Companies use transportation optimisation for many purposes. The items to be transported can be packages, pallets, Roros (roll on - roll off), wood, raw material, refrigerated goods, liquid, people, etc. Things can be transported by land, sea or air.
However, the transport equipment varies according to the condition and the need, so that the right goods must be in the right place at the right time and transported with the right equipment. There are innumerable use cases, but mathematically, these are “only” the goals, variables and constraints that need to be fitted to serve the business need.
There are also many synonyms for transportation optimisation which are commonly used in companies: shipment routing, computational logistics, delivery optimisation, transportation optimisation, fleet employment optimisation, allocating orders to vehicles, using fixed assets, moving asset optimisation, mobile asset optimisation, route optimisation - to mention some. However, in the same regard, it is all about the branch of logistics optimisation, which aims to optimise operational transportation equipment, transportations and customer orders.
Business needs and opportunities
In general, transportation optimisation is used mostly to improve a company’s efficiency and reduce/manage costs. Transportation optimisation can easily be thought of as planning transportation outside the company’s walls, but it can also be applied to transportation inside the walls of a large company or factory.
The cost savings that can be achieved depend on the initial situation. Compared to the manual design process, savings of up to tens of percent can be achieved. Here, as in many other optimisations, the optimisation algorithm matters. In terms of both performance and the quality of the result. It is good to realize that there is no single optimisation algorithm that would solve all types of transport optimisation problems.
"In terms of transportation optimisation, the savings are most often materialised in the amount of transportation equipment required, as well as in decreasing kilometers and time savings. We are living in the 2020s and companies are also paying an ever growing amount of attention to their societal and environmental responsibilities, in particular CO2 emissions. The benefits of optimisation here are clear: less kilometers, simulation of vehicle maintenance and renewal, and emphasis on transportation for low-emission vehicles.
Significant savings are also achieved by reduced planning/design time. The most advanced companies also translate this into a business advantage, as after the introduction of optimisation, personal dependencies decrease. Design/planning work can be shared among the team, and the know-how accumulated from it helps, for example, customer service to develop its own operating model and serve customers better.
The business needs of different companies range from planning in seconds to longer-term planning at the tactical and strategic level. There are businesses like taxi firms and lunch courier services that should get information about the next gig in seconds. In other companies, planning is done on a daily basis, while in some, standard routes are renewed once every 3 months or less.
Optimisation can also be used for simulation. Here the mathematical optimisation model is used as the digital twin of the real world. The model can be tested with different business volumes: new locations, changing equipment, volume growth, etc. and get results that help to make strategic and tactical decisions such as pricing or using new equipment.
Special business needs
Traditional uses of transportation optimisation are related to delivery or pick-up and type of delivery use. These can also be combined with innumerable special needs, such as the needs related to the choice of equipment, where a certain customer can be visited only with a certain type of vehicle. Or taking delivery time windows into account.
"In general, route optimisation as a term is understood as a relatively trivial (so-called) ‘Traveling sales man’ optimisation problem. However, simply visiting different places is rarely enough - you usually also need to spend time arriving and taking or picking up stuff. In addition, the control of operations may involve the need to consider the further processing of the goods being transported, such as balancing the workload or storage space at the receiving end. In this case, the company, for example, picks up some of its own goods, which it cleans and takes to the next customer.
The need may also be related to staff workload management and job satisfaction, such as balancing drivers working weeks and days.
Trip merges that can be applied to taxi rides, for example, are also considered as a special business need. Taxi companies are constantly developing their operations and new business needs for trip merging can be found for the efficient transport of people and other things that can be picked up by a taxi.
Increase customer satisfaction with route optimisation
For companies whose business involves transportation in one way or another, transportation-related customer satisfaction and customer service are key factors. Customers expect accuracy in delivery times and service levels. The driver must be in the right place at the right time.
"Customers also appreciate the freedom of choice so that one can choose the delivery time that suits them best and get their order delivered at the lowest possible cost.
Taking all these aspects into account, optimisation is a great tool for prescriptive analytics, as the soft constraints of optimisation allow different factors to be weighted relative to each other, and the strict constraints preclude unwanted transport options.
Questions about this topic? Don't hesitate to reach out to:
Joonas Ollila
E-mail: joonas.ollila@twoday.com
Phone: 044 230 3847