Supply-demand disruption during and since COVID-19 upended traditional static and master route distribution models for bulk gas fuel. The result has been higher fleet costs, uneven customer service and strained manual processes trying to meet volatile demand.  

Fleet operators in the commercial and industrial gas market have historically found supply management to be more art than science. The same trucks supply homes and businesses on fixed routes, delivering mainly propane gas and fuel oil. Usage fluctuates with temperature and demand. Large commercial and industrial users deploy sensors and metering to monitor flow and available capacity; small mom-and-pop businesses and households are mostly satisfied with a consistent schedule of regular deliveries based on rough demand forecasts. 

In the previous B2B environment it was enough to know tank capacities, baseline usage patterns — and “degree days” of declining temperatures (meaning higher consumption) since the last fill up — to forecast when next to schedule a delivery. When degree days pass a threshold, an optimal 150-gallon delivery is triggered through the fleet operator’s ERP system, to be made within a seven-day window, allowing the operator time to build a full load. A truck can never be precisely timed for all deliveries. Drivers constantly risk returning with fuel left over or, worse, coming up short, requiring a follow-up trip. 

Add to all of this market volatility from multiple competing suppliers of all sizes and geographic reach, delivering an essential but standardized product on fixed routes, many in remote locations. More customers, even those with smaller orders, have growing expectations around on-time/in-full (OTIF) delivery and updated ETAs. The system’s inefficiency — highlighted during COVID supply disruption and hoarding — continues to cost distributors serious money. 

The Need for Change

The industry is ripe for change, specifically dynamic route planning driven by optimization software and analytics, says Cyndi Brandt, vice president, fleet solutions for cloud-based logistics and supply chain management solutions provider Descartes. 

Dynamic route planning abandons fixed routes and regular calls initiated by the supplier based on past demand, usage and weather, and instead optimizes deliveries across the broad network, directing capacity and service where it’s most immediately needed. The challenge is the change management required, getting customers to engage with suppliers and be more flexible around dates and times they can be serviced as routing and ETAs are optimized and adjusted.   

The main objection from many distribution customers is that they want the certainty of a regular visit from a driver they know within business hours, although that’s often unnecessary today, with most propane and fuel oil tanks now placed outside homes and businesses and accessible securely. 

Brandt says the key threshold fleet size where dynamic route planning and optimization are becoming a must-have is 25 trucks, but most of those operators are still working off manual processes. She adds that smaller, regional or mom-and-pop family-owned fuel and propane companies typically don’t make changes until the third or fourth generation, but that’s now happening as older bosses and owners retire and younger, college-educated employees and family members take over.

“They’ve grown up with technology, they’re comfortable with it, they’ve seen how it’s changed everything and realize that what’s happening now is incredibly inefficient,” she says. “They’re asking, ‘Why am I using a paper manifest? Why are we printing 50 tickets every day and having the drivers sit in the break room, grab coffee and a donut and sort those tickets into how they want to deliver the route?’.” 

Benefits of an Optimized Network

Beyond the basic inefficiencies of a paper system, the larger objective is to structure and prioritize loads to manage variable demand. The two most urgent concerns, which do not exist with most other products, are 1) avoiding runouts where the truck is emptied before scheduled deliveries are completed, necessitating a second truck trip for the same route; and 2) emergency spillover effects for customers, triggered by those runouts, typically in winter months, when homes need heating, and businesses need power to operate. If a second truck is delayed by scheduling problems or road conditions, a third vehicle may be needed, for example, to deliver gas cans to residential customers. In these situations, the distributor is functioning as a utility and may be liable if residents lose heat or hot water, or a business is forced to suspend operations.  

Dynamic route planning collects and integrates real-time and historic truck and customer data across routes for a bigger-picture view of supply and demand — including seasonal, holiday and other fluctuation — in advance of delivery. This gives a fleet manager better visibility across routes to consolidate trip miles, rethink fuel loading patterns and locations, optimize delivery schedules and prioritize urgent orders for more efficient operations and cost savings.

“In the typical day of a planner you’ve got more orders than you can service, and you’ve got ‘must-dos’ and ‘can-dos’ that you have to prioritize,” explains Descartes technical account manager for global sales Shaki Kodi. “The question is where we become efficient. There’s a lot of math behind deciding which customers I should cherry-pick to service first, and that’s where software doing the underlying number crunching delivers efficiency in both time and cost.” 

