Static Versus Dynamic Route Optimization to Reduce Your Costs

MercuryGate Blog - Freight Category
Shippers and logistics service providers seek out the most effective ways to maintain a competitive advantage in operations, improve profitability, and reduce costs. Route optimization is a widely recognized opportunity and means to achieve these goals. Route optimization in freight is not a new idea and there are many basic forms of route optimization that shippers and logistics service providers rely on. Often, the route optimization in place today is static and is not flexible or conducive to an omnimodal shipping environment. Shippers and logistics service providers who embrace dynamic route optimization as opposed to traditional, static measures will yield benefits that aid in achieving desired outcomes, including reduced costs in freight.

Challenges of Managing Logistics With Static Routing Optimization

Those shippers who rely on static route optimization processes will face increasing challenges as the movement of freight requires a proactive, strategic alignment of resources. Static route optimization involves little foresight and does not consider a vital piece of the supply chain puzzle: the influence of human error. Drivers may make mistakes, and even when everything goes according to plan, other drivers could lead to a disruption on a major thoroughfare and contribute to a disruption. Route optimization in the basic sense can improve delivery service, reduce miles, and save up to 30 percent on fleet-operating costs, reports Supply Chain Brain. Unfortunately, major challenges arise when the static, more manual approach to optimize routing fails to consider all aspects of the shipping equation, including:

  • Miscommunications between dispatchers and drivers.
  • Disjointed technology systems, which hamper shipment-level visibility.
  • Attempting to create a route based on last-minute data and an inability to look beyond the needs of the short-term.

Dynamic Optimization Is Essential to Global Freight Management

Dynamic route optimization takes the traditional concept of optimization and uses the latest available technologies, including real-time data, to make continuous improvements to the route and adjust to any risk or disruption on the fly. Dynamic route optimization — sometimes referred to as transportation modeling — analyzes numerous customized parameters, including a shipper’s historical shipment data and the latest market information about rates and capacity. Dynamic route optimization provides the information shippers need to develop plans that optimize the entire supply chain. Further, dynamic route optimization processes data across all devices at the fastest speed available. Continuous data accelerates the speed of decision making by transforming volumes of data into actionable intelligence on-demand, ensuring all shipments are routed at the fastest mode available, no matter the disruption. This allows shippers to proactively inform drivers and customers of any changes.
For shippers and logistics service providers to utilize true dynamic route optimization, they need a platform, such as an enterprise cloud-based transportation management system developed with advanced algorithms, artificial intelligence (AI), and machine learning (ML). An enterprise TMS will optimize routes across North America and Europe, reducing miles traveled and consequently fuel and money expended.
It’s also worth noting that dynamic routing doesn’t just bring benefits to shippers’ and logistics service providers’ bottom lines, it’s also about improving reputation with consumers. A bad road accident could lead to a customer’s shipment being delayed. For example, a food shipper may send a shipment to a store that relies upon on-time delivery for an advertised sale. Without the product in-store, not only are advertising dollars being wasted, but the store’s reputation with customers is also in jeopardy. More accurate data, with dynamic route optimization, enables the shipper to better serve their customers. And, logistics service providers are able to provide their shipper customers with more accurate notifications for estimated delivery times.

How to Use Dynamic Rulesets and Optimization to Lower Freight Spend

Dynamic ruleset use derives from the infusion of technology within traditional route optimization. Shippers and logistics service providers need to apply these key best practices to truly lower freight spend and realize benefits that go well beyond the basic premise of faster delivery:
  • Utilize routing optimization with analytics to gain insights into operations.
  • Connect assets with GPS-enabled and IoT-capable sensors to track and collect data in real-time.
  • Avoid distractions and miscommunications by centralizing optimization of routes within a best-of-breed SaaS platform.
  • Leverage a TMS with native omnimodal capabilities.
  • Look for systems where machine learning is continuously working to offer quicker decisions for the shipper to manage routes at all times.
  • Use artificial intelligence algorithms to make automatic actions and handle exceptions without requiring human intervention.
  • Leverage an automated TMS that includes dynamic routing optimization and transportation modeling as a core function.
  • Transform raw data into actionable insights through powerful visualization tools and business intelligence dashboards within a TMS.

Choose MercuryGate to Empower Your Supply Chain With Advanced, Dynamic Route Optimization

Route optimization is an evergreen supply chain topic, and dynamic optimization will become the leading force in successful logistics through 2020. Shippers need to realize that many areas of the supply chain—ranging from supplier collaboration and customer service—depend on faster, more efficient, and more informed routing.

Find out how to enable dynamic routing in your supply chain now and better leverage your transportation resources to yield the cost savings and desired outcomes you seek

Jim Davis
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