3 Secrets to a Successful Load Optimization Implementation

Tom Livernash - Tuesday, September 02, 2014

When a firm begins to implement a route optimization system it does so with the expectation of maximizing services and minimizing cost. Companies can insure they meet these objectives by keeping three simple secrets in mind when implementing a load optimization system.

Secret #1:  Expect PlanTools™ to route freight differently. Route optimization systems are implemented because companies expect to save ten percent or more on freight cost through their use. It stands to reason then that if an optimization system can reduce your firm’s freight cost by this amount then it does so by producing routing solutions not previously considered. When you see those “out of the box solution”, your first reaction should not be “we have never done it like that before”, but rather you should ask “is this load feasible?” By feasible you should ask the following five questions about the load:

  1. Will the load save money?
  2. Will the load meet the customer service requirements?
  3. Is the load within the physical capacity of the truck?
  4. Can the carrier execute the load without violating DOT hours of service?
  5. Does the load conform to the load parameter you have specified in terms of the number of pickup, drops, miles etc?

If the load meets these criteria, it should not be disregarded simply because the routing solution has never previously been considered. Take for example a load originating in Seattle with shipments bound for Los Angeles, CA, and Phoenix, AZ. Most transportation coordinators would route this load from Seattle to Los Angeles and a final delivery in Phoenix. On the other hand, a rate-based optimizer will route this load to Phoenix, with a final delivery in Los Angeles, since the Seattle to Los Angeles rates per mile ($1.30) are significantly lower than the rates from Seattle to Phoenix ($1.75), and the rate differential more than makes up the cost of 270 extra miles incurred by looping back to Los Angeles. Coordinators need to be coached to apply the five criteria above before disregarding or editing the load just because it is not what they are use to seeing.

Secret # 2: Don’t be constrained by outdated rules of thumb. Lacking any alternative methods transportation coordinators for years have developed rules of thumb for guiding them in developing daily transportation plans. These rules of thumb range from things like the optimal amount of weight for a truckload to the maximum miles per day. While these rules of thumb may have had a useful role in the past, they frequently focus the planner on the wrong issues and unduly constrain the optimization system. During a recent implementation, a transportation coordinator inquired how we could constrain the optimization system so that on any one load there would be no more than two deliveries per day regardless of how far the truck had to travel or how far apart the drops were. When I inquired what this rule was based upon, I was told that this was to insure that deliveries would never be late. Further inquiry indicated that the real issue was that the planners were worried the application would not make proper allowance for the variability in stop time at individual consignees. These issues included not only  the differences in the average wait to unload, but the fact that some consignees had standing appointments. Once the planners were trained to used the PlanTools™ features for dealing with variable stop times and standing appointments at each consignee, they found that, on average, PlanTools™  could comfortably add an additional 1 and ½ stops to each to each truck per day without degrading service and with a corresponding reduction in cost.

Secret #3: Take the time to record the details that are important to your operation. The better the information that goes into the system the better the answer the application will produce. Your planners know a great deal about your product, your customers, your carriers and your overall operational requirements. However, human planners can’t possibly keep track of all this information when trying to build the lowest cost transportation plan that must meet many requirements. Additionally, if all this information is in their head, then that information is of no value to PlanTools™ or to anyone else if they are gone. Successful implementation requires that you take the time to define your product characteristics and your shipper and consignee operations characteristics. Things like pallet size, hours of operations and customer service requirements are all important elements in determining the goodness of PlanTools™ results. PlanTools™ has a highly robust parameter set capable of storing over 200 individual routing parameters. Most firms only need to populate a fraction of these, but the ones they need to populate are important. A client was complaining because the PlanTools™ took twice as many trucks to route its freight compared to when they routed their freight manually. When I asked if the pallet were stackable, I was told they were. When we changed the stackability code in the parameter set to recognize that the pallets as stackable, PlanTools™ use only ¾ of a truck.  Correct data matters. 

Following these three simply rules will greatly improve your chances of successfully implementing a route optimization system and achieving your objective of minimizing cost and maximizing services.

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