How Excessive Routing Costs Can Affect Your Business
Routing costs may not sound like something to place at the top of your priority list. Many businesses may focus on increasing sales or conversion rates, rather than thinking about how poor route choices can affect the organization.
Some businesses may also feel that transport and routing issues do not really affect them. While it is true that shipping or logistics companies depend immensely on transportation and, thus, are more affected by transport costs, it’s beneficial to all businesses to reduce transport costs. Here’s how routing costs can affect your business.
Why Are Your Routing Costs High?
There are a variety of reasons why your business may have high routing costs. Internal reasons may include poor route planning, unsuccessful deliveries, returns or complaints from customers, a lack of transparency in the decision-making process, and more. These are factors your business has the power to control, but if left unattended can shoot up your transportation costs.
External reasons are factors outside of your organization. This can include fluctuations in oil and fuel prices, trends in the transportation industry, demand forecasting and predictive analytics, the state of the economy, and more. 2020, for example, posed numerous difficulties to the transportation and logistics industry including social turmoil, economic uncertainty, the call to stay home, and other factors leading to high costs.
To achieve success and balance routing costs, your business ought to always consider the effect of the external on the internal operations of your company, and plan accordingly.
5 Ways That Excessive Routing Costs Can Affect Your Business
The purpose of route planning is to promote efficiency and productivity in your fleet. When routing costs are high, it means there is a lack in your organizational planning. Poor efficiency and high routing costs can affect your business in the following ways.
1. Fuel Costs
Unplanned routes result in excessive fuel spending. When your drivers get lost or use long routes, they consume more fuel to cover the extra distance. With a fleet that includes numerous drivers and vehicles, this cost multiplies, dealing a serious blow to your business.
2. Maintenance Costs
A factor closely linked to fuel consumption is mileage. If a lost driver wanders around an area searching for their destination, they increase the distance covered. This doesn’t just affect the fuel consumption, but it also has an impact on the vehicle condition. With more distance covered, your business has to schedule vehicle servicing faster than anticipated.
Furthermore, traveling on unplanned routes increases the likelihood of incidents. For example, your drivers may travel onto bad roads that cause damage to the vehicle. Thus, increased maintenance frequency is one of the ways that routing costs can affect your business.
3. Labour Costs
When it comes to delivery and transportation, it’s fair to say that the saying ‘time is money’ is certainly applicable.
Longer routes with stretched-out delivery times mean you have to pay your drivers more. Uninformed routing choices and planning lead to delays and extra time spent on the road. As a result, your business has to cough up more money for overtime. Or you have to reallocate the delivery which also piles onto your routing costs and delays your fulfillment of other orders.
4. Customer Satisfaction
Deliveries aren’t just about your business and its drivers. That’s only one end of the transaction. At the other end is your customer or client, who anticipates the arrival of their order at a particular time in spectacular condition. Delayed routes, fuel spending, maintenance, and labor costs also affect your customer service.
If your driver gets lost or gets stuck on a bad road, this affects the delivery and delivery time. As a result, your business ends up having to deal with dissatisfied customers. Furthermore, the increase in your routing costs raises your company costs overall. In a situation like this one, to still attain profits, your business has to hike up product prices, meaning your customer has to spend more. Higher prices will likely drive customers away.
Thus, high routing costs affect your customer delivery and relationship and client satisfaction.
5. Economic/Climate Effects
The modern-day business cannot just focus on the bottom line. Reputation and image matter. Sustainability and climate care are areas that are particularly important when transportation is involved. Customers care about business’ approaches to sustainability and environmental care. High routing costs don’t just portray poor planning; they can also give off the idea that your organization is apathetic about the state of the environment.
It is necessary to consider the effects of your fleet and transport management on the environment. By optimizing your fleet management and routing, your business reduces spending on fuel and cuts its carbon emissions. This routing cost affects your brand image and reputation, as well as your bottom line, as customers may choose to flock to your eco-conscious competitors.
The above routing costs are not isolated from one another. They each have a symbiotic relationship.
These routing costs are also compounded by the nature of transportation and delivery. Consider your driver's day. If your driver or delivery representative gets lost or delayed on their first stop, all the delivery stops following that one will experience delays. Thus, this multiplies the fuel, maintenance, and other costs for each succeeding trip.
One botched trip can have a domino effect on your upcoming deliveries.
8 Effective Ways To Reduce Routing Costs
1. Optimize Vehicle Space
A fantastic way to guarantee savings on your routing costs is by taking advantage of the size or capacity of your vehicles. Each time a vehicle leaves a loading bay with empty space, there is a potential financial loss to your business. Instead, your company should aim to organize routes that optimize the use of your vehicle space.
Consider scheduling your shipping or supply chain in such a way that your shipments arrive or dispatch in a common area at a similar time. This way, you can utilize one vehicle and fill it to capacity instead of adding costs by sending two different vehicles to different spots or at different times.
