How to optimise carrier selection with OPHEO
Companies that do not have their own truck fleet or handle at least part of their logistics through external contractor companies face the daily challenge of placing orders and tours quickly and cost-efficiently. They must find the “right” carrier.
In the simplest form, there are two ways to organize operations to obtain the corresponding vehicle resources: On the one hand, the company can book available capacities on the spot market, for example via a freight exchange. There are no predefined agreements here; the price and the corresponding award of contract are determined through a bidding process.
On the other hand, companies often build up a pool of freight forwarders that they can access according to individually agreed contractual framework conditions.
A large pool of freight forwarders or carriers
Companies therefore often rely on a large pool of service providers who are eligible for different goods, different delivery areas on different days and times, with different vehicles and vehicle characteristics. (Looking for help with your operational and strategic tenders? Our colleagues at Städtler Logistik can advise you on the service provider mix).
Also essential when awarding contracts: the logistics services are offered at different rates depending on the provider or carrier. Cost tariffs include several price components: among others, different surcharges for tolls, a sliding scale of diesel/fuel costs, or the amount hours of the travel costs. However, the actual availability of a vehicle resource must be considered independently of this.
All these criteria make the award process a time-consuming, highly complex task.
Manual selection of the carrier is time-consuming and open to human error.
The dispatcher is always faced with the same Herculean task: they must decide which order or which tour should be awarded to which service provider. In most cases, the price is the deciding factor, especially in times of growing competitive pressure and high-capacity utilisation. This means that if the ’offers’ are similar in terms of quality and are available at the same time, the dispatcher mainly decides in favour of the service provider or carrier with the most favourable overall tariff.
But there can also be other approaches. Qualitative criteria such as punctuality and service can play a role in the awarding of contracts, as can strategic considerations. Sometimes, despite a more expensive tariff, one prefers to award contracts and tours to long-standing business partners who may in turn offer more favourable tariffs for other contracts.
What unites the problems of a manual selection process in each of these cases, however, is the tediousness and, moreover, the error-proneness of the process. The dispatcher must collect, compare, evaluate and decide via actual information and risky ’gut feeling’. Communicative aspects such as checking availability with the service providers also make it difficult to reach a decision at short notice. In short: what experienced dispatchers often only manage to do with knowledge and experience gained over many years is almost impossible to solve, especially for newcomers or career changers.
Intelligent software supports carrier selection
Many transport companies already rely on software-supported solutions in the critical area of truck dispatching, especially when it comes to route planning, route optimization or the precise calculation of arrival times. Increasingly widespread telematics solutions enable the constant collection of data from vehicles. The focus must shift to processing this information intelligently and therefore optimizing processing and digitizing workflows within the company.
Software can also support the selection of the carrier. With the ’carrier optimisation’ function available in OPHEO, dispatchers are provided with an essential tool for making this process efficient and effective.
Carrier optimisation fulfils the three main objectives when placing orders: the dispatcher can place the order quickly, they can place it optimally, and they avoid mistakes.
How OPHEO’s carrier optimization works
In simple terms, carrier optimisation in OPHEO works as follows: The dispatcher selects an order, an entire tour, or a tour day plan for carrier optimization. The system then automatically determines the ’best’ carriers – in the background.
For this purpose, the system analyzes an order to be placed, compares all necessary parameters and criteria and carries out the necessary calculations; for example price calculations or routings. The parameters and criteria include, for example:
- Kilometres/miles inc. forwarder-specific journey
- Vehicle type
- Characteristics of vehicles and personnel
- Portfolio of carriers for postcode or order type
But even if all these award criteria are positive, this does not mean that the order can be placed with a carrier/service provider. This is because the master data stored in the system says nothing about the current availability of the resource. That is why the system automatically carries out an availability check.
The system avoids double and incorrect bookings
The availability check ensures that only those service providers who can actually take on the job are included in the final selection. Special cases in which several dispatchers access a service provider and block each other’s available vehicle resources are excluded by the availability check. Double bookings or incorrect bookings are therefore a thing of the past.
As a result of these calculations and optimizations, the system generates an ideal allocation proposal for the dispatcher from a cost point of view, from which they can immediately select for planning. The routes are then created and dispatched directly.
The final carrier decision always lies with the dispatcher
However, the planner can also make a different decision. The system provides them with a list of all possible carriers, including an evaluation and cost overview. They can then, for example, select the second-best proposal when it is that carrier’s turn again or when it is qualitatively better.
If the system determines a different cheapest service provider than the one sometimes expected, OPHEO also provides valuable transparency information (as to why the expected cheapest provider does not appear as the top choice). It may be, for example, that the forwarder or carrier is not active with the required vehicle type in the searched postcode area. This information can also play an important role in the design of contract content with ’favourite’ or preferred hauliers.
Rapid reallocation of entire daily schedules
In day-to-day business, there is often the requirement to reschedule a tour with several orders that have already been planned well in advance, or even to reassign an entire daily tour schedule. The software also supports you in these cases. In addition to the allocation of a single order, OPHEO carrier optimization can also be used to optimally allocate pre-scheduled round trips or entire daily schedules with several trips to forwarders.
Carrier optimization in OPHEO is therefore an effective tool for quickly and effectively comparing several carriers and booking them at the lowest possible cost.