Digging for green gold

Posted on 13 Jul 2009 by The Manufacturer

Andy Smith, senior consultant with Davies & Robson, outlines sustainable delivery options for manufacturers

The UK government’s Sustainable Distribution Strategy document emphasises the need to define sustainability in environmental, economic and social terms. Central to this `triple bottom-line`approach are the trade-offs that have to be made between preservation of the environment, prosperity and the quality of life.

In some cases however, so-called ‘green-gold’ measures will yield both environmental and economic benefits without the need for cost benefit trade-offs.

A potentially rich seam of ‘green gold’ is often to be found in the area of delivery vehicle utilisation.

At a time when cost reduction is so important, many businesses are focussing their efforts on their core activities and often overlook the opportunities to save cost in their transport fleet operations. Putting a few measures and disciplines in place can quickly allow a company’s distribution function to make its contribution to savings and even survival.

Distribution activities can quickly become sub optimal especially when business profiles alter and distribution patterns change; a feature being experienced currently by many manufacturers. Taking every opportunity to maximise vehicle utilisation will reduce costs and continue to make a contribution to environmental improvements.

Listed below are a few key items companies should ensure are considered and put in place to ensure delivery fleet utilisation is maximised and the asset is ‘sweated’.

1 A good starting point is always to measure current transport utilisation as part of your transport KPIs.
Important measures are empty miles, vehicle fill, time usage, drops per route and routes per day. These tell you where you are starting from and allow improvement targets to be set. Make these visible, so staff can see performance and achievement towards targets.

2 Consider the use of own fleet versus alternatives such as subcontractors for one way journeys; or pallet networks to make those small deliveries to outlying areas; or even outsourcing the whole operation. Getting the balance right between own fleet levels and the use of contractors will make a difference. Over many projects, Davies & Robson has experienced a wide range of savings that have been achieved, and many factors will determine the level of these. In recent examples, the company has been able to identify savings up to 15% in overall cost.

3 Consider the specification of vehicles in light of current and future delivery profiles.
If drop sizes are getting smaller then a vehicle route will become more time constrained and smaller vehicles may become an option. Corollary, if drop sizes increase (perhaps through order taking policies or customer/ product profile changes) then higher capacity vehicles become more appropriate to maximise utilisation of route times.

4 The operation of delivery vehicles can often be improved by considering the following:
a. Look to increase the drop density of customer deliveries by:

• Nominated day delivery schedules. This will allow a greater clustering of drops.

• Longer distribution lead times will have the same effect, if this can be made available within the overall order fulfilment lead time.

• Reducing any delivery time window restrictions for delivery. This could include the approach to booking deliveries with the customer or exploring out of hours deliveries.

• Be careful regarding fixed routes unless customer orders are consistent. You can often find a fixed route is optimised on certain days of the week but sub-optimal for the other days.

b. Attempt to increase drop sizes or at least hold any slide towards smaller drop sizes by:

• Consider minimum order or drop size accepted. Small drops may lend themselves to network or even parcel network deliveries.

• Look at product pricing structures to reflect the distribution activity required to fulfil the delivery, such as premiums for smaller drops. Customer profitability should always take into account the full cost of logistics fulfilment.

c. Work with customers to reduce delivery problems such as:

• Is the drop time excessive and can it be reduced? What can be done to speed up unloading and reduce any waiting time? Examples may include a pre-delivery advance warning call, ways to reduce access restrictions or the availability of equipment. Reducing this time may allow more drops on a route.

• Are there any vehicle access restrictions that are no longer relevant or could be challenged?

5 Larger fleets, generally over 10-15 vehicles, can sometimes benefit from computerised routing and scheduling systems.
These systems when properly calibrated can reduce the time and distance of planned routes through optimal sequencing of deliveries. They can be particularly useful where a number of orders come to the planning process with later and later cut off times; and a manual planning exercise struggles to fully re-plan effectively before release to picking and load assembly processes.

6 It is important to monitor driver performance.
Do drivers keep to scheduled routes and do they maintain planned delivery times? Some businesses utilise vehicle tracking systems to provide this information in ‘real/near time’ and for use in debriefing and planning.

The data can also be used to identify trends in delivery problems that need to be addressed.

7 Work with suppliers to collect inbound raw materials and packaging.
Where suppliers are located within close proximity to customer delivery points it may be cost effective to negotiate factory gate prices and collect with your own fleet. An important consideration will always be the cost and service impact on your own fleet availability and customer deliveries. Many businesses do undertake this activity and achieve a clear net benefit. However, it is also an issue for manufacturers where customers, particularly in the retail sector, are looking to exploit this opportunity; clearly having an impact upon your own fleet capacity.

8 Businesses with other operational sites or sister companies should look to maximise opportunities to integrate movements allowing, for example, triangulation of routes, shared deliveries, combined routes and sharing of resources.
This often requires some co-ordinating action by senior management to get teams to co-operate and work together. Many businesses through the current recession are increasingly working to exploit these opportunities. Some are finding that, as a previously unexplored area, there are some initial easy ‘quick wins’, such as return load opportunities and vehicle sharing.

Sustainability refers to the ability of a process to be continued indefinitely without damaging or degrading the environment on which it depends. Keeping track of fleet utilisation and ensuring that it is aligned with current business profiles is one of the ways in which this can be achieved.

And, as luck would have it in the current economic climate, a more sustainable distribution operation will not only help save the planet but might just do the same for your business.