Another way you can optimize your vehicle capacity is through smart route planning and order management. Establish delivery clusters to fulfill orders in the same area for delivery by the same driver. This saves time, money, and other resources.
A final option involves establishing a diverse fleet with varying vehicle types. This way, you can select suitable transportation for the task, ensuring capacity optimization.
2. Use Route Planning or Route Optimization Software
Route planning involves the consideration of various elements. These can include fuel prices, distance, available drivers, other deliveries, vehicle types, the neighborhood, peak traffic hours, weather, and so many more. If handled manually, your route planning may become overwhelming and inefficient.
Utilizing route planning or route optimization software is a practical and convenient way to streamline your routing tasks, and get the best out of route planning for your business. Route planning software uses advanced algorithms to map out the ideal routes. It also automates necessary tasks like the designation of trips to drivers.
Useful Track-POD features your company can gain from using the software include:
Geocoding and/or geofencing
Vehicle tracking/ GPS monitoring
Real-time traffic assessment
3. Communicate Effectively
Your transportation software can also act as a necessary communication channel for your business, your customers, and your drivers. With Track-POD’s delivery app, you can assign work to your drivers right to their smartphone. The app utilizes a navigation system to guide them on the optimal route, updating trips to avoid traffic. Furthermore, you can monitor your drivers’ progress and delivery in real-time, providing an accurate ETA for customers.
Another benefit to communication is how the app streamlines the documentation of deliveries, making it easy to manage for everybody involved.
At the delivery point, drivers can access all the necessary information on the app and execute the customer signature electronically. The app automatically shares delivery documents to the customer, including a delivery notice and receipt. The information is also automatically uploaded to a central, cloud-based system that’s accessible to your business, which you can also connect to your invoicing software.
4. Train Your Drivers or Representatives
Connected to the use of route planning software and better communication is the education and training of your drivers. Employee management is important, of course! However, once your drivers are out on the road, you have no power over their actions. It is up to them how they behave, but their behavior does affect your business.
It’s vital to bring all your delivery representative to book about industry regulations, road safety, internal safety, and transport procedures. That way, they know how to conduct themselves appropriately for their safety as well as the customers’ and other drivers’ well-being.
It is also important to remain transparent with your employees about your transportation decisions. Don’t just introduce new software without correctly training your drivers on how to use it efficiently. Forcing workers to use software that they’re unfamiliar with will result in confusion, inefficiency, and, in the end, higher routing costs and wasted software investment.
Thus, consider running workshops and other training forms to familiarize your drivers with the software and policies.
5. Have A Monitoring System
One way to ensure drivers conduct themselves properly on the road is through a vehicle tracking or GPS monitoring system. This allows you to observe whether drivers abide by the planned routes and ensure that they don’t make personal stops. You can also use GPS monitoring to observe their speed, driving habits, and road safety. This helps you to reduce incidents and/or high fuel spending.
Most route planning or optimization systems come with GPS tracking systems, so you get the best for your business!
6. Develop & Keep An Efficient Routing Guide
Once you’ve consolidated the best cost-saving methods for your business, it’s important to take note of them. Maintaining efficiency is as vital for your transport management as introducing efficiency measures. There’s no use implementing a good measure if you’re not going to sustain it!
That’s what your routing guide is for. It’s a document you and your transport management team can refer to for transportation decisions and systems. The points of information you should add in your routing guide include:
Preferred and alternative carriers per area or region
Special delivery instructions (e.g., for multiple deliveries)
The types of delivery options your company offers
Details on how to check if deliveries are completed well
How to manage complaints or returns
Steps for recording proof of delivery
How to respond in emergencies
Your routing guide is a handy tool to ensure that everybody understands what is required of them and what to do in specific situations.
7. Regularly Schedule Vehicle Maintenance
You can’t afford to have your vehicles broken-down or unavailable during a busy delivery day. That can affect your business dramatically. Make sure all your vehicles are in good working condition by scheduling regular vehicle maintenance checks. You may feel like you’re losing money whilst paying for the maintenance, but it is a necessary and beneficial loss prevention measure.
With the travel distance recorded by your route planner, you can schedule checks in advance and when needed!
8. Do The Delivery Right The First Time
There’s no better cost-buster than just getting it right the first time. If you plan routes efficiently and share them with your drivers in time, they can familiarize themselves with the routes and make productive deliveries. You avoid unnecessary costs, and you give the customer exactly what they paid for!
The Bottom Line
Routing costs have a substantial impact on your business and its operations. High routing costs can result in higher fuel consumption and spending, frequent maintenance scheduling, and environmental effects. Moreover, they can have a significant effect on your customer relationship and service provision.
Brilliant business management is about mastering the connections of different departments and making them work smoothly together. Thus, optimizing your route management benefits the sustainability and efficient operations of your business.