The following article is reprinted with the permission of CCJ

May 2002

Decisions, Decisions

The more trucks you have, the more options you have. But do you have the tools to consider all those options and make optimal real-time decisions? Dynamic decision support systems do.

By Aaron Huff

As margins grow tighter, fleets must continue rising to new levels of efficiency. The larger your company is, however, the more complex it becomes to boost productivity and trim operating costs for each individual tractor. When dispatching hundreds of loads each day, it's impossible to consider all possible ways to optimize your operations in real time - at least without a little artificial intelligence.

"The trucking industry often goes by rules of thumb, but as the industry changes and margins tighten, the rules of thumb loosen up," says Greg Gorvin, president of Q Carriers Inc., a 200-truck carrier in Shakopee, Minn. Two years ago, Gorvin invested in Netwise, a strategic decision-making software tool from Integrated Decision Support Corporation (IDSC). The most essential benefit of Netwise, Gorvin says, is knowing the yield of all logistical moves - past, present and hypothetically.

"That yield number encompasses everything," Gorvin says. "You could throw out all other numbers and it can be the only number you look at. It's very telling." According to Rick Murphy, president of IDSC, "yield" is a very complex calculation of the margin per load per day within the concept of the total network.

IDSC, Logistics.com and Transport Dynamics are the leading developers of highly advanced and dynamic "optimization" systems for truckload and less-than-truckload (LTL) carriers. These advanced software systems, installed in stand-alone office computers and/or used as Internet-based services, extract raw data from the carrier's enterprise-wide database and perform optimization solutions in real time. The costs are substantial, but depending on how much data you fuel these systems with, the more intelligent - and profitable - your decisions can become.

Technology avenues

Companies that use systems from these vendors usually start with their fuel optimization modules. The size of your fleet is not so much of a barrier in this case, as both IDSC and Logistics.com offer PC and Internet-based versions of fuel optimization software. The pricing is scalable according to the number of trucks the fleet operates.

IDSC's Expert Fuel and Logistics.com's Fuel&Route software integrate with all major mileage, dispatch and mobile data communication systems. These options can be included in more comprehensive routing packages, but that path also involves more expense. For that reason, most Logistics.com customers start with Fuel&Route, says Joe Wagner, Logistic.com's vice president of global sales. "It's a fast ROI and they are able to implement it easily."

Once fleets are successful at reducing fuel costs through optimizing driving routes and fuel purchases, some decide to add modules such as IDSC's Swap Advice or Logistics.com's Drop&Swap, say the executives at both companies. These modules interface with the dispatch software to provide dispatchers with real-time guidance on load swapping to maximize driver/equipment utilization, to minimize service failures, and maximize driver time at home.

In addition to - and often independent from - using fuel purchasing and routing optimization modules, are the strategic planning systems. By name, these types of systems include IDSC's Netwise, Logistics.com's OptiYield Profit Analyzer or Transport Dynamics' Pilots+ Capacity/ Yield Manager. Carriers use such systems to analyze the yield or profitability of each lane and each customer.

"[The system] is constantly reviewing the business you're doing to see if it makes financial sense," says Russ McElliot, vice president and general manager of Olathe, Kan.-based TransAm Trucking, which has used Logistics.com's OptiYield Profit Analyzer since 1995. Besides reviewing the profitability of each customer and lane, these systems help fleet managers perform "what if" analyses for analyzing the effects of adding a new customer or bidding a new contract.

"We don't use Netwise for a load by load analysis," Gorvin says. "We use it for account analysis and when prospecting for new accounts. It helps generate a rate that really pertains to the characteristics and tells us how it sits into our existing systems."

To these strategic tools, fleets can add modules that optimize the minute-by-minute logistical decisions. These add-on systems interface with the dispatch systems and give load planners and dispatchers recommendations for power-to-load matching, en-route tractor or trailer or load swapping, which freight to accept or reject, and what freight to solicit - to name just a few capabilities.

"Most dispatching systems display loads up top and power units on bottom," IDSC's Murphy says. "All we do is display in a highlighted color the recommendation. If they want to know more, they can hotkey to other screens."

More for the money

In addition to OptiYield Profit Analyzer, the 850-truck TransAm Trucking uses Driver&Load and Drop&Swap. These two modules are real-time execution and decision-making tools. Driver&Load and Drop&Swap provide TransAm's dispatchers and load planners with dynamic, real-time recommendations - meaning the system constantly makes adjustments throughout the day as data streams into the system.

"Any data that's changed, such as a new order, a driver's hours or a truck becoming available, is constantly re-optimized. It looks at the global perspective, not just one driver and truck," McElliot says. The Driver&Load feature gives the company's dispatchers a primary recommendation and then four secondary ones.

"Our percentage for taking one of them is 95 percent," McElliot says. "We're taking the primary recommendation between 62 and 65 percent of the time." A direct result from using the recommendations is lower deadhead miles. "It takes out about 1.2 percent."

Because of the time-sensitive nature of its freight - refrigerated goods between the Rockies and the Eastern Seaboard - TransAm Trucking uses Drop&Swap to "drastically" improve service and keep costs at a reasonable level, especially when emergencies arise, McElliot says.

"If a truck breaks down, or we need to get drivers home, Drop&Swap searches the fleet for the most cost effective truck and route that will provide on-time delivery for the least cost for TransAm."

In addition to routing drivers according to loads entered into the system, optimization systems can forecast future loads and recommend moves according to the probability of where the next load will be. Transport Dynamics, for example, gives carriers the ability to tie its Driver Scheduling module - its primary product - to a Demand Forecasting module.

"Not all companies know all their freight over the next few days, which is needed to build tours for these drivers," says Paul Stevens, president of Transport Dynamics Inc.

As with freight forecasting, all other recommendations given by optimization systems are only as good as the amount - and quality - of the data that gets plugged into the system. Last November, Cannon Express, a 780-truck carrier based in Springdale, Ark., added IDSC's Match Advice to its Netwise system when freight was extremely slow, says Rodney Jackson, vice president of customer service.

"We're still learning," Jackson says. "It's hard to get a handle on how well it is being used because freight slowed down. Freight has been so sporadic that we've had trucks waiting while loads are being entered into system."

Despite slower freight, Match Advice was able to help Cannon Express improve asset utilization by recommending the optimal delivery date and time for each load, Jackson says.
The delivery times are not negotiable with some receivers, of course, but the guidelines keep Cannon Express' dispatchers aware of potential opportunities to avoid unproductive layovers.

Jackson says the company has reduced deadhead miles between 1 and 2.5 percent, resulting from following the recommendations about 65 percent of the time. In addition, since installing Match Advice, which takes into account driver preferences and schedules, the company noticed an immediate benefit last December.

"We guarantee our drivers home at Christmas, and it came in really handy at that time," Jackson says.

Time efficiency

Because systems continually re-optimize the fleet's logistical moves as new data comes in, dispatchers and load planners can - at least in theory - make more decisions in less time. As a result, another benefit of optimization software is reduced overhead.

"Because dispatchers do not have to sit and figure all that stuff out, you become much more efficient in your planner-to-truck ratio," McElliot says, adding that the ratio has improved considerably. "We have 200 trucks per planner. It was 120-130 trucks prior to running Driver&Load." The reduction in overhead, however, is not among the top returns that fleets get.

"There is definitely a labor savings, but the real savings is a dramatic reduction in empty miles and utilization," IDSC's Murphy says.

Improved efficiency is not necessarily limited to the operations department, however. With Internet-based systems such as Logistics.com's Network Dashboard, sales and accountants from any location can analyze lanes and customers. Network Dashboard interfaces with Logistics.com's OptiYield Profit Analyzer to extract data from the company's dispatching system.

"The carrier can view the true cost of lanes, regions and customers," Wagner says. "The Network Dashboard takes information and makes it available over the web to enable customer support reps anywhere, not just at one location."

Carriers can use the Internet to automate the communication of optimal decisions to several different parties at once. For example, fleets that use IDSC's Netwise can post excess equipment and loads, as determined by the optimization software, to online freight exchanges - such as TransCore or the Internet Truckstop, Murphy says. IDSC also has a module that generates and sends e-mails to shippers to solicit specific loads, based on the optimization findings.

The most significant difference between Logistics.com and IDSC is that Logistics.com also has optimization software for shippers. Contrastingly, IDSC is strictly carrier-focused. A growing number of very large shippers use Logistics.com's OptiBid or OptiManage and can present load tenders to their carriers through the Internet using XML standards. Carriers that use Logistics.com's OptiYield Profit Analyzer with the Network Dashboard module can receive load tenders and instantly know the yield of each one, Wagner says.

Despite the purported advantages of both carriers and shippers using optimization software from the same company, not all carriers believe the hype.

