Transportation optimization best practices

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]

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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.

Route Management Features diagram

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.

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.

Optimization Strategies diagram

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.

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 a higher number of customers.

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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.

Fleet management components diagram

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.

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 fleet management software components diagram

Custom software enables your business with these capabilities: