While handling another hectic holiday shipping season, FedEx Ground contractors are also familiarizing themselves with a new delivery routing technology.
FedEx Ground is offering the technology, called dynamic route optimization (DRO), to independent service providers that it contracts with to deliver packages. FedEx COO Raj Subramaniam said in an earnings call that DRO will boost efficiency at Ground, which is combating rising costs.
DRO is FedEx Ground's old routing technology “on steroids,” said Spencer Patton of contractor Patton Logistics. It is designed to balance routes so no one delivery van is overwhelmed with packages while others are running light, he said.
The shift in technology comes as FedEx Ground is handling a rising number of packages — an average of 9.5 million daily this past quarter — but has seen profits shrink with its preparations for year-round, seven-day delivery.
FedEx Ground "is in the process of making this technology available in various locations across our network," FedEx said in a statement about the technology. Patton guessed 20% of states are now using DRO.
How Ground delivery routes are set
For FedEx Ground terminals currently without DRO, routes are organized the evening prior to make sure vans have reasonably balanced loads, said Tony DiNitto of Route Tycoon, a delivery route consultancy.
“They say, ‘OK, that route is totally overwhelmed, let’s take some of those stops off and put it on this other particular route,” DiNitto said.
If a package is sorted to the wrong route or the routes aren’t organized well in this system, FedEx gets the blame, DiNitto said. Through DRO, FedEx is shifting more responsibility on the contractors while getting rid of a source of tension, he said.
“We see them continuously push more and more stuff on the contractors, this is just one more thing to push off,” DiNitto said.
Paul Gillette, owner of service provider Colonial Routes, said he’s still working with Ground terminals to organize what areas each route will cover. If changes to a route aren’t executed, “it can cause extra stress in the morning,” he said. DRO could eliminate the back-and-forth that comes after a routing misstep.
“We just hope it’s reliable where if we make a change and do something, it gets executed,” Gillette said of DRO.
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Contractors get more route control
Subramaniam said DRO “provides near-real-time data” for service providers, which they can use for “decisions regarding their vehicle mix and workforce to accommodate the increase in both large and small packages.”
“All of this is expected to drive efficiency, while further strengthening the reliability of both residential and commercial FedEx Ground service,” he said. “Looking ahead, our investments in this business ensure we are optimizing capacity and productivity in the long term.”
DRO allows contractors to set the parameters of each route and what they receive themselves, according to James Sheehan, CEO of Sheehan Trucking, a FedEx Ground service provider now using the technology.
Through DRO’s technology and data, service providers can decide the best way to run their business, Subramaniam said. Sheehan couldn’t make his own routes in the previous routing system. However, the contractors don’t get to set how the route is exactly driven, Sheehan added.
“Let’s say if you have a main road, for instance, and you want to run up one side and down the other,” he said. “You can’t get the route set up to run that way.”
There have also been issues with how it sets routes, Sheehan said, like a route having a stop at an apartment complex and coming back to that same complex 20 to 30 stops later.
“It will be fine as soon as they get the routing fixed,” he said.
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Learning curve with new technology
Patton compared DRO to Microsoft Excel: a platform that can be used in both simple and complex ways. Patton Logistics is still trying to learn the platform on a deeper level, which Patton said will take time.
“Like any technology platform in its first four weeks, I think there’s a lot of learning,” Patton said earlier this month.
DRO specialists from FedEx Ground are traveling the country to help contractors learn the platform, according to Patton. Patton Logistics learned the basics of the system so it could get through the busy holiday delivery season successfully, and Patton said the service provider will spend more time understanding it after the holidays.
FedEx overall moved 37.8 million packages on Cyber Monday (Dec. 2) alone, Subramaniam said. The Memphis logistics giant said last month that it expected to more than double its average daily volume on the two Mondays that followed Cyber Monday.
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Sheehan said his drivers are handling peak season with the new routing system well, although newer drivers are having some difficulty because they are still learning their delivery territory.
DiNitto thinks the shift to DRO won’t affect contractors too much but added that the move allows FedEx to “cut more fat in terms of its employees” with more responsibility going to the contractors.
“I feel like it will actually be good if it routes stuff properly, it’s just not routing stuff properly right now, and for us to be a transportation company, routing’s kind of important,” Sheehan said.
Max Garland covers FedEx, logistics and health care for The Commercial Appeal. Reach him at max.garland@commercialappeal.com or 901-529-2651 and on Twitter @MaxGarlandTypes.
2019-12-23 12:00:00Z
https://www.commercialappeal.com/story/money/industries/logistics/2019/12/23/fedex-ground-new-routing-technology-dynamic-route-optimization-holiday-shipping/2697585001/
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