How do experts like FedEx plan their routes?

August 13, 2018

Have you ever wondered how FedEx — one of the world’s experts in home delivery — handles their logistics?

FedEx delivers 3.4 million packages in the U.S. every single day — they must be doing something right! I’d like to give you an insider’s peek into their 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 Independent Service Providers (ISPs). It does not reflect the operations of the wider ISP network or FedEx’ internal operations.

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 ISP can deliver anywhere between 500 to 2,500 packages a day, with fleets ranging from 5 to 25 vehicles. So, how do they handle such high 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.

The flow of a package

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 postal code. The boundaries of a route, also known as. driver territories, are configured in advance by a set of simple rules. This means as soon as orders are placed, FedEx ISPs 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.

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.

Within each route, the 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. They sometimes will load their truck up by region to make it easier to find the right packages.

Although, sometimes, this isn’t possible when your truck looks like this:

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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 and 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), then you’ll lose a lot of efficiencies if you use simple rules like driver territories. It may make the route planning process easier, but it won’t make your drivers nor your wallet very happy. In these scenarios, running your orders through route optimization software on a daily basis would allow you to keep things simple while maximizing efficiency.

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. Keep in mind that this model 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.