3 Questions to Ask When Considering Route Optimization Systems

Tom Livernash - Monday, November 17, 2014

So you have decided to drag your company into the 21st century.  You are tired of trying to plan freight by shuffling papers and making phone calls.  You believe a load consolidation system will save your company time and money and improve service.  Well before you start down the long road of researching, cost justifying and getting approval on such a system you need to answer three questions:

Question 1: How much money can we expect to save?

Question 2: Is it feasible for my company?

Question 3: Are the savings worth the effort?

Let’s deal with the first question.

A determination of the amount of money your company will save can be determined from a detailed analysis of your freight, which of course we can provide for you.  However, you can get an estimate of the potential level of savings by looking at the results that others have achieved.  Based on our own experience with clients over the last several years we have found that 7 out of 10 companies have significantly reduce their freight cost through the implementation of load planning software. The table below shows the incremental benefit from implementing computerized shipment consolidation optimization under several starting conditions: 

Current operational process

Typical Cost Saving Percent Experienced from Optimized Consolidation

Low

High

All LTL shipping by LTL carriers.  No alternative transportation mode considered.

20%

45%

Some LTL sent via truckload based on simple, rigid rules.  Most saving is based on estimate or rules of thumbs and normally savings are not verified with historical data.

10%

25%

Systematic manual shipment consolidation.  Performed contentiously but without the aid of computer or decision support tools.

5%

12%


The range of savings obviously depends on many variables such freight characteristics and operational constraints. Make a clear eyed and honest appraisal of how your firm currently operates and rank your firms current operational process.  Then ask yourself and others in your company, if we only achieved the low end level of savings, would we be willing to make this investment?  The answer to this of course will depend on the feasibility of the project and whether your company thinks it’s worth the effort.  Tune in next when we will examine these two questions


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