How Fast Will You See ROI on Route Optimization Software?

Any purchase of business management software – including route optimization software – should include an assessment of how fast you will recoup the cost. That is basic business sense. The difficulty in predicting ROI comes from the fact that there is a widely diverse range of business areas from which the savings that drive ROI will come. And every case is different.

However, it is not unreasonable to ask any potential route planning software vendor for an estimate of how fast the return on investment could be, or where it will come from. So what can you expect?

Could route optimization cut costs for a company like mine?

Every company is starting from a different point of operational efficiency. Those with the most limited route optimization tools – or no tools at all – have the most to gain from route planning and execution software, generally. Size is also a factor. If you have a $10m transport budget, and implementing route planning software saves you 10%, you get a million-dollar saving. But, for many of our clients, a $50,000 saving in the first year is a compelling return on investment, especially when you consider this is a saving that goes on happening every year.

Better use of assets, lower costs

Typically, ROI on a route planning software purchase comes from three main areas that will come as no surprise.

1. You make better use of your drivers by planning routes that make more efficient use of each shift.
2. You will use fewer vehicles, meaning you have to find $100,000 for a new truck less often, and reduce costly maintenance.
3. You are also likely to reduce the number of miles driven, trimming fuel costs.

Reduced administration costs

But some areas that generate savings with better route planning and execution are less obvious.

1. Often, the person responsible for route planning wears multiple hats, and allocating time for planning each day can be challenging. Route planning might get squeezed in at the end of the day, in between other tasks, making it difficult to achieve a good plan consistently. When you implement routing and scheduling software, you gain the confidence that you have an accurate and reliable transport plan every day.
2. In a larger operation, there can be multiple people planning routes; perhaps one at each site, each trying to fit in planning among other tasks. With automated route planning and scheduling, you can centralize the planning from one location, freeing up the other people to use their skills and knowledge to benefit the business elsewhere.

Later cut-off, earlier picking

1. Another benefit comes from the ability to push back the cut-off time for accepting customer orders. Automating route planning makes it a much quicker task which means that orders can be accepted later and still comfortably fulfilled without putting pressure on the picking team. Being able to comfortably fit in later orders, knowing that you can schedule reliable delivery times, means an improved customer experience, which in turn means better customer retention and increased competitive advantage.
2. Furthermore, fast route planning means you can release work to a warehouse or distribution center and start picking earlier, reducing the need for night shifts in order to fulfill orders. If your order cut-off is 6pm, say, you can complete a route plan quickly and easily by 6:30, and start picking straight away.

Modeling potential savings

These are just some of the factors that feed into your potential ROI on a route planning and execution software solution. If you are willing to share data on your current operations, we can run scenarios that will model the changes to your distribution patterns and will show, in hard figures, what the potential savings are.

At Paragon Software, our customers experience an impressive ROI usually between 10% and 30% in operational expenses.

Hard examples include Marigolds & Onions, an event planning and catering company in Toronto, which said that using Paragon software has reduced its use of third-party couriers by 50% and reduced delivery labor by 20%, saving $15,000 per month and seeing pay back within 3 months of going live. Frozen Food Express, a US nationwide carrier, says revenues grew 9% in the first six months of implementing Paragon route optimization software because of improvements in the company’s ability to deliver a consistent and reliable delivery service.

Maybe your company’s distribution is struggling to meet growing customer demands. Maybe you are growing faster than your current route planning methods can keep up with.

In most cases, investing in software that drives efficiency in operations prevents you from buying more assets or throwing cash at extra resources. Doing so could save you a very significant amount of money, giving you the best ROI — from the money you didn’t have to spend in the first place.