It’s no secret that B2B buyers across industries are increasingly expecting B2C-style experiences—and it’s putting considerable pressure on B2B supply chains. A SANA report just found that one of the most important areas for supply chain optimization in B2B was powering “quicker delivery and improved tracking,” which speaks volumes about how much the Amazon Effect and other factors have changed the way that business is done.
Of course, B2B supply chain businesses—whether they’re food and beverage distributors, tire wholesalers, construction supply and metal sellers, you name it—have plenty of tools at their disposal for managing modern supply chain challenges. Modern warehouse management systems can help make inventory management—and thus order fullfilment—more efficient, AI-powered algorithms can help predict demand more accurately than ever before, and real-time visibility tools can have a powerful impact on fleet and delivery management.
But it can all fall apart in the last mile. If the larger supply chain is an obstacle course, then the last mile is a high wire act—there’s very little room for error if you want to actually capitalize on any process improvements further upstream.
The short answer to this challenge is: B2B businesses, at least as much as B2C, need a comprehensive approach to last mile logistics—which means finding the route optimization strategy. Unfortunately, the right route optimization strategy for most B2B businesses isn’t the most popular one.
Static vs. Dynamic Routing
Very loosely, people tend to talk about two different kinds of routing:
- Static routing: This means different things to different people, but, generally, static routes involve a fixed schedule or sequence of stops. These routes are referred to as “static” because they aren’t responsive to changes in order mixes or volumes.
- Dynamic routing: Ditto, this phrase can mean somewhat different things in different contexts—but the overarching theme is that dispatchers create a unique route plan every day based on the particulars of that day’s orders and customers, with an eye towards finding the fastest route for each combination of stops.
At a high level, the salient difference is this: using the same routes every day or week (static) or starting your route planning from scratch every day (dynamic).
If you do a quick Google search, you’ll learn which of these is the most popular—or at least the most heralded—approach. Dynamic routing is described as a “must have,” and apparently everyone should “make the change” from static to dynamic. The conventional wisdom is that dynamic routing is faster, it increases flexibility and agility, it can help reduce costs by increasing the number of stops you can make in a day. This is all true, and it makes sense! Every day’s set of orders is unique in some way, and by giving your software the freedom to generate the most optimal route based on the unique factors at play for that day.
Dynamic routing can be incredibly valuable. But at the same time, is it possible that it isn’t a one-size-fits-all solution for all modern supply chains? What if, for B2B use cases, there are advantages to static routing that dynamic route optimization unnecessarily leaves by the wayside?
Challenges in the B2B Supply Chain
Let’s not beat around the bush: when you’re managing the final mile of the supply chain for a B2B business, purely dynamic routing can actually lead to disruptions. To understand why, we need to look at some of the top challenges in B2B last mile logistics:
- For a wholesale beverage distributor, one of the biggest issues facing you in the last mile is meeting delivery time windows. Grocery stores, bars, and restaurants are all open at different hours, and they may have fairly specific needs for when they receive deliveries (e.g. a restaurant may not want a delivery truck taking up space in the parking lot during its lunch rush). Among other things, this means that what looks like the most optimal route on the map may not be workable in reality because one or the other dropoff point isn’t open when your truck is due to arrive.
- Because many B2B supply chains are designed around recurring customers (e.g. the same set of supermarkets, garages, or medical supply stores every week), customer relationship management is also a top concern. This impacts every level of logistics management from orders down to invoicing—but it can have a particularly significant impact on route optimization. A route that optimizes distance travelled but places your most important customer’s stop at the end of the day—where the business is in danger of closing if your driver is even a few minutes late—simply isn’t the optimal route.
- Of course, relationship management goes both ways—if you’re delivering tires to auto body shops, you might know that a particular shop is willing to receive a delivery an hour before it officially opens. While a cookie-cutter dynamic routing solution might not be able to utilize that wisdom, it’s something that human planners can use to their advantage if they’re given the right resources.
Each of these challenges adds up to a pretty clear directive for routing in a B2B supply chain: it doesn’t make sense to reinvent the wheel every day. If you start your routes from scratch each time a new set of recurring orders comes in, you’re taking a fundamentally inefficient approach to logistics—one in which you’ll have to solve the same problems over and over again every week.
Given the constraints above, it’s easy to imagine what a day in the life of a B2B router could look like in a purely dynamic route optimization environment:
- You load in orders, many of which are the same as the previous weeks, save for changes in volume and some new customer additions.
- The routing engine spits out a route that offers the least distance, but it doesn’t reflect your approach to customer management. A client who’s used to getting deliveries from a particular driver late in the day is slotted as the first stop on a completely different driver’s route. Meanwhile, your biggest client is scheduled right at the end of the day, meaning there’s a chance they’ll close before the driver arrives.
- You begin to manually massage the route that your routing solution has generated. This enables you to deal with the obvious issues—but the more manual changes you make, the less efficient the route becomes. At the same time, the labor savings promised by the automated routing technology begin to slip away.
