Route optimization impacts the bottom line

Plumbing and HVAC business owners managing truck fleets understand that there are some things they can control, affecting their bottom line, and other things they can't. Take the cost of fuel. Just a year ago, many contractors were complaining about the high cost of gas, and today the cost continues to fall to about a dollar below last year's level. However, there is a tactic that plumbing and HVAC businesses can implement — regardless of the cost of fuel — that can save a significant amount of money. It's an approach called route optimization.

Route optimization has been in use by companies with large fleets for a number of years, but it's now making its way into businesses with fleets as small as five or six vehicles. Basically, it involves finding a way to travel the least miles with the fewest vehicles while maintaining a high level of customer service. It links the real-life professional experiences of a consulting firm with sophisticated software to improve a company's routing efficiency, enabling them to realize significant savings on fuel, equipment, wear and tear, and labor.

Route optimization routinely reduces fleet expenses by 10-25%, whether for a company with a mega-fleet or a company with a small-size fleet. And with the downturn in the economy, contractors are taking the opportunity now to re-examine how they are managing their fleets rather than simply reacting to growth needs when business is booming again.

The return on investment of hiring a fleet consulting service is remarkable. Studies by AmeriQuest Transportation Services, a provider of fleet management services, shows that on average, a client typically devotes about eight hours to gathering input for a route optimization analysis with an AmeriQuest specialist. The cost of an analysis can range from a few hundred to several thousand dollars, according to the size and complexity of the fleet. When it's compared to what could be saved in overall operating costs for just one truck in one week, it has a quick ROI. Just the savings on one vehicle could be $1,400. Do the math for a fleet as small as 10 vehicles, and the ROI comes clearly into focus.

How it works

What is involved with the route optimization process? Initially, a member of the logistics consulting staff gathers information on a fleet and creates an operational profile that may show daily, weekly and monthly variations. Here is some of the fleet information that's requested by the consulting staff:

• Number and types of vehicles
• Driver schedules
• Distance and time traveled
• Number of service calls
• Sequence of service calls
• Hours spent servicing customers
• Peak travel times
• Traffic details of service area

Even details such as whether service calls are made to residences in multi-family units or in large apartment complexes can be a factor, as well as the number of after-hours emergency services that are typically handled. By systematically studying the flow of vehicles and activity, it becomes clear where there are imbalances as far as technician productivity or overuse of certain trucks or even when fleets are oversized.

The routing software tool used by a company like AmeriQuest can determine the effectiveness of current route configurations and identify preferable route plans and asset allocation. It might call for trimming a fleet by maximizing trips per vehicle or finding more efficient routes. The tool is supplemented by the recommendations of veteran transportation professionals who bring the human element to the route optimization process. The professionals understand that flexibility is key to running an efficient fleet and the importance of discussing a client's specific needs. While stand-alone route optimization software programs exist, they cannot duplicate the real-world experience that consulting professionals can share.

Bottom line benefits

The bottom line benefits that route optimization can bring to most plumbing and HVAC businesses are hard to ignore. These benefits include decrease in fuel, tire and other equipment costs; decrease in non-productive labor costs; improvement in timely customer service and quality control; reduction in carbon emissions; and reduction in customer complaints.

One example of how route optimization can positively impact the bottom line is a mid-sized Ohio business with a number of facilities. It wanted to establish proper utilization of its resources to operate efficiently and reduce overhead. The resource allocation algorithm of AmeriQuest's routing tool was used to maximize the use of the trucks and reassign routes to idle trucks and technicians without changing dispatching time. The study created a plan to reduce the fleet by about seven units and increase the fleet's utilization time. This was accomplished in part by shifting several routes to different days of the week and converting to vehicle rentals in situations that warranted it. Among the actual changes following the route optimization analysis was a 6% reduction in miles driven and a 20% increase in the fleet utilization.

Once business owners learn what route optimization is all about and why it makes sense in today's tough economy, they will turn to logistics consulting service providers to get help. With the need to create efficiencies and cut costs, it has been discovered by small- and medium-sized contractors as a great solution to their business challenges.

Dave Beaudry is director, logistics engineer and consultant for AmeriQuest Transportation Services, www.ameriquestcorp.com, a provider of comprehensive fleet management services. He can be reached at [email protected] or at 800/608-0809.