Route Optimization in a Service-Based Industry
Posted by Kevin De Meu on 13/12/2018
In the past, we have already seen that planning manually is not sufficient in transport-based industries. A tool in support can help planners and reduce costs significantly by combining the planners’ expertise with route optimization algorithms. In our experience, the transport industry is not the only industry that can benefit from route optimization software. On top of that, we see that companies can rise their revenues, just by using the right tools.
Service vs Product-based Companies
Service-based companies function in a comparable way as product-based companies. One of the biggest differences between those two industries is customer experience.
- A product offers similar quality for each customer.
- The perceived quality of delivering a service is influenced by multiple factors. This makes the client relationship very important for a customer's user experience in service-based businesses.
Another serious challenge for service-based companies is the so-called hit-rate. We translate hit-rate as the amount of accepted appointments in comparison to all optimally-planned appointments. A simplified version of the planning-flow could be as follows:
- All data on visits and personnel is gathered;
- Based on this input data, planning software creates an optimal plan;
- Customers are contacted and accept or reject the proposed appointment time;
- The appointment time remains when confirmed or re-scheduled if not.
The amount of accepted appointments is much lower in a service-based industry. This means that the flow of a planning must be tested very well because re-scheduling increases the complexity and is an important link in the planning chain. The planning must be controlled and updated constantly. Disapproved appointments must be re-planned immediately in the most optimal way.
Every time an appointment is accepted or rejected, new data is created. This master data needs to be administered by the right people with the right tools. The people know what the master data consists of and the tool makes it easier for them to manage the data.
From transport to service optimization
Another difference between the industries is service time. Service times typically differ on two dimensions:
- Length: in the transport sector, service times generally range from 2 minutes to an hour. With services on the other hand, orders demanding more then 4 hours are no exception.
- Varying efficiencies: In parcel delivery for example, the service time mainly depends on the driver's experience in the area, but for service industries, the service time depends on a variety of factors such as education, skill level, experience, team size etc. This creates extra complexity and results in a higher impact.
Because the ratio 'drive time/service time' is way lower in the service-sector, transport is a smaller cost component relative to the total costs. For this reason, management teams of service-based companies do not believe route optimization tools can help.
It is true that cost savings are limited, but the tool makes the service providers' plan more efficient, which makes it possible to execute more appointments. In our experience, we see that service-based companies can gain remarkably higher daily revenues thanks to a route optimization tool. In one particular case, the daily revenue increased by 8%!
The right man on the right place
Transport companies need to clarify vehicle and product types. These are important factors to take into account when optimizing routes in the transport industry. Size and weight are factors that avoid overloading the vehicles. Products can have specific conditions, which make it impossible to be carried by some vehicles, e.g. cooled products need to be carried by a vehicle that has a refrigerator.
In the service-based industry, there is a shift from a focus on vehicle/product type to skills. Different services need different skills. It is important that services are accomplished by providers with the right skills. Instead of allocating specific orders to specific vehicles, we allocate specific service orders to specific service providers. A proper tool assigns the right man (or woman) to the right job, by taking these factors into account:
- Skills: Which skills are needed for which job?
- Efficiency: If the necessary skills are present, who can execute the job most efficiently?
- Penalties: Would you prefer some employees not to execute certain jobs, even though they have good qualifications?
Customer and employee satisfaction
An extra -and often underestimated- added value from using a good planning tool is added customer and employee satisfaction. Not only does allocating the right man on the right place at the right time result in lower costs and higher revenue, your customers and your employees stay happy too.
We all know that satisfied customers and happy employees are crucial for long-term success!