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Route Optimisation for Retail Deliveries Return On Investment Part Two

In my previous blog I talked about the immediate dollar benefits of reordering your retail furniture deliveries so that you would drive the least distance, saving both time and money. I gave examples of actual returns using GeoSmart’s Route2GO Lite application which is designed for anyone to use. In other words, you don’t need to be a computer geek to be able to use it. You need to understand your business.

I gave the example of getting up to 1200% ROI on a single run and this is genuinely achievable. But there are so many more benefits to be had. Lets have a look at some of these.

First if you combine the knowledge of how long it is going to take to get from the shop or warehouse to each customer, you will be able to work out how much work the vehicle can do in the trip or in a day. This has a number of benefits. Firstly it provides clarity for sales people and the sales counter of what deliveries can be achieved in a day. Imagine if a customer came into your shop wanting to buy a bedroom suite as they have guests coming in the weekend. If you can’t guarantee delivery, your store loses the sale. That being the case, the sales person loses commission, your competitor gets your sale and the would be customer will be telling people not to visit your store, even if you have great product for a great price.

In the optimised example below, we have identified not only the driving time for each job, but based on experience, how long the driver would typically be on site unloading the truck and carrying the product into the customer’s home or premises. This is of course very important when planning the entire day.

The next thing that is really important for consumers is some sort of certainty as to when the truck will arrive with their treasured new purchase. They want the experience to be gratifying and they don’t want to be waiting around in the morning for someone who isn’t going to arrive in the afternoon.

Now you can actually provide some clarity. you wouldn’t of course tell Mrs Smith that her new bed will arrive at 9:43 AM, but it would be fair to say it should arrive between 9:30 and 10:30 or perhaps 11AM allowing you to under promise and over deliver. She may have had to take time off from work to be home for the delivery. We always hear complaints about delivery people who don’t turn up when promised and the flush of excitement can quickly turn into anger and frustration.

Deliver as promised and you don’t just have a happy customer today, you have a customer advocate who will be back at your store next time she is open to buy furniture and will be recommending you to her friends. People don’t buy furniture every day, but they may do so dozens of times during the lifetime of your business. There are loads of stories showing that people favour service ahead of price, so these repeat customers will also possibly be very profitable customers who will haggle less and make a decision more quickly because they like and trust your business.

Of course the delivery people will be much happier too. Who wants to deliver to a customer who is telling them off for not arriving on time. They are just doing their job, probably what they have been told to do. They don’t need to have their day soured by unnecessarily unhappy customers.

Because we know the order we are going to do the deliveries in, we can also produce a document that tells us how to load the truck in reverse order.

Lets face it, furniture is heavy and it makes a lot of sense to handle each item once onto the truck and once getting it off. There’s no benefit in having to move things around every time the truck stops, its inefficient, hard work and wastes time.

A list like this makes life easy for the truck driver and also for the warehouse staff, ensuring that all items get on the truck in the correct order. All it actually is, is the delivery list in reverse order. That’s what this is ultimately what this is about. It’s not rocket science, yet we do need a computer to work out the optimisation because the driver doesn’t know every one way street, no right turn, median strips where the truck can’t do a U-turn.

So now we have paid a few dollars to use this application on the web. We can see that we have enough resource to do some more deliveries if we get some more sales, which will inspire confidence in the sales staff. You get happy loyal customers who will come back and spend more with you and tell their friends to do the same. You can provide a better service than your competitors and your staff will be happy in their work knowing that their day will be less complicated and they will have happy customers.

The best part is you don’t have to take our word for it. Give us a few of your old runs in the order that you did them in and we will optimise them for you for free to prove our point. No cost, no risk, no obligation. You have nothing to lose and everything to gain. Why not contact us now?

October 1, 2010 Posted by | Delivery, driving, Freight, Furniture Delivery, geosmart, location based services, map tools, maps, Marketing, new zealand, Retail Profit, Return On Delivery, ROI, route optimisation, Route2GO, Sales, Uncategorized | , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Retail Delivery Route Optimisation Savings: Return On Investment Part One

In my last blog I looked at the example of a furniture store using Route2GO Lite to optimise a day’s deliveries. This time we are going to look at the payback, or as I like to call it WIIFM, What’s In It For Me.

