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Building Customized Delivery Management On the Internet

Delivery companies can opt to create a custom built delivery management platform or they can outsource their logistics technology and visibility applications to a new breed of service providers.

By Claude Germain

In the old days as a delivery dispatcher, your day would invariably start in the early morning with a walk around the dock. You would walk up to your delivery drivers, help them close their cube van’s door, pat them on the back, and wish them good luck. And that was it. If there were no phone calls coming during that driver’s shift, the assumption was all had gone well. For all intensive purposes, that cube van was one gigantic ‘black box’ rolling down the road.

The reality is dispatchers get calls - and lots of them. Because the dispatcher can’t always be sure as to which driver has which order, or can’t be sure as to what exactly is going on out there in the field, every day can seem like Christmas. One surprise after another. “Who has order #1234?”; “This address is bad, what do you want to me to do?”; “We’re missing a box here”; “I’m stuck waiting at XYZ’s dock, looks like I’m gonna be late” – and on and on and on… Being a dispatcher can often be one tough job.

Viewed at a high level, there is a pain in the market. In today’s market, delivery companies need to find ways to trim transportation costs, while increasing service levels to remain competitive. Leveraging logistics technology and supply chain visibility applications can address these issues.

Recognizing the pain, software companies have, for years, been peddling sophisticated logistics point solutions to help reduce costs, provide visibility and increase service levels. But the paradox has been that adoption of these solutions has been slow for a variety of reasons that include:

Additionally, existing applications in the market are often sold as point solutions. Due to the high costs of implementation and maintenance, and the inherent integration risks in combining disparate offerings, many companies are often unable and unwilling to make the capital and human resource investment in these solutions. In fact, more than two-thirds of companies operating private and dedicated truck fleets still rely on paper-based, manual systems for route planning and load building, according to a survey by the Logistics Institute at Georgia Tech University. This is an inefficient and costly approach, and the industry knows it.

“65% of the companies with fleets say better planning could save their organization anywhere from 6 to 30% in transportation costs.”

The Logistics Institute at Georgia Tech, Jan 2002

Well, that was then.

This is now. This problem has created a few market opportunities. Delivery companies can either opt to create a custom built delivery management platform themselves or they can outsource their logistics technology and visibility applications to a new breed of service provider that can address these barriers. These providers can integrate, operationalize and maintain these applications, while delivering them at a reasonable price. Either way, thanks to the maturation of the internet as a stable and secure method of opening lines of communication, and to the maturation of wireless to web technology, that dispatcher can now illuminate that ‘black box’ - and come home feeling great about the day’s work.

These platforms, at least for delivery, tend to manage the entire process. They include the following components: order entry and booking, route optimization and planning, dispatch management, real time field data capture, customer service and business intelligence. From the time the order is placed to the time it is delivered, there is visibility into the process, there is data integrity and there is improved planning.

The decision as to buy or build comes down to simple dollars and cents – actually mostly dollars, as this can be a very costly endeavor. There are strong benefits to building a platform: it will be customized to the specific processes of that company and it will be ‘owned’ – there are no dependencies on a third party. The drawback is cost, as it can cost well over $1M to complete such a project, and companies need to be prepared to spend as much on integration as they will on licensing.

For those companies that do not have the resources to spend on building the platform, there are new providers that can deliver this platform as a 'web service,’ that is to say the functionality of an integrated and state of the art platform is distributed to the customer, on a pay as you go basis, via the internet. The objective is to virtually eliminate the operating and financial risk to the client of using the platform. Think of it this way – the millions of dollars that a company can spend licensing and integrating software to build a platform to manage its deliveries is now done once by the service provider. And then it is offered over the internet by that service provider at a fraction of the cost it would take for a customer to build it itself. Plus, the service provider takes responsibility to host, maintain and train on the platform. The drawback to this approach is that, for some, what is a core competency is now outsourced to an independent third party.

If an outsourced solution is chosen, the features of these platforms tend to be:

Simplicity: these platforms are designed to be simple to use (any employee can unleash the full functionality of the platform) and simple to integrate (no systems integration, just a file transfer is required)

Web Enabled: these platforms sit ‘above’ the client’s existing technology infrastructure. There is no software or hardware that is purchased or installed.

Integrated: Leading business process applications come already integrated into the platform. The applications are offered as components, meaning the client only chooses and pays for the applications they require and nothing else. This flexibility is especially important to clients that have already made investments in related applications.

Transactional Model: These solutions are sold on a transactional basis. There is no licensing or up front fees, it is simply pay as you go. This payment structure makes these solutions an operating cost for clients, not an IT budget decision.

These platforms tend to be very practical and have a strong return on investment. The ongoing yearly cost of using these services – or in the case of ownership, maintaining the platform – may amount to 1.5 to 2.0% of the total delivery costs for a customer. The cost reductions are usually on the order of 5-15% of delivery costs.

The value proposition tends to break out as follows:

Decreases Operational Costs:
a) Reduces core delivery costs via optimized routing tools
- Fewer miles traveled
- Truck capacity maximized
- Fewer trucks/assets required
b) Optimizes tradeoffs between operating costs and
customer commitments
c) Improves workload labor planning

Improves Service Offering:
a) Enables cost effective scheduled delivery
b) Provides end to end order visibility
c) Improves exception management and service recovery