Vehicle routing and scheduling (VRS) continues to be a profitable, growing business.
The global market for VRS is slated to increase by 9% annually, to reach US$ 3 billion in 2024. src
A host of factors are driving this growth. Explosive progress in the e-commerce industry and the Amazon effect has led to shorter order cycles, decreased shipment sizes, rising consumer expectations of faster deliveries and a better experience. The last mile has emerged as a critical differentiator for companies to stay competitive and grow market share while meeting the ever-increasing customer demands. The demand for VRS technologies among businesses that manage private fleets or rely upon third party providers to fulfill their deliveries has created a crowded and complex market of providers and software solutions.
A company’s ability to identify and implement the best tools for its business success is an important step towards the optimization of supply chain operations.
Infosys Consulting helped an international logistics provider successfully implement VRS. The provider achieved lower operating costs, optimized asset utilization, improved on-time performance and greater customer satisfaction. In this blog, we will review some of the key decisions that we encountered during this journey.
AN ENGINE OR SUITE?
VRS providers offer customers significant functionality to solve routing optimization problems. At its core, one can view routing and scheduling optimization as a “math problem”. Each piece of software considers a finite number of constraints and arrives at the most efficient and cost-effective sequence to meet the variables. However, when breaking down VRS at this level, it is difficult to differentiate the solutions and capabilities of various VRS providers. All providers use similar mathematical models and heuristic techniques to produce answers to the equation.
Differentiation occurs when one evaluates the ability of VRS providers to put these answers in operation and apply them in practice.
While some vendors offer robust solutions as a package, such as dispatching and communication capabilities, on-road driver telematics and asset management, integrated with the routing and scheduling results, others offer these capabilities via modules in a stand-alone fashion. Firms must evaluate vendors on their ability to operationalize the outputs of their engines, rather than on the outputs of their engines alone. To push the analogy further, the engines are only a good as the results they can generate on the road in a live environment.
STATIC VS. DYNAMIC OPTIMIZATION
Gartner points out that there is a greater need for real-time dynamic technology to help tackle the many challenges of the transportation industry today, including a significant increase in last-mile deliveries. src Companies must consider the big picture while selecting a solution that solves the routing problem once, in a static environment vs. an integrated solution that receives real-time feedback during the delivery cycle and optimizes outputs accordingly.
Companies may be drawn to the immediate gratification and near term savings that a one-time static optimization can provide. The dynamic environment delivers the same near term benefits, with significant, continuous improvements moving forward.
The dynamic methods also discourage end-users from returning to bad habits that static environments facilitate at the outset.
One of the key lessons learned by the provider during the implementation of its own VRS on-road integrated optimization and navigation (ORION) system, is that the best solution is the one that is constantly evolving.
The routing and scheduling programs that will add the most value in the next decade will be designed to constantly learn and adapt.
These programs will combine advanced algorithms, artificial intelligence (AI) and machine learning (ML), to offer benefits of a business processes integration that route optimization cannot provide alone. Many operations processes are built based on historic industry experience that is full of human errors. These processes must be redesigned and integrated with new capabilities. In order to ensure successful implementation and acceptance from the end-users, companies will need to develop a comprehensive training and communications program. Providers should include the end-users in the design and rollout of a solution rather than adopting a top-down approach.
For companies that wish to implement new VRS processes, change will be an ongoing effort. The dynamic nature of routing and scheduling will require logistics companies to build capabilities for continuous large-scale transformation and stay updated with evolving technology and competition. In our experience, the companies that succeed with VRS are the ones that take a business-centric, methodical approach and have clear strategies for these decisions.
Senior Principal, Infosys Consulting
Josh has 23 years of consulting and logistics experience, mainly in the development and execution of large-scale supply chain engagements. He has helped our key clients accomplish objectives through supply chain transformation efforts including omnichannel development, warehouse and transportation evaluations and system implementations, resulting in cost reduction, improved customer service, increased market penetration, and revenue growth. He brings technology, engineering and sustainability solutions to a customer base that includes Fortune 50 companies and businesses trying to grow rapidly and gain market share. He is particularly interested in supply chain network design, warehouse layout analysis and design for optimum throughput and improvement of customer experience.
Associate Partner, Infosys Consulting
Sylvie is a passionate and results-oriented supply chain executive. Her experience with supply chain start-ups has demonstrated to her that supply chain professionals must question the status quo in order to deliver next-generation solutions. She is a believer in hands-on experimentation in order to deliver maximum results. Sylvie has developed and implemented numerous supply chain transformation initiatives for her clients and has extensive experience working with leading retailers and consumer brand owners. A supporter of lifelong learning, she continues to seek out fresh and innovative new ideas and insights through a network of supply change thought leaders. She is also giving back to the field as a guest lecturer at the University of Maryland.