The first thing to look at with any business investment is what you are trying to achieve. One furniture retailer we are talking to, told us that they currently achieve an average of 8 deliveries per truck per day and would like to achieve 10 per day. That’s great because it is easily measurable. Start with a goal in mind, but there is of course much more and I’m going to look at two levels of Return On Investment (ROI). They are tangible and intangible.In this blog I will focus on the tangible, but as you will read in the next one, intangible is equally as important if not more so. Bookmark or subscribe to this blog and come back to find out why.

Tangible

First you have your fixed overheads as far as deliveries go. The first one is your vehicle. It is difficult to get specific vehicle running costs for commercial vehicles. As it was explained to me, when you buy a car, they come off the production line in 10’s of thousand identical vehicles. In theory they should have the same lifetime costs. When you buy a truck or van, you will have a choice of gearbox, and everything that goes on the chassis. For example you could have a metal truck with a luton over the cab, it could be a flatbed, it could have cloth sides. It may have low gearing because it is designed to carry heavy loads etc.  This means that there is no list available that will tell you cost per km for commercial vehicles. I managed to get hold of a document that says that a new 3001 cc diesel car running 14,000km a year has an average cost of 98.4 cents per km over a 5 year life span. Obviously commercial vehicles will drive far more than 14,000km a year and will have great costs.

The best thing you can do is ask your accountant, they will be able to work it out very quickly. I suspect at best you’ll get no change from $1.30 per km.

Let’s back track for a second. What is route optimisation again? It is a tool which looks at all the stops you want to make on a journey and calculating the sequence that you should do them in, in order to drive the least distance in the shortest time.

Why use GeoSmart’s Route2GO and not leave it up to the driver? Because we have a full turn restriction dataset for routing. That means we take into consideration a variety of factors including main roads vs. minor roads (designed for faster traffic flow), one-way roads, no right turns, implicit turn restrictions where you may be able to legally turn but a large vehicle couldn’t safely complete the manoeuvre, roads with median strips where you can’t do a U-turn etc.

Proof? Don’t take my word for it. Give me some run sheets of completed days trips in the order they were done and we will process them and show you the difference. We did this recently for a firm with half a dozen routes. Half of them returned modest results, but the other half generated some significant savings. Consider that if you could cut as little as 20km off a day’s deliveries for one vehicle at $1.30 per km, that’s a saving of $26. Do that every day over a year and you have saved almost $10,000! Of course petrol and diesel prices aren’t coming down any time soon!

But wait there’s more: What about labour costs? Your truck or van doesn’t drive itself. It has at least one, or in the case of bulky or heavy items such as furniture two people on board who have a cost. What do those people cost you per hour? No I don’t mean what do you pay them. Employing staff includes all sorts of things. Perhaps office space, special clothing, phone, desk, mobile, Taxes, ACC Levies, training, holidays, insurance, management and of course all the ancillary costs of doing business, accounts, kitchen facilities, tea and coffee, bathrooms etc. I think you’re getting the picture.

Whatever way you measure the cost of your staff, they key is productivity and in the area of productivity, the simplest way of looking at it to start with from an ROI perspective is, if you can increase their productivity without increasing your overheads, you are making more money right? Let’s say you could have your driver be more productive by half an hour per working day. From memory, we work around 222 days a year after taking off weekends, public and annual holidays. Half an hour a day increase in productivity is almost 3 weeks over a year. I’m not going to guess that cost, but your accountant can tell you what that represents.

These are only two tangible ROI Factors, but they on their own already produce an impressive result.

What does it cost? What’s the catch. I’m glad you asked that question.

The great thing with Route2GO Lite is that it is a web application. You don’t buy it, you don’t pay a monthly fee, you only pay for what you use. When you are not using it, you pay nothing.It is volume based and the more you use it, the cheaper it is per use, but even at the lowest entry level it is very economic.

Route optimisation comes with 2 components. The first part is what we call geocoding. This is where we get the geographic coordinates of the address. That could be the driveway of a home, or it could be somewhere inside a complex, such as a school or a business park. The dearest this gets is 12.5 cents per address. You only do this the first time for each address, so if you have regular customers, this is a once of cost.

The second part is the route optimisation. You tell us the starting location and optionally the end location and our application then looks at every possible combination of the route many times until it is satisfied it has the best combination. This starts at 50 cents per location.

So let’s look at a hypothetical example. We looked at a typical customer trip in the furniture delivery example. We saved a vehicle with 2 staff 20km at a total of $26 savings on a standard trip.  Lets say we also saved $40 in wages. We now have $66 in savings. The cost for Route2GO Lite was 8 geo-codes at 12.5 cents = $1 plus optimising a journey with 8 stops at 50 cents each = $4. So total cost to save $66 was $5. As I mentioned, there are no additional costs, no set up costs, no monthly license fees, its pay as you go.

