Traffic congestion has remained as one of the biggest pain points in logistics management. As this trend keeps growing, freight service operators are challenged to come up with the most cost-efficient schedules for delivery. This article discusses traffic congestion causes, how it impairs efficiency of logistics activities and possible solutions to overcome traffic congestion.
1. Magnitudes of congestion
Traffic congestion is an escalating problem worldwide, especially in developing countries with a high rate of economic growth, increase in population and unmet infrastructure needs like Vietnam. According to the Vietnam Institute for Transportation and Development Policy under the Ministry of Transport, the annual traffic congestion cost of its capital city (Hanoi) reaches 1.2 billion in 2019, meaning the city lost 1 million working hours to congestion this year. Globally, INRIX 2018 Global Traffic Scorecard shows that Moscow, Istanbul, Bogota, Mexico City and Sao Paulo make the top 5 in Global Congestion Impact ranking (INRIX Research, 2019). Congestion level has risen as 75% of 56 countries reported increasing in traffic congestion between 2017 and 2018 to Traffic Index, provided by TomTom, a Dutch navigation technology company.
2. Negative effect of congestion for Logistics
For road users, congestion is just the hindrance of vehicles on highways or urban streets due to traffic excess. But to the professionals in logistics, congestion relates to flow rate, capacities, volumes, speeds, and delay. A study in the Netherlands called the VERDI conducted by TNO shows that half of the delayed delivery trips to warehouses was caused by traffic congestions.
It is likely that traffic congestion has a negative effect on the supply chain. Traffic congestion occurs anytime during the day when the road capacity does not meet traffic demand, especially throughout holiday seasons due to the rise in travel, delivery and shopping demand.
Congestion-related delay causes additional operation costs, such as: excess fuel and oil consumption, transport officers’ salary when vehicles run in congested condition. Not only adding on operational costs, congestion makes predictions and estimates of logistics managers go out of plan because managers are lack of visibility in freights and drivers’ location. Traffic jam also creates difficulty in tracking Travel Time Reliability because it is more complicated to measure with interrelated delays on the road. When the vehicles stop at multiple delivery points and once they are late at a stop, a series of late delivery occurs without any tracking control. Delays in delivery of goods often causes customer dissatisfaction. The time loss caused by congestion results in delayed delivery.
A case is explained in Cairo Traffic Congestion Study when they calculated all of the component costs that directly related to traffic congestion in Greater Cairo. The main contributor to the total direct cost is the delay costs (36%). The impact of late deliveries has been proved to be significant to customers expectation and experience, especially in the Last Mile Delivery. If customers have to wait for late shipments, they might consider changing their businesses to other competitors.
Delays caused by traffic congestion add to Capital Expenditures costs, which are major long-term expenses on physical assets, including vehicles and trucks. Traffic congestion play a big role in the increase of this costs when the vehicles are not used up to its capacity. Traffic-related delays also affect Just in Time business models, which depend on supply of goods when they are needed. Because of traffic congestion, this inventory management technique cannot be applied to serve its purpose of cutting costs and waste. There are negative effects on warehousing cost as the productivity of the warehouse operation is decreased, workload is not streamlined and deliveries are clustered.
3. Key causes of congestion
Traffic congestion is caused by multiple reasons. Especially during holiday seasons, there is a shortage of trucks and chassis, loading or unloading delays at ports due to spikes of demands, labor strikes, general lockdowns in industries. Other causes would be glitches in warehouse that lead to delay in loading/unloading, bad weather or incidents on the road.
4. The impacts of traffic congestion on supply chain
Traffic congestion directly affects delivery schedules and competitiveness of a company, in comparison to its peers without congestion. It lessens the opportunity of earning larger market size, affects intermodal connection of freight transport, slows down business operations.
5. Solutions to overcome congestion and speed up delivery
To reduce traffic congestion’s adverse effect in logistics, there is an increasing demand for IT systems that manage logistical activities efficiently. There are platforms that provide warnings of congestion delays in real-time as well as offer communication solution between vehicles and delivery points. Route planning is also significantly improved by the development of IT. These systems arrange congestion-free routes for vehicles to commute, ensure to maximize efficiency in coping with traffic delays. Companies should also apply centralized warehousing to manage inventory, track inventory in real-time or use cross-docking procedure to cut warehouse costs.
By using route optimization algorithm, Abivin vRoute provides the most optimal transportation management solution to avoid traffic congestion, save cost and time for businesses. The system automatically generates optimal routes and allows its users to navigate freights’ location and track inventory in real-time. With Abivin vRoute, companies are able to cope with traffic congestion and reduce harmful effects while having full control of deliveries.