- Eventually, you get the route into shape, just in time for last minute order changes to upend the entire schedule. By the time you’ve dealt with these changes, your cost per delivery has crept up considerably.
Again, reinventing the wheel every day is inefficient. Not only does it present a challenge in terms of maintaining efficiency without a huge outpouring of manual labor, it also presents problems with continuity. What do you do if the primary router with a head full or client-specific knowledge wants to take a week off?
Of course, abandoning dynamic routing altogether for purely static routing isn’t an option either. If you can’t respond efficiently to change, you can’t turn a profit. That’s why B2B supply chains need a new path forward for managing the last mile.
Creating a Hybrid Routing Model
In practice, there aren’t really solutions that offer purely static or dynamic routing. Most solutions functionally provide a mixture of the two, but the modern emphasis on dynamic routing frequently means that the benefits of static routing (and those benefits do exist) fall by the wayside.
What B2B supply chains need is an approach to routing that takes the best of both worlds from each of these techniques:
- Static routing capabilities: offer stability, as well as the ability to codify domain-specific knowledge that might otherwise only reside in the router’s head. A static route that has been optimized to your business’s specific goals saves you from having to reimagine delivery management from scratch every day, and it offers you a strong foundation on which to optimize.
- Dynamic routing capabilities: provide you with the ability to stay agile and flexible, getting the most out of your capacity by optimizing based on daily volumes. Dynamic route optimization is an important means of managing delivery costs and cutting out waste and inefficiency.
There are different approaches you could take to combine those two routing techniques, but the most straightforward for our perspective is to create a hybrid approach that allows you to create static “skeleton routes” for your most important recurring business.
For a food and beverage distributor, this might mean that every Monday there are six “anchor stops” at the biggest supermarkets in your portfolio that have to occur at the same time with the same driver. These are essentially static routes that have been optimized based on your specifications—i.e. you prioritize hitting the exact time windows that your top tier customers specify, and you build in the domain knowledge about which clients prefer which drivers, which time slots to avoid for particular deliveries, etc.
Once you have your static “skeleton route,” you can begin to use dynamic route optimization to fill in the space around it. If your business is about 50% recurring week over week, your static routes might account for half the stops, and your dynamic route optimization technology could dynamically route the other 50% around the stops in your skeleton routes. Here, you gain the stability that comes from static routes, as well as the flexibility that comes from dynamic routes optimization. It’s hard to overstate how much of a difference this can make to delivery costs and customer retention in the B2B supply chain.
What Would Hybrid Routing Look Like in Practice?
Okay, let’s say you’re implementing a hybrid routing approach within your B2B supply chain. You have a set of recurring orders, clearly defined client tiers, and a mission to reduce your cost per delivery. What does the whole thing look like in practice?
For starters, you strategically develop your skeleton routes. Your goal here is to do your best to get all of the accumulated wisdom and domain knowledge of whoever usually routes your most important stops out into the open. You need to document who’s open what hours, who requests which delivery windows and drivers, and which accounts can’t have their orders bumped to the next day under any circumstances.
Of course, that’s just an example: one company might be placing its focus on customer relationship management while planning its logistics strategy—while another might be more interested in cost reduction wherever it can be accomplished. Either way, you should let your specific business goals drive your route optimization, no matter what stage you’re at.
Once those routes are set, the rest of your routing process should look a lot like more typical dynamic route optimization. At the beginning of the day, you look at all the orders that have come in with an eye towards routing them in the most optimal way for your business—but instead of starting the routing process from scratch, you use your skeleton routes as a baseline, with stops for late additions and newer client accounts sequenced in between your “anchor stops.”
Here, where a purely dynamic routing process might have put equal weight on your top tier customer and a new, smaller addition to your roster of clients—potentially pushing your top tier stop to the end of the day and jeopardizing on-time performance—your hybrid approach keeps your anchor stops in place to make sure that doesn't happen. More broadly, it ensures that you’re not missing out on the domain-specific knowledge that your routers have acquired for the last mile of your supply chain.
In this way, you’re able to reap the benefits of static route planning. At the same time, most of your routing is dynamic, and you gain those benefits as well. You’re able to maintain stability and predictability where it’s needed, but you can still respond to volatility without missing a beat. This enables you to keep your cost per delivery down even when volumes are fluctuating and new complexities are being introduced at every turn.
Now more than ever, B2B supply chains are facing increasing pressures from volatility and rising costs. Because the last mile of the supply chain is often the most expensive leg of a given product’s journey, it’s also one of the most fruitful areas for cost optimization. If you can route your last mile deliveries efficiently, you can improve supply chain performance overall. But while conventional wisdom might say that dynamic route optimization is the only path forward, the unique challenges of B2B delivery mean that you can’t fully abandon static route planning either. The upshot? It’s time for B2B supply chains to buck the trend and drive towards a hybrid model of route optimization.