Taking routing decisions away from dispatchers and drivers with institutional knowledge and customer relationships, in favor of a more data-driven approach based on real-time delivery priorities as customer fuel supplies near the reorder point, is controversial. But it is also key to cutting operational costs with better truck utilization, lower fuel consumption and improved driver performance, at a time when labor, fuel and insurance costs are stable or rising and average last-mile delivery cost is approaching $3 per mile. 

Brandt estimates the typical operating cost savings from advance route planning to be in the 10-25% range. “It’s expensive to run trucks these days,” she says. “If I can take even 10 miles out of every route every day, that’s a lot of money over time.” Descartes estimates a potential 15% increase in OTIF deliveries and a 35% increase in delivery capacity through route planning efficiencies.

Some other advantages of software-driven versus manual route planning:

• Efficiencies from real-time monitoring of fleet performance and predictive vehicle maintenance.

• Real-time adaptability that enables bulk gas distributors to respond quickly to emergencies or changes in customer needs through real-time route adjustments.

• Integration of mobile platforms for real-time access to driver locations and to inventory via pump meters on trucks, to streamline communications and administrative workflow.

Service Flexibility is a Win-Win-Win 

Driver performance is an important component in improving network efficiency. Like anyone else, drivers develop patterns in managing workflow on a static route, maybe doing the harder or easier deliveries first, or going the furthest distance out and working backward. These may not be the most efficient patterns for servicing customers at risk of runout or making sure that long-time customers are well served.

“If it’s 47 degrees outside and a customer runs out of fuel oil or propane, they’re not going to freeze, and whether I make the delivery in an hour or six hours isn’t going to matter,” Brandt says, “but if it’s two degrees and it’s an ice storm it’s going to matter. And also, if I have a 30-year customer versus a six-month customer I want to make sure that 30-year customer gets fuel oil.”

Trucks delivering fuel oil and propane enjoy added flexibility with deliveries since fuel loading points are typically accessible from the street at any time during daylight hours without requiring an appointment. This creates an incentive for both employer and driver to build route density, Brandt explains. Each of them benefits from more reliable schedules with fewer truck miles traveled and less duplication of effort, as well as more positive customer relationships by avoiding runouts. Distributors additionally benefit from improved vehicle utilization and lower costs when the truck can return to the yard empty with its route completed. That in turn translates into less travel time and more predictable schedules for drivers.

Finally, viewing routes through a wider network lens allows a fleet planner to respond to emergencies in the least-cost fashion by redirecting the closest available truck, and then easily re-prioritizing affected stops. “What’s different, and key, in this space,” Kodi says, “is that you need a system that's always on. It's really hard for a person to sit behind the desk constantly to monitor these trucks and make those on-the-fly decisions, and especially since the product isn’t specific to a customer, I can deliver it to anybody.” 

An Emerging Service Spectrum

Bulk gas distributors are now beginning to take a more serious look at network optimization along a continuum of service levels, depending on their customers’ needs, that includes:

    Fixed route optimization that retains pre-optimized fixed routes for a more tailored customer experience, better balancing of workflow across drivers, clearer understanding of the network-wide impacts of off-order insertions (orders from new customers or non-routine orders from existing customers) and an ability to track deliveries in execution via dispatch/tracking integration. 

    Dynamic route planning that continuously updates delivery routes and stop sequences based on the customer and order mix. Software reviews all possible combinations of route path and sequence to ensure optimal order fulfilment and handle variable demand at the lowest cost. 

    Hybrid route planning that offers the benefits of dynamic planning, but with the added capability to service anchor accounts regularly with defined delivery times. Routes are dynamically adjusted around these anchor accounts based on location and order size, adding deliveries as feasible to match demand and improve utilization. 

Historic knowledge, and judgment based on years of experience, served bulk gas fleet managers well for decades. But as older fleet managers and planners retire, the new generation replacing them — which grew up with digital technology — is turning to digital solutions to navigate an increasingly complex market environment. 

Hopefully, as a result, when the next ice storm hits, fewer homes and businesses will be without fuel oil and propane, more drivers will be home after shorter workdays, and distributors will have higher earnings and better margins to show for it. 

Resource Link: https://www.descartes.com/solutions/routing-mobile-and-telematics