Load Optimization

If we could choose three things to illustrate the key concepts behind “load optimization,” the most apt would be a pair of scissors, a stopwatch and a dollar sign.

First, the scissors. Cost cutting is at the heart of load optimization. It's a process that enables you to manage a wide variety of factors so that your fleet operates as efficiently and cheaply as possible. “It's all about how to load your trailers, sequence your stops, minimize the miles you need to make deliveries, find the cheapest place to get fuel, and minimize out-of-route miles — all while meeting the customer's transit time requirements,” explains Gary Whicker, sr. vp-engineering service for J.B. Hunt.

Next, the stopwatch: This refers to the newest wrinkle in load optimization strategy, which is how to quickly develop and plan low-cost, highly efficient routes and procedures for moving a particular load. This is one area where computer software is getting a lot more attention.

“Looking at a million different possibilities is impossible for a dispatcher,” says Dave Faulkenberry, managing director for HomeDirectUSA, a subsidiary of Bekins Van Lines. “The beauty [of software] is that it gives you choices you can't configure by yourself, providing a range of delivery options that best meet the needs of the customer and the fleet that you otherwise wouldn't have — and much faster as well,” he notes.

That explains why the dollar sign represents the ultimate goal of load optimization strategy: making more money.

“The drivers here are how to maximize profits and margins through the more efficient utilization of a trucking company's assets, from trucks and trailers to drivers and freight terminal personnel,” says Mokhtar “Mo” Bazaraa, Ph.D, managing director of global logistics for the Logistics Institute at Georgia Tech.

“With [freight] rates flat or going down these days, the only way to make money is for a fleet to reduce its costs,” adds David Rewers, vp-sales for FleetOne, a fuel management firm. “The only way to reduce costs is through more planning and more efficiency. That's why load optimization strategies are so much more critical today.”

LET SOFTWARE DO THE WORK

While many fleets still put together their load plans by hand — with dispatchers and drivers combing through maps, looking up truckstop fuel prices, etc‥ — software is increasingly being viewed as the one tool that can open a fuller range of money-saving load optimization opportunities for fleets.

“You really have to look at routing and fuel prices at the same time, and in real time, in order to drive the most cost possible out of your business,” says Mike Brewer, spokesman for Comdata. “No longer can you focus on reducing costs in just one slice of your operation. To get the most benefit, you have to look at the whole pie and take an integrated approach.”

Kevin Kendrick, who's in charge of Comdata's Internet-based Network Manager fuel optimization system, adds that automation is the real key for fleets.

“You're talking about being able to factor in every potential cost here: fuel price, state fuel taxes, fuel discounts, mileage and out-of-route mileage,” Kendrick notes. “Also, you then have to be able to plot routes very quickly and get that information to your drivers quickly.”

Speed is the key advantage to software, simply because so much can change at the last minute in today's trucking market, says Edward Forman, CEO of Prophesy Transportation Solutions. “The advantage to using load planning software is that orders always change at the last minute. They can get cancelled, doubled in size, or re-routed somewhere else,” he points out. “Software allows you handle the last-minute stuff quickly and efficiently without adding more cost to your operation.”

That's especially critical for fleets that are growing their operations, Forman adds. “If you are doubling the amount of shipments your fleet is handling, you don't simply want to double the number of trucks and personnel to handle them,” he says. “You want to make sure you're maximizing the use of the assets you already have.”

Using load optimization software systems can also help factor in the toughest part of the process — customer shipping and delivery requirements — at the lowest possible cost to the carrier, says J.B. Hunt's Whicker. “We have to make sure we meet customer needs, such as load delivery time windows, while at the same time taking care of our fleet requirements,” he says.

HomeDirect's Faulkenberry concurs. “We have to try to maximize the profit on our capacity within the parameters of our customer's needs,” he says. Automating the process “allows us to lay out the best route for the operation, then determine customer needs and modify” routes accordingly.

NOT FOR EVERYONE

In spite of these pluses, however, some experts point out that load optimization software isn't the right option for every fleet.

According to Whicker, “The proverbial ‘it depends’ applies here. First, you have to look at your freight flows and the size of your fleet. If you're a large fleet with a very dynamic, changing freight mix, then technology can really help you with load optimization. But if you're a smaller fleet with steady, predictable freight, using a map and published fuel prices might do the job.”

While Georgia Tech's Bazaraa says that most carriers “can benefit from some form of load optimization strategy,” he cautions that for fleets with four or five trucks, a computer driven system really may not be needed. He says major benefits of automated load optimization become evident with fleets operating a minimum of 100 tractors.

But lack of appropriate technology should not close the door altogether on using load optimization strategies. It just means that the strategies have to be used in a different way.

Household goods carrier Bekins is one example. John Mazzuca, sr.-vp-operations, explains that since the company relies exclusively on owner-operators, “involvement in route and fuel stop planning is not a cost factor for us.” However, Bekins does use a type of manual load planning to help its owner-operators determine the profitability of a load. “We use verbal communication with drivers on a load-to-load basis to determine the driver's and customer's needs,” Mazzuca says. “We also back it into our revenue per-day and per-mile calculations so our drivers can better determine if the load is worthwhile or not.”

FINAL ANALYSIS

Many industry professionals believe that while customer service may be the most critical factor right now, in the future technology will play a more pivotal role in determining which carriers keep or lose freight business.

Harry Drajpuch, exec. vp-order management and distribution for USCO Logistics, puts it this way: “The tipping point for technological savvy is fast approaching. In the future, with all things being equal, the carrier that has the most advanced technology and that can ‘hook in’ best with our information systems and those of shippers will get the business.”

Richard Alfonsi, vp-business development and marketing for software maker Velant, adds that for all carriers, but especially LTL operators, shippers will be most concerned about the following: Are they using technology to be as efficient as possible, and can they pass on costs savings from that efficiency to customers?

One factor that will determine whether fleets can maintain cost savings and efficiencies down the road is their ability to incorporate changing business conditions into their operations strategies, explains Mark Rourke, general manager for Schneider Brokerage, a subsidiary of Schneider National.

“Factoring in highway delays caused by construction and traffic congestion are other issues — but we're not at that level yet,” he adds. “Maximizing yield from a finite number of assets is a constantly evolving process.”

And it's one issue that can make the difference between red or black ink at the end of the day.