"That's where there's a little conflict between shipper and carrier," says TransAm Trucking's McElliot. "They're auctioning off freight and making it more of a commodity. We're not in favor of that."

McElliot is not just speaking about Logistics.com, but of all private freight exchanges and Internet-based transportation procurement services. Just like carriers, shippers use optimization software to lower their costs. With the advanced analytical tools available to carriers, knowing whether or not their rates work for you can be known in a matter of minutes. Looked at from the concept of your total network, an unprofitable lane may actually be worth accepting.

A whole new approach

Carriers that have several hundred or more trucks will find their first exposure to dynamic optimization eye opening. At first, you may be shocked at the cost, as the price tag for start-up licensing and implementation fees for fuel and other systems may run $30,000 and above for even a 200-truck carrier. In addition, expect to have an annual maintenance fee. With enough cost-saving moves - which really depends on how many options your fleet has to play with - the investment can be like a consultant that pays for himself.

The purpose of using an optimization system, Gorvin says, is to develop a continuous process of improvement. To continue to improve, however, you have to know exactly where the opportunities are. And the answers are not always apparent to even the brightest managers.

A little help for smaller players

Highly advanced decision support software remains the domain of larger carriers - those with, say, 200 or more trucks or with very complex and/or dense freight networks. One reason is cost. But it's also true that computer-aided decision support tools, which are standard in many of today's dispatch systems, give users confidence in their ability to manually optimize their logistics.

"The average trucking company doesn't have the volume to make it (optimization software) an issue," says Mike Till, president of PCS Software Corporation. The typical size of PCS Software's 650 customers that use its Express enterprise software is between 50 and 100 trucks. None of them use advanced decision support software, Till says.

The major enterprise-wide software systems have developed interfaces with Logistics.com, IDSC and Transport Dynamics. But for most of their customers, the search functions, filters, and the way the options are presented can narrow the decision for a dispatcher down to the best possible choice.

Maddocks Software's recently released Opt2Mate, a module for its TruckMate for Windows, shows the dispatcher the best trip based on deadhead miles origin and destination, delivery times, type of equipment and commodity.

"It's not making the decision, but it's showing them the best options," says Neal Cranna marketing manager of Maddocks Systems Inc.

"If you have less than 50 trucks, you can do all this stuff manually," Cranna says. "Above 100 to 200 trucks, you would want a better decision making tool to consider all the parameters."

Often, especially for smaller carriers, the greatest challenge for dispatchers is not optimizing their available load and driver selection, but finding spot loads and extra equipment to limit deadhead. Enterprise software vendors PCS and Innovative Computing Corp. have recently added to their product offerings modules that enable users to post and retrieve loads to other carriers, through Internet communication, directly from their dispatch screen.

PCS Software offers its Webhauler free to all carriers. Innovative software offers its LoadCentral service free to all users of its R7, R8 and IES Access enterprise software.

For fleets that are considering advanced decision support tools from Logistics.com, IDSC, Transport Dynamics and others, the quality of their data, and the dispatch software they use, makes a big difference in whether or not the implementation is successful. The dispatch software and the quality of your database is the foundation for success in using decision support systems, says Tom Weiz, president of TMW Systems.

Tom McLeod, president of McLeod Software, believes that the cost and data validation required for taking advantage of advanced decisions is too much investment for most carriers to justifiy.

"It requires a substantial effort on part of trucking company owner to make sure their data is good enough," McLeod says. "Some fleets have had a pretty tough time seeing the return on their investment from what are some pretty long and complicated implementation cycles."

Small area, great complexity

Carriers that make a large number of daily deliveries in a limited geographic area, such as an inner-city delivery service of heating oil, have complex sequencing and routing needs. Even a 30-truck fleet may make over 300 deliveries each day.

A number of vendors make advanced fleet optimization software for such services that simultaneously re-optimize routes and schedules according to the numerous capacity constraints that change throughout the day, such as time windows, road closures, driver schedules and new orders coming in.

"The main problem is designing a territory while evaluating the true duration, mileage and quality of service and respecting the day-to-day restraints," says Bernard Tetu, chief executive officer of GEOCOMtms, which markets tmsRouter.

For more information about fleet optimization software appropriate for high-volume, short-distance carriers, see "Charting a Path to Savings," CCJ, September 2001.

Resources

Integrated Decision Support Corp. (www.idscnet.com)
Logistics.com
Transport Dynamics (www.transdynamics.com)