilization and minimize the cost of servicing your customers. A planner is limited to looking for solutions on a load-by-load basis in most environments, whereas an optimizer can look at the problem as a whole and determine the best combined solution for the entire network. Tests given to some of the most experienced planners in the industry have proven that even with a limited number of options, say 5 trucks and 5 loads, the odds of coming up with the most efficient solution from an empty miles perspective alone are heavily against the planner. Now consider that problems involving thousands of trucks and loads can be computed in a matter of minutes, and it’s easy to see the power of technology.

Planners are invaluable resources in the organization and have a tremendous influence on the bottom line. Planning optimization is not intended to replace the decision maker, but rather empower the decision maker with valuable information at the point of impact. Ideally, use the technology to provide swift and efficient solutions that can be used to effectively address the bulk of the planning workload, and then leverage your time to handle the exceptions that will always be the real challenge: loads that were previously missed, hot loads that get booked at the last minute, drivers that need to be home for emergency reasons, or overbooked markets that require critical thinking and out-of-the box creativity to resolve.

Planners are the best at solving critical problems and dealing with the daily exceptions. However, planning optimization can help here as well. You can use it to find the best possible asset to cover a shipment, available options to repower a load, or even identify unseen capacity by highlighting loads with excessive delay that could be dropped to free up more immediate capacity in a given market. The bottom line is planning optimization drives efficiency in your operation by giving planners a wealth of business intelligence at their fingertips.

Organizations implementing this type of optimization regularly experience benefits ranging from empty miles reductions of 2-4%, increased utilization of 5-15%, and often on-time service improvements of 1-5%. Do the math. For a fleet of 500 trucks, that’s a multi-million dollar impact to the bottom line.

Fuel Optimization

Fuel prices in the U.S. are at record highs and expected to continue their painful trend upward. Can you afford not to optimize your fuel network?  Negotiating the best prices with the major vendors is a critical task, but how do you know your fleet is getting the best price on a given route?  That’s where fuel optimization pays huge dividends.

Fuel optimization considers the available route, the fuel level of the vehicle, and today’s fuel prices combined with an organization’s fuel discounts to determine the most cost-effective place to fuel. The fuel recommendations are processed in seconds and steer your fleet towards the best prices within your defined network of fuel stops.

This is one of the easiest-to-implement forms of optimization with one of the best residual returns available. Fleets typically reduce their fuel purchases by several pennies per gallon when using fuel optimization, which typically means several hundred thousand dollars in reduced fuel spend for a fleet with a few hundred trucks.

Summary

Although many believe market conditions are improving, key cost factors such as fuel, maintenance, and driver wages are expected to rise. With the added challenges of driver availability constraints, efficiency becomes even more critical. Those who take advantage of optimization will create a healthier bottom line and be better prepared for the next economic downturn. For example, one carrier with more than a thousand trucks recently reported an improvement of 5 points in their operating ratio and they credited optimization. You may be doing several things well, but if you are not optimizing, you are not as good as you could be.

  • James LangleyJames Langley
    James is the Vice President of Business Analytics at TMW Systems, Inc., the leader in software solutions for the trucking industry. He has more than 18 years of experience in business intelligence, logistics engineering and operations management. He has served in key senior management roles for both billion dollar institutions and small businesses. Leveraging real world experience with an analytical approach, he has spent his career bridging the gap between business and technology.
     
    His experiential expertise includes transportation and logistics management, fleet maintenance, and prepaid financial processing. His approach to achieving business objectives is working directly with business owners to identify areas of strategic opportunity, developing an understanding of the existing environment through process and data analysis, collaborating with the business to design a plan of action, and helping to operationalize the plan within the organization to actualize the ROI.
     
    His ability to overcome data quality challenges, convert business intelligence into actionable processes, and implement strong data stewardship accountability and initiative measurement standards has proven to be a catalytic mechanism for businesses striving to adapt in an ever-changing environment.

    Editor's note: More transportation articles, resources, news and events are available in the BeyeNETWORK's Transportation Channel. Be sure to visit today!

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