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AdexinBlogTransportation optimization best practices

Transportation optimization best practices

Feb 19, 2024
5 min

Summary

When we focus on optimization, we often consider several main areas crucial for our operations: transportation, supply chain, and logistics. Optimization in transportation is a challenging task. We need to be cautious not to favor one area at the expense of another. There must be a balanced outcome that benefits each operational area.

Considering the complexity of each industry, we need to take a holistic view of all operations to keep our business up and running. For this reason, companies have started using customized software solutions that provide insights much more deeply than before. Today's logistics manager can finally avoid making decisions based solely on assumptions and gut feelings. Frankly, logistics and transportation in the supply chain are KPI-oriented businesses that keep company resources from slipping through their fingers. We all operate on a very narrow margin to remain competitive, so you should consider transportation optimization best practices in your operations.

This article teaches you about affordable areas where optimization can influence your operations. We share insights about practices used by top players in the market. By examining their experiences, you can see how they benefit from various optimization methods. You can also delve deeper into custom software solutions for transportation optimization. Let's embark on this insightful journey.

What is transport optimization?

Looking through the lens focused on logistics, transportation, and supply chain, we can define optimization clearly. It is a strategic process that aims to improve the efficiency and effectiveness of transportation and logistics operations. The main goal is to enhance the overall efficiency of the transportation network while minimizing costs and maximizing the usage of resources.

Optimization can be applied to various modes of transportation, including road, rail, air, sea and more. We will tell you more precisely about the optimization you seek for each transport mode later in this article. At first glance, we want to emphasize the main areas common for each transport mode.

Key aspects of transport optimization include:

Route optimization

Here, you can determine the most efficient routes for transporting goods to minimize shipping time, fuel consumption, and costs.

Cargo optimization

This area focuses on maximizing available cargo space to ensure that shipments are economically and environmentally viable.

Planning optimization

This is about efficient planning and scheduling of transportation activities. This avoids delays, reduces downtime, and increases overall productivity.

Inventory optimization

This area is about balancing inventory levels to meet demand. For transportation, this means timely product availability and lower transportation costs for logistics.

Technology integration

Technology goes hand in hand with innovation, so implementing advanced technologies such as GPS tracking, IoT devices, and custom software solutions for real-time data collection can help make informed decisions.

Cost optimization

You should combine all aspects of transportation to identify opportunities to reduce transportation costs. This can include fuel consumption, maintenance, and labor costs.

Giving the best example of transportation optimization, we can focus on utilizing container space for shipping through the sea. It's important to highlight that containers will undergo intermodal transportation, so the journey will begin on the trailers at the distribution center. Containers will be loaded and delivered to ports, from where they are loaded onto cargo ships and shipped through the sea to their destination.

By optimizing the load of containers, you can more effectively utilize space in containers. If you ship 40ft containers with a quantity of 20 per week, you may shrink the load to 20 ft. That means you can probably save the load of 10 pallets per shipment. This process starts strictly in the warehouse and impacts further transportation.

Optimizing freight can yield a return on investment (ROI) ranging from 4% to 8% on freight costs. Considering a shipment volume of around 20 per week in a 40ft container, we can clearly picture what remains to be allocated within our budget. Thus, optimization has real and measurable benefits to one of the most important areas of transportation. [1]

How do we optimize transportation?

One way to optimize transportation is to digitize most of the processes involved in shipping. Route optimization software is a type of technology designed to streamline and improve the planning and execution of transportation routes for vehicles such as delivery trucks or service vehicles.

Key features of route optimization software may include: 

Smart integration with satellite maps

Integrates with maps and real-time traffic data to meet the challenges of current road conditions and potential delays.

Multiple stops

You can get the ability to operate multiple stops within a single route while optimizing the order of stops.

Traffic challenges

The software helps you overcome constraints such as delivery time windows, vehicle capacity, and special restrictions or requirements.

Optimize costs

You can minimize overall transportation costs, including fuel and labor.

Real-time tracking

Real-time vehicle tracking allows you to monitor route compliance and respond to unexpected changes.

Scalability

You can gain the ability to scale and adapt to different fleet sizes and vehicle types. So, whether you are a small or medium-sized company, you can benefit just as much as larger companies. 

Legacy systems integration

Route management software can seamlessly integrate with other logistics and transportation management systems for a comprehensive solution.

Route Management Features diagram
Route Management Features diagram

By deploying route optimization software, you can develop various transport optimization strategies that require cohesive cooperation between various business entities. You can initiate the implementation of processes that help with better deliverability. 

