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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

What Tools Do You Need to Develop a Mobile LBS Application Part 4

A key component and possibly the second highest webmap query on the Internet is for Driving Directions and this has even more relevance in a mobile scenario. Driving Directions is a key point of difference for GeoSmart in New Zealand. In many other countries, the government provides free or low cost map data of a very high quality and suitable for car navigation and other purposes. In New Zealand this isn’t the case. The LINZ maps are the official datum for cadastral property boundaries. However, their road centreline is derived by a computation of the property boundaries.

As I’ve previously mentioned, New Zealand was town planned in Edinborough in the late 1800’s and many of the roads they draughted were never formed or constructed. They are known as paper roads. These roads exist on paper and on the LINZ map data used by services such as Google Maps, but they physically don’t exist. An example is Threepwood Road in Otago. If you have a look on the hybrid mode of satellite view and map view on Google, you will see that while the road exists on the map data, it physcially isn’t there in the satellite photography. This would cause a real problem if you wanted to go for a drive on it.

When GeoSmart discovered this problem and realised that, while it didn’t matter a lot for printed maps where you still have to analyse the data and make a decision on where you drive yourself, practically speaking, if you used either car navigation or a printed set of directions and couldn’t see a map as such, paper roads could cause a lot of confusion and grief. With LINZ having the only full maps of New Zealand, we decided we had to make our own maps. To do this we drove almost every road in New Zealand and also used a lot of Orthophotography to develop a driven road centreline, eliminating all paper roads and at the same time creating an accurate road centreline.

While collecting this data, we were also able to collect information such as the intersections controls (roundabouts, traffic lights etc), turn restrictions (one way streets, no left turns), speed zones, whether the road was sealed, accuracy of street signs and much more. We were even able to establish things like the angles of corners and inclination of roads (how steep they are etc).

This enabled us to build the car navigation dataset used by all the major brands including TomTom, Navman, BMW, Ford, Siemens VDO etc. It also allowed us to create sites like AA Maps and provide the API’s used on Wises web site. Now you can go to AA Maps, plan your journey and print out turn by turn directions from anywhere in NZ to anywhere in NZ and be confident that the instructions will work.

So, from there to your mobile. The Directions Web Service will work on any device that can identify a start point and where the user wants to go. The User Interface is up to the developer  and will probably vary from phone to phone because of its controls and screen size. For example a touch screen such as that on the iPhone or Windows Mobile, would have functionality closer to a web page, whereas a phone without a touch screen would have to function differently. That is really just a design issue, not a significant barrier.

If your phone has GPS or the ability to use cell tower triangulation, it will know where it is. But it is also possible (if you know) to tell your mobile where you are and where you want to go This could be an address you want to get directions to, or it could be Points of Interest from our POI Web Service mentioned in Part 2 of this series. Once you know the start and end of your journey, you can use the Directions web service to guide people directly to your desired location.

So now you can have turn by turn directions delivered to your phone. This could be send as an SMS with text directions, it could be an MMS combining text directions with an image of the route map, or an image zoomed in to your destination, or it could be information in your mobiles web or WAP browser, with enanced functionality.

Here’s the thing. If you are at home or in the office, you can use your PC, but it is of no use to you in your car or away from the computer. You may not know where you are going to want to go until you are out on the road. An LBS application with the Directions Web Service can give you the same freedom, without the necessity of interpreting a map, or more commonly the map isn’t there when you need it. Pick up the kids, meet someone for coffee, find your way from the car park to the show. All easy to do with LBS.

Just as a footnote, a few days ago a 62 year old woman set of from Christchurch to her  home on the West Coast of the South Island. She didn’t arrive and her friends and family spent a couple of days searching for her after she crashed her car down a 5 metre embankment. She was eventually found but the story could have been very different. She may not have been found at all, or not until it was too late to save her life, or she could have been found very easily. If she had a mobile with GPS, after she had been reported missing, if the phone was within coverage, it could have been called and located using an LBS service using GeoSmart tools and her searchers could have had turn by turn directions on their mobiles, right to the spot where her car was.

I suspect this sort of application will be available within the next few years, but someone has to create it first. Tracking elderly people is something that is also a major opportunity.

April 5, 2009 Posted by | AA Maps, cartography, driving directions, geosmart, gps, lbs, location based services, maps, Mobile maps, navman, new zealand, new zealand maps, satnav, tomtom, web maps | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment