Optimization Software
ASP optimization helps a reluctant trucker.
JOHN BENDEL
TECHNOLOGY EDITOR
Mike Walsh knew he needed routing and optimization software, but finding the right application was a challenge. Walsh is CEO of LifeGas, based in Norcross, Ga., near Atlanta.
"We supply medical gases to hospitals, physicians and home-care companies, companies that provide respiratory therapy to patients in their homes," Walsh said.
LifeGas delivers gas in cylinders to clients in 11 states from 18 locations from Texas to Florida. Each location typically operates a fleet of from five to 10 vehicles, all Kenworth T-300s with various size van bodies and hydraulic lift gates. All company drivers are hazmat qualified.
According to Walsh, LifeGas has been growing at a rate of nearly 70% a year.
"The company started as a small company. We were at one location operating three or four trucks and it was all manually done. We did a good job of managing those trucks because we had strong knowledge of the local markets and had one highly qualified person routing them for us," he said.
Manual routing worked well as the company expanded to three locations, even four. Then things began to change.
Walsh said, "Three years ago I started getting phone calls. "You said you'd be here at this time, you're not here. Why?' I got enough of those that the red flags went up for me."
Walsh found that most complaints involved missed appointments and delivery windows. It was a question of routing and scheduling — a logistics function.
"I think we're like a lot of companies. We grew up with strong knowledge of our industry, of our business, of our products. I never knew we were going to turn into a trucking outfit," Walsh said.
"I was a civil engineer. When I looked around, I had a bunch of industrial-type engineers and marketing and sales professionals on our management team. We had some highly educated people but no one knew a thing about distribution.
"I knew the answer was going to be software because it was too complex for someone to do manually. I made it a key initiative of mine two years ago to go out and find best-practices for distribution. I looked at several companies within our industry and a few outside our industry.
"I was getting frustrated because what I saw was either what we had — a very manual process — or I saw people who had software they spent a lot of money on and in the end it wasn't being implemented," said Walsh.
So he turned to nearby Georgia Tech.
"Tech has a good logistics program. I called down there looking for consulting help to guide me through this. They suggested I talk to Don Ratliff who had started this firm, Velant," he said.
Velant's Transportation Management Center offered routing and optimization — what LifeGas needed — in a form particularly suited to LifeGas's structure. Velant operates as application service providers (ASP). The software resides on Velant's computers. Customers enter their data remotely and Velant returns optimized routes for fleets, typically over the Internet.
"I got real excited because it didn't require me to build expertise, to go out and hire IT professionals," said Walsh.
That wasn't the only benefit of the ASP arrangement.
"I've been a big believer in decentralization for those locations that I talk about. We treat them as separate business entities," Walsh explained.
"So as much as I can leave it on that level I try to. When you deal with software, centralizing it internally, you end up building a corporate department that supports the locations. I've seen that fail and didn't want to go down that path.
"Velant was being a supplier to each of our locations. They could use Velant to help develop their own processes and their own strengths locally without someone from corporate telling them want to do. So it gave me the software solution we needed and it allowed me to keep the integrity of the organization in place — decentralized," said Walsh.
Walsh decided to go with Velant in February.
"We started as a pilot in Atlanta and agreed to do it for four months. The first month was setup work," he said.
"What's key is to get through that period of development and (learn) what your constraints are. The guy sitting in the distribution seat knows them in his head. But until you get most of those orders to repeat, he makes mistakes or he doesn't remember. He forgets that Dr. so-and-so is not open on Tuesday so we don't set that as a constraint. It was a frustration to our local manager the first month because he thought he'd give them information and the routes would be perfect the next day.
"We see 98% of our clients within a month, so it was really a month until we had all the constraints set in place," said Walsh.
According to Walsh, the Atlanta trial succeeded and Velant is now being introduced to the other locations where the process is much easier than the initial start up in Atlanta.
Now customer orders on the LifeGas computer network are sent to Velant in a file at 4 each afternoon.
"They receive it and the computer sends us back routes for the following day within half an hour. That gives our manager a chance to look at it, see if there are any mistakes, any jockeying that needs to be done. He can go back and change ship dates or the sequence of something. Later that evening at 1 in the morning they run their final pass, so we actually do two iterations with Velant."
Walsh said it's important to remember that "once you get through that process of manual input, once it's in there it's there forever. Then all you're doing is tweaking constraints."
LifeGas has had a good experience with Velant, Walsh said. He was reluctant to reveal distribution costs as a percentage of sales, but he did say that implementation of remote, optimized routing has reduced overall distribution costs by approximately 30%.
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Velant's Academic Roots