Here are examples of supporting strategies and processes for shipping and delivery that can be implemented by using route software:

Just-in-Time (JIT) delivery

JIT is a logistics strategy that ensures that products or materials arrive precisely when they are needed in the production process. It minimizes inventory costs and warehouse space.

Just in Sequence (JIS) delivery

JIS is a variation of just-in-time manufacturing in which components are delivered to the production line in the order required for assembly. It optimizes efficiency and reduces production delays.

Last-mile delivery

This delivery type focuses on the supply chain's last stage, aiming to efficiently deliver goods from distribution centers to the end consumer. It often uses technology and local delivery networks to increase speed and convenience.

Reverse logistics

This logistics process involves managing product returns, as well as refurbishment, recycling, and disposal. It plays a crucial role in optimizing supply chains and addressing environmental considerations.

Optimization Strategies diagram
Optimization Strategies diagram

By understanding where route software can assist with transport optimization, we can easily observe which industries deploy specific strategies and processes for logistics and transportation to support supply chain planning. In many cases, companies use all the mentioned processes to some extent. We can see how DHL or UPS benefit from last-mile delivery, which is also crucial for small and medium-sized businesses that cooperate with these logistics giants. By utilizing route management software, your business can better handle expectations while subcontracting delivery to UPS, DHL, or FedEx. These companies extensively use independent carriers and freight forwarders to extend their supply chain networks. 

Therefore, it is also worth noting that you may secure contracts with major industrial players more effectively when your business complies with requirements. For this purpose, the best practice can be to present experience to some extent with software for route management, which instantly increases your business capabilities.

According to trusted sources such as Gartner, the use of software solutions for route management is not just an ongoing trend. Statistics show that as much as 46% of all transportation, supply chain and logistics solutions in use include areas such as delivery operations are covered by digital solutions.  [2]

Fleet management optimization

Fleet management is one of the best-known ways to optimize transportation, but it's unclear for many small and medium-sized businesses when fleet management software might be required. Small and medium-sized truck fleet owners may perceive fleet manager software as a faraway prospect. Nothing could be further from the truth. This is because the optimization term is not exclusive to large companies. Small and medium businesses should be even more cautious, as transportation optimization ROI can be significantly more important in the short term. And this is how you can really benefit from it. You can gain fast ROI, as your margins and incomes significantly affect your business plans due to higher number ofcustomers.

What is fleet management about?

Fleet management applies to the comprehensive coordination and organization of a company's vehicles. It's mostly about trucks, trailers, and container management. It involves a series of tasks and responsibilities dedicated to optimizing truck operations' efficiency, safety, and cost-effectiveness.

Here are crucial components of fleet management:

Vehicle sourcing

Fleet management involves selecting and purchasing vehicles that meet the company's operational needs. Size, capacity, fuel economy, and technological features are considered.

Maintenance planning

Fleet management helps schedule and oversee regular maintenance and repairs to ensure the optimal condition of fleet vehicles. In this way, breakdowns and downtime can be reduced.

Fuel management

Using a fleet management strategy, you can accurately monitor fuel consumption to control costs and increase efficiency. You can implement strategies such as route optimization and fuel-efficient driving using fleet management software.

Driver management

Driver management helps maintain a qualified, trained, and safety-compliant workforce. This includes monitoring driver behavior and addressing any safety or performance issues.

Compliance management

Fleet management helps you stay compliant with legal and regulatory requirements. You won't miss out on driving documents such as licenses, or you can maintain compliance with emissions standards and safety regulations.

Fleet management components diagram
Fleet management components diagram

As already mentioned, fleet management is more efficient when deployed through software. In many cases, fleet management software will allow you to instantly optimize your routes with this built-in element and carrier management. There are three very characteristic elements of fleet management software, as it enables your business with all the functions above it can assist with, as follows:

Integration with legacy systems

Ensuring seamless integration with other business systems, such as supply chain management and logistics software (like inventory management and warehouse management systems), for a more comprehensive and interconnected approach.

Analytics tools

Fellet management software always provides analytics tools that allow you to process data to provide valuable insights into vehicle performance, driver behavior, fuel efficiency, and maintenance needs.

Mobile access

Enabling fleet managers to access and monitor critical information on the go. This means having a mobile app that can be used on tablets. Additionally, this benefits both sides, as during this time, your drivers can also benefit from mobility. Mobile apps improve responsiveness and decision-making.

Giving an example of best practices for fleet management, we can certainly refer to the software capabilities in the area. So, it was mentioned that fleet management software enables your business with analytics. These can help lower CO2 emissions and influence cost savings in fuel consumption. Reduction of fuel usage can be even about 5-10%. It was found that lower fuel consumption directly results in lower CO2 emissions because 35% of emissions come from fuel consumption in transportation. [3]

Custom software for transportation optimization

We have referred to in this article that software provides your business with capabilities for transportation optimization. By integrating some of the software modules, you can construct your own Transportation Management System (TMS) dedicated to supporting continuous improvement, specifically, transportation process optimization.

Custom software for transportation optimization is a solution tailored to your specific business needs. This means you can quickly gain a competitive advantage by benefiting from functions not available in particular commercial off-the-shelf software (COTS) solutions. 

Custom software enables your business with these capabilities:

Route optimization

By developing software, you can embed customized algorithms and logic for efficient route planning. There might be unstandardized functions that can support operations such as delivery schedules, road conditions, and fuel management.

Feet management

Customized software can combine functions for your truck fleet management. You can get a comprehensive platform for overseeing and optimizing a company's fleet of vehicles.

Loading optimization

Customized solutions can enable your warehouse with dock scheduling and loading planning to maximize vehicle payloads for cost-effective transportation.

Real-time tracking

With customized functions, you can get GPS tracking not only for your truck fleet but also for trailers and containers. You can have advanced tracking capabilities to monitor the location and status of vehicles in real-time for better visibility and responsiveness.

Configurable reporting

You may leverage your operational ability to create customized reports and analytics tailored to specific metrics. This means that you can run, among others, key performance indicators (KPIs) relevant to your business and create more accurate forecasts. 

Compliance management

Customized software can make available tools to ensure compliance with industry regulations, security standards, and other regulatory requirements.

Scalability

Small and medium-sized businesses can gain, with customized software, a high ratio of flexibility to scale the software as the company grows or new requirements emerge.

User-friendly interface

Customized software allows you to build an intuitive and user-friendly interface tailored to the specific needs of the transportation team.

Shipment optimization

With customized software, you can get a strategic process for shipment demonstration and optimization. Your logistics and supply chain management can focus on maximizing the efficiency and cost-effectiveness of transporting goods from one location to another. 

Custom fleet management software components diagram
Custom fleet management software components diagram

These are some of the most valuable functions that can increase your business operability. By using custom software development, you can build specific modules on top of your existing system. In this way, you don't have to increase your expenses for developing completely new business logic but can exceed the existing one.

Before you decide on a software solution, it is worthwhile to consider what factors play a crucial role in the evaluation of custom software development companies. You need to learn how to navigate the choice of the best transport optimization software for your business

What are the benefits of transport optimization?

Transport optimization is about continuous improvement. This means that you can gain long-term advantages and also see results in the short term. It all depends on the areas where you're seeking performance adjustments. Being in your company during the process of customized software development, you can achieve much more, as you can optimize your transportation in many various areas.

Here are the benefits of transport optimization:

Cost Reduction

By optimizing routes and minimizing fuel consumption, you can enhance overall operational efficiency. Your businesses can experience significant cost savings in transportation.

Improved Efficiency

Efficient route planning, load optimization, and real-time tracking contribute to streamlined operations. This is how you can reduce delays and improve the overall efficiency of the transportation process.

Enhanced Customer Satisfaction

Timely and reliable deliveries are possible through optimized transportation. This leads to improved customer satisfaction and loyalty.

Reduced Environmental Impact

Transport optimization can contribute to lower fuel consumption and reduced emissions. Here is how you promote environmentally friendly and sustainable practices.

Resource Utilization

Efficient use of vehicles maximized cargo capacity and contributed to better resource utilization. This is what's making the most of available assets.

Real-time Visibility

Advanced tracking capabilities provide real-time visibility into the location and status of shipments. This functionality allows for proactive issue resolution and better decision-making.

Compliance Management

Transport optimization systems often include tools to ensure compliance with industry regulations and safety standards. You can follow legal requirements and reduce the risk of penalties.

Data-Driven Decision Making

Analytics and reporting features enable businesses to make informed and data-driven decisions. This is leading to continuous improvement and strategic planning.

Flexibility and Adaptability

Businesses can respond quickly to changes in demand AND market conditions. You can tackle better unforeseen challenges by having a flexible and adaptable transport optimization strategy.

Optimized Supply Chain

Integrated transport optimization contributes to an optimized supply chain. You can reduce lead times and improve inventory management.

Competitive Advantage

Businesses that implement effective transport optimization gain a competitive edge by providing efficient and cost-effective transportation services.

Improved Safety

You can monitor driver behavior and adherence to safety regulations. This approach enhances overall safety, reduces the risk of accidents, and ensures compliance with industry standards.

Scalability

Transport optimization solutions can scale with the growth of the business. 

Transportation Optimization Benefits
Transportation Optimization Benefits

Final takeaway

We emphasize the importance of digitizing transportation processes. By using route optimization software, especially in conjunction with other modules of the Transportation Management System (TMS), you can empower your business with key features. These include intelligent integration with satellite maps, handling multiple stops, overcoming traffic challenges, cost optimization, real-time tracking, scalability, and seamless integration. This underscores its potential to revolutionize transportation planning. At Adexin, we specialize in assisting companies with optimizing transportation through the development of customized software solutions. With a wealth of experience, we have successfully helped companies in the transportation, logistics, and supply chain sectors in various countries. We bring tangible value to your business through a customer-centric approach. Contact us today, and let us support your transportation optimization.

References:

[1] Transportation Optimization; Retrieved from: https://scg-lm.s3.amazonaws.com/pdfs/mercurygate_mtc_transportation_optimization_083016.pdf

[2] Gartner Survey Shows 70% of Supply Chain Leaders Plan to Invest in the Circular Economy; Retrieved from: https://www.gartner.com/en/newsroom/press-releases/2020-02-26-gartner-survey-shows-70--of-supply-chain-leaders-plan

[3] Advanced analytics can help achieve 5–10 percent hauling fuel optimization in open-pit mining; Retrieved from: https://www.mckinsey.com/~/media/mckinsey/industries/metals%20and%20mining/our%20insights/advanced%20analytics%20can%20help%20achieve%20fuel%20optimization%20in%20open%20pit%20mining/advanced-analytics-can-help-achieve-fuel-optimization-in-open-pit-mining_vf.pdf

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FAQ

What are the transportation optimization problems?

The transportation problems bring typical optimization challenges to the light. The goal is to determine the most cost-effective method of transporting goods from multiple suppliers to multiple destinations. The main objective is to minimize total transportation costs while taking into account supply and demand constraints. This optimization problem is characterized by the complex task of effectively managing as well as the logistics involved in transporting goods to reach optimal cost and operational efficiency.
Here are selected problems with transportation optimization:



  • Congestion

  • Infrastructure Deficiency

  • Fuel Price Volatility

  • Environmental Impact

  • Safety Concerns

  • Limited Accessibility

  • Lack of Intermodal Connectivity

  • Regulatory Issues

  • Capacity Constraints

  • Technology Integration

  • Political and Economic Factors

How can transport costs be optimized?

Transportation costs can be optimized through various methods, such as route optimization, load optimization, or efficient scheduling. Using route optimization software, shipments can be consolidated, and fuel-saving practices can be applied. This is a very effective logistics and supply chain strategy.
Besides this, you can use these practices:



  • Strategic Carrier Negotiations

  • Intermodal Transportation Solutions

  • Efficient Warehouse Management

  • Optimized Reverse Logistics

  • Real-time Visibility and Analytics Tools

  • Collaborative Freight Consolidation

  • Advanced Technology Integration

  • Dynamic Pricing Models

  • Continuous Improvement Strategies

What are the different methods for transportation optimization?

Transportation optimization uses a variety of strategies to increase efficiency and reduce costs in the movement of goods. Route optimization focuses on identifying the most efficient paths while minimizing travel time and expenses. Cargo optimization ensures maximum utilization of available cargo space for economically viable shipments. Scheduling optimization emphasizes efficient scheduling to avoid delays and increase overall productivity. Inventory optimization is designed to balance inventory levels to meet demand, ensuring timely product availability while reducing transportation costs. Integration of technology, such as GPS tracking and custom software solutions, ultimately facilitates real-time data collection. Cost optimization includes identifying opportunities to reduce expenses in many aspects, such as fuel consumption and maintenance and labor costs.

Why is transportation optimization important?

Transportation optimization is critical for several reasons. It contributes to significant cost reductions and minimizes transportation expenses through strategic route planning, load optimization, and technology integration. Efficient transportation operations increase overall operational efficiency, reduce delays, and improve the reliability of supply chains. This leads to increased customer satisfaction through on-time deliveries.

What is optimization in supply chain management?

Optimization in supply chain management refers to the strategic application of various methodologies and technologies to increase the efficiency, profitability, and overall performance of the entire supply chain. It involves the systematic analysis and improvement of processes related to procurement, production, distribution, and logistics. Optimization is intended to minimize costs, reduce lead times, improve customer satisfaction, and increase overall competitiveness.

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