But wait, there’s more ROI, plus you aren’t going to dock these guys half an hour in pay, you want them to do 2 more deliveries. Well now you have time to do that, so you can increase their productivity. You probably charge per delivery, but your fixed overheads aren’t going to change much, so you will save even more.

If you found this interesting, please bookmark this page or subscribe to this blog, because there is much more coming. The ROI on this page equals more than 1200% return, but the intangible benefits also make very interesting and exciting reading, so please come back to find out how this works. Also if you know anyone in the retail industry that does deliveries, why not email them a link to this page and share the knowledge.

If you want to give Route2GO a try and get us to compare a few of your routes for free with no obligation, contact us.

September 28, 2010 Posted by | Delivery, driving, Freight, Furniture Delivery, geosmart, GIS, location based services, map tools, Marketing, new zealand, new zealand maps, Return On Delivery, route optimisation, Route2GO, Sales, software, Uncategorized | , , , , , , , , , , , , , , , , , , , | Leave a comment

How Furniture Shops can Save Time and Money on Deliveries with Route2GO Lite

Do you have delivery vehicles? How would you like to be able to do more deliveries in a day just by being a bit smarter? It’s expensive running a truck, especially in the city where traffic congestion is a given most days of the week. In the furniture business you may have a plan of which areas you will deliver to on certain days of the week. That’s a plan, but if a customer says he will only buy that expensive lounge suite if you deliver it tomorrow, do you walk away from the business? Times are better than I thought if you can do that.

In this industry and today’s economy a furniture store or chain needs to be smart, deliver on its promises and be competitive.

So what does your vehicle truly cost you to operate. Your accountant should be able to give you information on the total cost of ownership for your trucks or vans per annum. This includes depreciation, maintenance, petrol and oil, road user charges if applicable, insurance, tyres and other consumables and of course petrol. You will know the distance the vehicle has driven over the 1 year period, so can come up with a per km cost for this vehicle. So now divide the total cost of the vehicle for one year by the kilometres driven and you have your per km rate. This is important because you can’t calculate your return on investment on a service without knowing what your initial costs are. This of course doesn’t include the costs of the driver and possibly second staff person required in the truck because much furniture is to bulky or heavy for one person to manage.

A key problem with furniture delivery is that no two days are the same. This means that you can’t just plan a route out and repeat it. Each day you need to prepare a new run sheet and rely on someone to put it into an appropriate order. Sounds easy and obviously this is what people are doing every day. The problem is that, even with a printed road map, you may not know about one way streets, no right turns, dual carriageways where you can’t do a U-Turn and so on. We are currently working through some recent daily run sheets for a medium sized furniture retailer. The very first run sheet we processed through Route2GO, the optimised route was half of the distance of the route they did. It cut down their driving time for the day’s work by about an hour, meaning they could have easily done two more deliveries in the same amount of time.

So what skills do you need to be able to use Route2GO Lite? The minimum is the ability to correctly spell the street names you are going to and to follow the instructions in our user manual. You enter the addresses you are going to and we tell you what order to do them in.It can be as simple as that. If you have someone on staff that has basic spreadsheet skills, you can do so much more.

You can load the truck in reverse order so you’re not wasting time re-handling the furniture on the truck each time you stop. You can do much more and we’re going to tell you more about it in this blog. You can also get some more information on our web site. Best thing you can do is talk to us about your business. you can contact Luigi Cappel on phone 09 9668 768, or email luigi.cappel@geosmart.co.nz. Send us a job sheet for a run you have already done and let us check it for you. We’ll tell you whether we think we could have suggested a better route. Want to try it for yourself, we can set you up with a free trial so you can see how it works for your business.

Subscribe to this blog if this is of interest because I am going to come back and provide more information about how this can help your business grow. You don’t have to be a rocket scientist, you just have to have the desire to increase productivity and profit and provide a competitive level of service that will have your customers coming back for more and recommending you to their friends. Now check out where the tangible ROI comes from.

Finally remember that the companies who are best prepared in tough times are going to profit the most when the economy picks up. We want to help you. You understand the furniture trade, we understand New Zealand roads and how best to get around them.

September 21, 2010 Posted by | Route2GO, Uncategorized | , , , , , , , , , , , , , , , , , , , | 2 Comments