Have you ever wondered how FedEx — one of the world’s experts in logistics — manages its deliveries?
Pop quiz: How many packages does FedEx deliver a day?
In the U.S., the answer is 3.4 million packages. Every single day.
I know what you're thinking – they must be doing something right! I’d like to give you an insider’s peek into the FedEx world; maybe you can learn a thing or two for your own home delivery logistics.
Disclaimer: The following observations are based on a tight collaboration we’ve had with a handful of Fedex contractors, also known as FedEx Independent Service Providers (ISPs). It does not reflect the operations of the wider ISP network or FedEx’ internal operations.
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FedEx Ground and Home Delivery
FedEx Ground and Home Delivery services are the last-mile ground shipping arms of the FedEx corporation, an American multinational courier delivery service.
A single Fedex contractor or ISP can deliver anywhere between 500 to 2,500 packages a day, with fleets ranging from 5 to 25 vehicles. So, how do they plan their delivery routes efficiently and manage such high delivery volumes logistically?
The most important advantage they have is the luxury of very high order volumes, and hence density. Because of this, operational efficiency of deliveries is almost taken care of by itself. An average FedEx driver can deliver anywhere between 75 and 125 packages per day! This is extremely high if you were to compare it to the home delivery industry at large, where the average is closer to about 15 to 35 per day.
How do FedEx drivers know where to go?
Step 1: Sort routes by zip/postal code
FedEx customers can create a shipment or schedule a pickup a number of ways: via FedEx’s website, by calling the FedEx toll-free line, or by walking into their closest FedEx store.
Once orders are processed in the FedEx system, they are automatically assigned to a particular route by zip or postal code. The boundaries of a route, also known as driver territories, are configured in advance and allows ISPs to split a large geographic area up into delivery zones so their drivers aren’t wasting time driving all across the city. By assigning each zone to a dedicated driver, they are able to focus on a specific area of the city, get familiar with the route and its customers, and complete more deliveries per route in a shorter amount of time.
This also means as soon as orders are placed, FedEx contractors know almost immediately which driver is going to be delivering the package. Preset boundaries simplify the number of route permutations and logistical decisions, making route planning a much quicker and easier process.
Step 2: Divide packages by driver territory
Before drivers even arrive at the FedEx depot, packages are already sorted into piles by territory. Drivers can start loading up their trucks right away, only paying attention to the packages in their pile. The drivers use a barcode scanner to scan each package into the system as they load up their trucks. If a package ends up in a pile that doesn’t belong to the route, the scanner will beep and alert the driver.
One tip we've learned from delivery businesses is packing your trucks in the order in which they're going to be emptied out on the delivery route. This saves drivers a ton of time as they won't need to search through the truck's cargo to find the right parcels.
Within each route, the FedEx driver is in charge of how they sequence their stops. Some drivers approach the route with a rough circular direction and hit each region in the same sequence. Some drivers will try loading up their truck up by region, but sometimes this can be a challenge when the back of your truck looks like this:
Route planning tips & takeaways
Because FedEx routes have a high density of orders, the distances between each pickup or delivery is always very small. That’s why they can rely on simple rules like territories to build the routes.
But even in the FedEx world, these rules have their limitations. We’ve encountered a scenario where a FedEex ISP had carved up an area, sending 7 drivers east and 7 drivers west. The problem was that the western region was often much busier, sometimes accounting for more than 70% of the daily volume. Drivers in the west were overloaded, while the drivers on the east had short days and were largely idle.
If your home delivery business is a bit more dynamic (i.e. you drive different routes every day and deliver to different addresses day-to-day), then you’ll lose a lot of efficiencies if you rely on simple rules like driver territories. It may make the route planning process easier, but it won’t be good for business. Like the example above, you may end up with both over-worked and under-worked drivers. That kind of imbalance is not the most efficient use of everyone's time and resources.
In these scenarios, running your orders through route optimization software on a daily basis would allow you to keep things simple while maximizing efficiency. Route optimization is used when you want to minimize drive time for multiple stops, while also accounting for a range of complexities like customer time windows, vehicle capacities, driver schedules, and more.
Lean on route optimization
Route optimization typically uses algorithms. This is because the complexity of route optimization means that humans can’t easily compute all the different parameters to find an optimal route, especially in a short amount of time. It would be far too time-consuming.
Route optimization algorithms aim to solve two of the most difficult computer science problems: the Traveling Salesman Problem (TSP) and the Vehicle Routing Problem (VRP). And solving these problems helps you plan delivery routes efficiently.
Algorithms can also handle unexpected detours and bumps in the road in ways that human dispatchers can’t.
Suppose that a customer suddenly needs an item delivered between the hours of 2 and 4 p.m. The algorithm can easily take that into account when calculating the best route for your drivers. The same goes for issues like roadblocks, traffic jams, coffee breaks for your drivers, and last-minute cancellations. That’s a lot for you to think about on the fly.
Letting an algorithm do the heavy lifting doesn’t just give you better performance—it gives you peace of mind that your drivers are on the right path.
Create delivery zones
Having said that, if your volumes are really low, then it makes sense to create density by creating delivery zones on specific delivery days. This forces all deliveries to customers in the same zone to be delivered on the same day by the same driver. Organizing your delivery operations in this fashion means you are willing to tell your customers that they can only receive deliveries on a specific day of the week.
Once your volumes pick up, you should probably consider relaxing these boundaries and planning daily, dynamic routes (routes that change on a daily basis) in order to lower your cost per delivery.To tie everything together, here’s a summary of courier tips for your delivery operations, and a few new ideas as well:
- Create service areas or delivery zones: Optimize your service areas so drivers can travel less but deliver more. If you want to serve a larger area, consider breaking it into smaller geographical regions and assign one vehicle to each area.
- Optimize your delivery routes using algorithms and software: Use a route planner to optimize your pick-ups and deliveries. This will help you deliver products faster and save you fuel costs from moving inefficiently around town.
- Decide between outsourced and in-house delivery drivers: You can choose to hire your own drivers and vehicles, or outsource this to a third party. There are benefits of both, so you need to decide which makes more sense for your courier business.
Routific's Engine API helps to optimize fleets and get delivery businesses back to scaling. If you want to take advantage of powerful routing algorithms to help you solve your vehicle routing problem, learn more about the solution here.
More tips on managing your small delivery business: