Benefits of Solving the Last Mile Problem with Route Optimizations

Route planning for the "Last Mile"

The Last Mile Problem has been around for a while now and has been a thorn in the side of any number of industries, from telecommunications to transport and logistics.

In essence the transport version of the problem is this,

Last mile deliveries can incur up to 30% of all transport costs.

Essentially this means that, no matter where the product was manufactured or warehoused, and how far it has traveled, getting it to the customer's door from the nearest depot will cost almost a third of that entire trip. This issue is only becoming more and more important to solve as cities and towns become ever more congested and eCommerce drives ever more demand for deliveries (and in particular, free deliveries) placing ever more pressure on companies to lower costs associated with the last mile.

As you'd expect, with an important business problem to solve, entrepreneurs and inventors have been hard at work coming up with creative ways to try and solve this issue. this includes crowd-sourced delivery apps in which people from the general public can pick up something and drop it off (because they happen to be travelling in that direction already) for a very small fee. The trade off is that your reliability might suffer for deliveries people simply don't want to make.

Other companies have downsized their city delivery vehicles to nimble bikes or scooters. This also enables those deliveries to avoid the worst delays associated with traffic congestion, and, of course, these vehicles are much lighter on fuel and less expensive to maintain. The trade-off is that they have less capacity and so have to return to the depot far more often to pick up new deliveries.

But no matter what methods you try to reduce costs, there is something you can do that will knock a significant portion of the last mile costs down sustainable, and in a way that improves your efficiency and makes operations, management and logistics a lot simpler.

This is where route optimizations and route planning comes in. Here's the type of advantages your business can derive from optimizing routes (and obviously, these come with serious benefits in terms of reducing your costs, streamline processes, and generally making the 'last mile' far less of a headache for your business):

Optimal Fleet Management

Would it be better to have smaller, lighter cheaper vehicles to complete pickups and dropoffs, or would larger vehicles with more carrying capacity end up being more efficient?

Trying to decide via trial and error is a pretty expensive exercise given that you would, at the very least, have to hire and run different fleets of vehicles to compare their costs. Of course, with route planning, you can instead enter digital versions of your vehicles into Optergon and run these against typical. real-world schedules to see which end up being cheaper in the long run.

Virtually testing different fleets (with their associated costs and limitations) is a lot quicker and cheaper and will ultimately mean you end up buying and maintaining the cheapest possible fleet that allows you to fulfill your business needs.

Understanding Business Limitations

Optergon recently helped a client who was in the process of expanding their fleet due to growing demand. They were making in excess of 300 drop-offs a day across 3 neighboring towns. Before expending their fleet and hiring on new drivers they ran route optimizations on their previous week's deliveries using their existing fleet.

The optimized routes showed that not only was a costly fleet expansion and employment drive unnecessary, but that they could actually reduce their vehicle count and still meet their obligations.

Planning Ahead

A route optimization doesn't only reduce costs. It's got an added side benefit in that it can actually tell you if something is possible at all. Pretend you are bidding for delivery work and want to quote for a large number of stops. By running an optimization beforehand it is possible to see whether or not your intended workload is in fact possible at all - given the real-world limitations of your business.

This can help you become more competitive because it allows you to plan better than competitors who might take on more than they can deliver - and end up suffering reputation al damage in the process.

Warehouse Efficiency

Knowing ahead of time what your optimal routes are gives you an additional business advantage. You now also know which vehicles are delivering what, and, more importantly, the order in which they are performing those deliveries.

Sharing these routes with your warehouse personnel allows them to better plan, stock and pack the warehouse and vehicles leading to reduced costs and additional streamlining before a vehicle has even left the depot.

Better Customer Communication

How often have you waited for a company to make a pickup or delivery, or even arrive to perform a service, only to be told something like, "we'll be there sometime on Monday, or maybe Tuesday." It's not ideal - but often companies simply don't have the capacity to be specific about when they'll arrive.

By optimizing routes ahead of time you can know with certainty (barring force majeur events) when you'll arrive at each location in your schedule. This means you can tell customers something like, "we'll be there at 11:45 on Monday." A much better service and experience.