Choosing The Right Dispatch System in 2024: Centralized Or Not?

Your customers expect an Amazon-like delivery experience, but you’re a small team with a local focus. How do you compete? Your personal touch and local knowledge can take you a long way, but to really deliver a standout customer experience you’ll need to build a top-class delivery management system. Centralized dispatch can help to unlock the potential of your home delivery service. In this article we’ll give you an overview of centralized dispatch, its benefits, and how it can help streamline your deliveries.

What is a dispatch system?

Your dispatch system is how you move your products to your final customers. It includes your vehicles, drivers, and routes. Using all these resources efficiently can help you deliver faster, reduce your costs and enhance customer satisfaction. 

Centralized v decentralized dispatch – and a hybrid

There are two main approaches to dispatch in delivery operations: Centralized and decentralized. There’s also a third hybrid approach which is less common:

• With a centralized dispatch model, all decision-making and deliveries happen from a single hub. This is where products are collected, stored, packed, and loaded for delivery, and where dispatchers plan and manage routes. With centralized dispatch, businesses can track shipments, monitor performance, communicate with drivers, and manage delivery schedules more efficiently.
  One example of centralized dispatch is UPS's Worldport facility, which coordinates and manages a massive four billion global deliveries every year! At the other end of the scale, another example would be a local bakery that centrally bakes and delivers fresh bread to multiple retail outlets in a city every day.

• In a decentralized dispatch process, deliveries are sent from a network of smaller local depots. Each depot will have its own dispatch manager, driver teams, and vehicles. Decentralized dispatch can be seen in franchise operations like Domino's Pizza, where each store handles its own deliveries, or in regional courier services that operate independently in different cities.
• In a hybrid remote dispatch model, a central dispatcher or team does all the planning and monitoring, but actual loading and delivery is done from a network of smaller depots. This semi-decentralized dispatch model has become more common in recent years as the tools of remote working have got better. It can help to streamline back office operations, even when your delivery areas are too far apart to make central dispatch viable. But it does need a very high level of organization and discipline. For example, we have one customer who manages all her company’s logistics for the southern and eastern United States remotely from Argentina! But she’s a former military logistician, and has two dispatch managers handling things on-site, so this may not be a viable option for everyone.

Choosing the right dispatch model can have a big impact on your last mile delivery business. Let's dive in and explore the advantages and disadvantages of centralized vs decentralized dispatch models in more detail.

Is a centralized dispatch model right for your business needs?

Advantages of centralized dispatch

Let’s take a look at how a centralized dispatch system can help streamline your delivery operations for greater efficiency. There are six main advantages:

1. Efficient resource allocation: Centralized dispatch from a single location means you can manage your vehicles, drivers, and routes more efficiently. Using good dispatch management software makes a big difference here! This can enable quicker delivery times and easier operations. 
2. Lower costs: A centralized dispatch solution may need fewer employees, and route planning software can help to eliminate human error. A single hub also means lower overhead costs such as rent and utilities.
3. Simplified route optimization: With all routing decisions made centrally, and if you have the right software, it's easy to optimize routes for faster deliveries and lower fuel costs.
4. Easier communication and decision-making: When all the information is in one place, you get faster, more consistent decision-making and smoother communication. Dispatch software can enable clear communication with your delivery drivers, so you get real-time alerts about delays, cancellations, or other issues that may arise.
5. Improved customer experience: Dispatch management software can send automated notifications to your customers so they can know ETAs and monitor their deliveries in real time. This customer communication can help eliminate a lot of stress and time-consuming “where is my delivery?” calls, for a better delivery experience all round.
6. Improved security: Monitoring your drivers' whereabouts and activity can help protect against theft and other crimes, ensuring the safety of your customers' packages.

Disadvantages of centralized dispatch

Now that we've seen the benefits of a centralized dispatch system, it's important to acknowledge its potential drawbacks. Here are six main disadvantages to consider:

1. Limited geographical coverage: If you serve a large or geographically dispersed customer base, it can be hard to do efficiently from a central location. Deliveries to remote areas might take longer and cost more due to increased travel times.
2. Increased risk of disruptions: Centralizing your dispatch operations could make your business more vulnerable to unexpected events like weather-related disruptions, traffic accidents, power outages. In these cases, having multiple dispatch centers could provide better resilience.
3. Scalability challenges: As your business grows, you may need to invest in a larger central hub or add more resources to handle the increased volume of deliveries. This could lead to higher capital expenditures and longer implementation times.
4. Technology dependence: A centralized dispatch system relies heavily on technology like dispatch software and GPS tracking. This means that your operations may be more vulnerable to technology failures, cyberattacks, network issues, or other technical problems. Paperless documents are only a good idea, for example, if you can rely absolutely on your storage and communication infrastructure.
5. Difficulty managing local nuances: If you do all your dispatching work centrally, you could miss out on local knowledge and insights that could enable more efficient routing and delivery. Local teams may be better equipped to handle unique challenges like navigating narrow streets or avoiding construction zones.
6. Driver dissatisfaction: With a central hub, delivery drivers may have to travel longer distances to pick up and drop off packages. This can lead to increased driver fatigue, reduced job satisfaction, and potentially higher turnover rates.

Weighing the pros and cons of a centralized dispatch system will help you determine if it's the right fit for your delivery business. It's essential to carefully consider your business needs, goals, and resources to make an informed decision.

How to choose a dispatch model for your business

So, which model is right for you? Here are some factors to consider:

1: How big is your business?

The size and scale of your business are important factors to consider when selecting a dispatch system. A centralized dispatch system is more suitable for larger businesses with a wider customer base. For smaller businesses that operate in a handful of local markets, it may make more sense to dispatch orders from depots that are close to each market. If you only have one location to start with, you’re operating a centralized model by default!

2. What kind of product are you delivering?

The nature of the products or services you deliver can also impact your choice of dispatch system. For example, if you're delivering perishable goods like food, a decentralized dispatch system can help ensure quick delivery times. A centralized system may be more appropriate for non-perishable items. 

3: What kind of geography are you serving?

Traffic and population density can have a significant impact on your choice of distribution system. In big cities or other areas with heavy traffic or high population density, centralized dispatch can allow for better route optimization and coordination of deliveries. However, in rural or less populated areas, decentralized dispatch can enable more personalized service and quicker response times for customers. You may need to balance delivery speed against transportation costs to optimize both.

4. What are your available resources and infrastructure?

A centralized system may require significant capital expenditures to establish a central hub and hire additional staff. 

5. What are your future growth plans?

If you're planning to expand your business in the future, a centralized dispatch system may be more scalable and easier to manage. 

Consider all these factors together when choosing your model. For example, your ultimate goal might be to have a nationwide meal prep delivery service. That scale might suggest a centralized model — but because you’re dealing with food, freshness and speed are critical. In this case, you might want to have a decentralized network of prep kitchens located as close as possible to your delivery locations. 

How to implement centralized dispatch software

To centralize your dispatching, you'll need to automate processes that were previously handled manually. Start by identifying key processes for your business, such as processing orders, optimizing routes, and scheduling repeat orders. Then, choose dispatch management software that accommodates those needs. Depending on your business model, here are some of the software features and functionality you may want to look for in software solutions:

• Real-time data collection
• GPS tracking
• Returns automation 
• AI-powered route optimization
• Automated customer notifications
• Proof of delivery
• A mobile driver app
• Prescheduling deliveries

In conclusion, centralized dispatch can help improve customer satisfaction and efficiency for any delivery business. If you’re just starting out, or planning to grow your business, your choice of distribution and dispatch model is an important step.