Route optimization – milk run method

Configuring the optimal vehicle route to ensure efficient deliveries is an important issue in the world of logistics. The methods commonly used in delivery systems are diverse, including the milk run method.

The complete management of shipments through TMS systems has become an increasingly popular practice, as the advantages and benefits of their implementation in delivery logistics are reflected in the daily activities of those working in this field. With the xTrack TMS system, the TMS software solution developed by Axes Software:

• planning and tracking of shipments;
• route optimization, including last mile and milk run optimization, loading of goods and transfers between warehouses;
• What-If analyses

are achieved with ease and maximum efficiency.

Here’s what the milk run method means, how it can be applied and how effective it is compared to another method, direct delivery.

What the milk run method means

The milk run method is a delivery method used to transport mixed loads of goods from different suppliers to a single customer. It replaces the transport organization model in which each supplier, separately, regularly sends a truck to deliver a specific product or a series of products to a company (direct delivery).

The name of the method originated in the last century when the common practice in the dairy industry involved a truck collecting milk from several farms and delivering it to a processing company. This system was also applied to the supply of dairy products to individual consumers, as it allowed both the delivery of milk to the customer’s home and the collection of empty bottles (returnable packaging) for reuse.

In the context of today’s logistics, a milk run is a trip on a circular route that allows for a more efficient use of transport vehicles and reduced logistics costs. A truck (or any other suitable transport vehicle) stops at each of the company‘s suppliers and picks up the necessary products for it.

This is why the milk run method is used when setting transport routes by companies which, if they have their own transport fleet, collect their goods directly from several suppliers, or by 3PL logistics firms providing transport services for companies without a fleet.

xTrack TMS is useful because the application, in addition to trip planning, can also set and optimize milk run routes to save time, fuel, money and effort. xTrack TMS automatically determines the type of vehicle to be used according to the volumes of goods to be collected.

The milk run method is an efficient approach to transport logistics because it allows goods to be grouped, loaded and delivered to a single customer in a single vehicle, at a frequency agreed upon by the parties or dictated by consumption needs, whose final destination is either a warehouse or a distribution center.

Therefore, in the case of the milk run method (and other methods), the main source of logistical efficiency is the digitalization and automation of transport activities at all stages. Collection routes are generated automatically, based on a complex algorithm that can be parameterized via an application. The route planning takes into account the schedule of all the entities involved (suppliers, customers, logistics companies). This ensures that warehouses prepare goods at the right date and time for transport activities and distribution with maximum efficiency. The application also helps optimize warehouse processes by identifying orders with a higher picking priority than others.

By implementing a TMS (Transport Management System) the best combinations of delivery methods can be configured. Route optimization can be done not only for the collection of goods according to the milk run method, but also for last mile deliveries or transfers between warehouses so that the goods arrive at the desired destination in the shortest possible time.

Benefits of using the milk run method

The milk run method integrated into a TMS software solution is an excellent tool for calculating optimal routes in terms of transport costs. In addition to reducing costs, the method helps to reduce traffic, fuel consumption and gas emissions.

Collecting goods on a milk run route is more efficient compared to direct deliveries if the suppliers are in the same area and the distances between them are shorter distances. In this case, the time needed to pick up and deliver goods is short as well and suppliers save on transport costs because they are no longer responsible for making separate deliveries on their own.

The facts of the matter change if some suppliers are located in different geographical areas. In this case, direct deliveries are preferable. Long distances or possible situations where demand for certain products is urgent make delivery time a challenge that cannot be solved immediately by using the milk run method.

This method (and others, as well) can be considered when automating transport management in route optimization processes in a network of warehouses, route planning, delivery scheduling, load optimization and distribution area management. The optimization algorithm tests a large number of variants and chooses the most cost-effective one.

Milk run transport routes can be internal or external. For example, in manufacturing, an internal route refers to the route taken by a vehicle in different areas of a single location to supply different production facilities, whereas an external route refers to one where the vehicle makes stops at suppliers’ or other more distant company warehouses to collect and deliver raw materials or semi-finished products needed for processing, assembly, etc.

The optimal route is automatically determined according to the coordinates of (two or more) suppliers, one of the basic criteria being the distance between locations. It is important to plan the trips in advance and without mistakes, and the use of TMS software solutions allows scheduling to be done automatically, with all the necessary details: route, supplier locations, vehicle + driver assigned to each trip, date and time, etc. Using xTrack TMS, the customer company can create a schedule of freight collection trips for its own transport logistics department. If the company has outsourced this service, the scheduling of collection runs can be done directly by the logistics company based on the data received from it.

Products collected from suppliers are delivered either to the logistics company’s warehouses or directly to the company requiring continuous replenishment of stocks. Companies often use the milk run method, as it also indirectly contributes to reducing costs in inventory management and optimizing production or distribution activities.

On the whole, milk run optimization through xTrack TMS has benefits from a carrier’s perspective, because:

• the application automatically determines optimal routes (shortens travel distances) and sets schedules;
• transport and maintenance costs are reduced due to lower fuel consumption and less wear and tear on vehicles (collecting more products from more locations and making optimal use of vehicle capacity also means fewer runs);
• the right vehicle is quickly selected based on the volumes to be transported;
• transport costs can be fairly distributed and covered by all parties involved, i.e., suppliers and the customer company.

From a supplier’s perspective, the milk run method is useful because:

• quantities delivered regularly/frequently from the warehouse are smaller and easier to handle and manage;
• frequent deliveries mean freeing up valuable storage space each time;
• surplus stocks are avoided and this means reasonable storage costs and less staff.

The supplier’s benefits also apply to the case of the warehouse where the collected goods arrive. In addition, there is a practical improvement in the customer company’s business due to its control over the collection of goods from suppliers. Adapting the collection schedule to the needs of the customer company leads to optimized workflow on production lines or in distribution processes, as it avoids the bottlenecks caused by insufficient stocks.

There is no doubt that the milk run method plays an important role in optimizing distribution and costs. For this reason, it is one of the essential parts of the logistics management machinery, including software solutions.

Introducing milk run routing functionality into the xTrack TMS system has advantages and benefits that you can enjoy if you implement this software solution.

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