Secondary Network Routing
One of the most common uses of private fleets is to support final mile delivery of a company’s products. We call this the “secondary distribution network.”
The secondary network is defined as the movement of product from a distribution center to the end customer location and can be further broken down in subgroups categorized by stop densities. The focus of this paper is on High Density networks.
This type of network is commonly seen in food service, paper and beverage distribution businesses. It is characterized by routes with high stop counts (10-20 stops), dense delivery networks, vehicles that typically return to the domicile each day and the need to support a variety of delivery constraints, including customer time windows and vehicle size restrictions.
To service this network, these distribution businesses rely on a fleet of vehicles and drivers to deliver to their customers small yet frequent orders.
While the advancements in fleet routing technology have been impressive, drivers continue to complain about the solution quality generated by today’s routing packages.
Area 3 – Multi-faceted Optimization
Solvers used in transportation planning typically employ cost minimization as their “objective function.” These solvers use advanced heuristics coupled with user-specific, configurable parameters that constrain the solution, such as vehicle capacity, time windows, and route duration.
These parameters are utilized to ensure the operational feasibility of the solution. However, the primary purpose of these heuristics is to minimize costs subject to user-specific constraints.
ORTEC has extended the legacy approach and moved from a purely financial objective function to a multi-faceted solution approach that, in theory, will yield better overall results.
Area 4 – Industry-Specific Cloud Solutions
When speaking with routing and dispatching software providers, JBF typically asks what type of fleets their solutions are designed to support. We become skeptical when providers, especially those without track records, say they can handle any type of transportation fleet. We don’t believe they are lying. We believe they are ignorant of the significant differences in requirements across industries that operate fleets.
For instance, a courier may be routing sprinter vans with 70 stops while a grocer may average 2 stops /route on a tractor-trailer. Some longer-haul fleets may have multi-day routes and consequently look to optimize internal backhauls or sell capacity on the open market to generate revenue.
However, field service fleets may look at the problem differently and seek to maximize revenue per employee while also adhering to vehicle inventory, driver skillset constraints, and geographic proximity when assigning work to a driver/technician. Again, these are fundamentally different problems that require purpose-built solutions.
To address this need, ORTEC has undertaken the process of building specific routing and dispatch solutions to address 5 specific industries (see chart below) and the unique requirements each has. We anticipate that these solutions will enable faster implementations with quicker time to value for ORTEC’s customers, given the out of the box solution may be much closer to “go-live” ready than a generic solution that requires significant tuning.
While we think industry-specific solutions are the best approach, even more focused solutions will likely be required in the future. For instance, the Food and Beverage solution likely includes manufacturers like Tyson Foods, food service companies like Sysco Foods, and grocers like Kroger.
The requirements of each of these companies are vastly different from one another, so there would be little commonality in terms of what each business would require from their routing/dispatch system. That said, we know that ORTEC has to start somewhere, and the 5 categories that have been identified likely represent a logical breakdown of ORTEC’s current and future routing and dispatch customers.
Routing and Dispatch Solutions to Address 5 Specific Industries
Area 5 – Cloud and the AI Implications
ORTEC has long been known in the logistics software space as the “math” guys. Over the past 4 decades, they have differentiated themselves and stayed relevant by building sophisticated mathematical heuristics and models embedded within their software. This approach has driven customer value in both transportation and distribution to hundreds of customers.
While we find ORTEC both highly competent and humble (a rare combination for tech companies), we have been critical of their legacy, on-premise technology that was not cloud ready. In this conference, ORTEC put that concern to rest. They are now a cloud software company with all the benefits to customers that that implies (e.g. automatic upgrades, enhanced security and system maintenance, and performance tuning).
It also addresses an impediment to sales, given many ORTEC prospects have made the transition to SaaS as their preferred deployment model. Essentially, ORTEC had to move to the cloud or face an existential threat to their business.
However, a cloud solution provides additional opportunities for ORTEC to collect, analyze, and communicate both predictive and prescriptive information to shippers whose data had historically been hidden from ORTEC.
ORTEC’s new cloud data repository, called DnA, will now house these data, which provides some intriguing possibilities. While I was hesitant to bring up artificial intelligence in this analysis given the excessive hype we have seen since the release of ChatGPT, I do see ORTEC being one of the few mid-size technology companies that is positioned, from an internal skill-set perspective, to embrace these technologies.
By leveraging both customer-specific data and aggregated data across customers, ORTEC can provide basic benchmarking and other analytics but also provide AI-driven prescriptive recommendations as the solution identifies behaviors, trends, and other activities that imply lost efficiencies and/or potential opportunities.
ORTEC is in the early stages of their AI journey, but I appreciate that they are focusing not simply on the technology for the sake of the technology. Instead, they are focused on how the technology will help their customers. Their initial foray into predicting travel and stop durations is somewhat mundane and aligned with virtually every other TMS/R&S vendor we speak with; however, their vision to embed artificial intelligence and machine learning into their solution and workflows is what we liked seeing.
Summary
At this year’s Optimus conference, ORTEC laid out a compelling vision that addressed our biggest concerns (i.e. technology and their migration to the cloud) while providing a compelling vision and product roadmap. Their project plans seem aggressive but achievable, and given the majority of JBF Consulting’s clients are in North America, we especially appreciated the company’s focus on North America as the key market for the business.
We look forward to seeing how the company progresses toward their ambitious plans and hope that some of the innovations discussed by ORTEC become commonplace across all logistics technology providers.
