Optimizing routes entails taking customer order and factoring in your fleet’s available resources, operational constraints, and logistics network in order to find the route and stop combinations that best fit your business' objectives. For instance, you might try to optimize for delivering customer orders at the lowest cost, or ensuring that all deliveries are completed regardless of cost.
Modern route optimization tools employ a more balanced approach, which can be customized to fit a company's operational and customer service goals. Complex route optimization goals may include minimizing delivery costs while meeting customer demands, or delivering orders in a way that will generate the most profit while working with limited delivery resources.
As part of the route optimization process, numerous variables have an impact on how effectively your route plans can accomplish your company's goals. These variables can include capacity constraints, driver skills, product and service differences, and much more. It’s a high level of complexity—which is precisely why businesses need route optimization.
What Is Route Optimization Software?
So what is route optimization software? Route optimization tools are used in route planning to determine the most effective route plan more thoroughly and more quickly than human planners could do by hand. To determine the best routes to use, route optimization technology makes use of algorithms and other technologies such as machine learning and artificial intelligence.
This might not sound too complicated, but robust route optimization software has a lot of depth to it. It needs to easily connect with a number of enterprise software solutions in order to ensure complete and accurate data. It has to let users configure their particular routing parameters and manually adjust routes without losing out on efficiency. It has to make routes transparent across operations. And it has to do all that at speed and scale.
How Route Optimization Software Works
Route optimization software takes into account different variables in finding the most efficient and cost-effective routes. Depending on the route optimization technology used, the variables differ in type and number. Variables might include:
- Order variables: handling units, full or partial deliveries, overall weight and dimensions
- Vehicle variables: capacity, size (weight and length), storage capabilities, loading and unloading requirements
- Customer variables: receiving hours, priority, and physical delivery requirements
- Product variables: weight, dimensions, handling and storage requirements, and whether it can be shipped with other commodities
- Road variables: speed limits, parking, time of day restrictions, historic traffic patterns
- Facility variables: Loading restrictions, operating hours, ingress and egress restrictions
- Business policies: mixing bulky goods with discrete shipments, making heavy shipments last, delivering a certain percentage of orders before a certain time, etc.
You can imagine why manual route planning is so time consuming and inefficient! The number of possible permutations is staggering, and the interactions between variables are hard to predict. Simply put, it’s a job that’s better suited to an AI-powered routing algorithm backed by scalable cloud technology.
What Are the Benefits of Route Optimization Software?
Routing optimization software lowers fleet operating costs, improves customer service, and increases delivery efficiency. With short planning horizons, such as same-day and next-day delivery, last mile delivery route optimization software enables planners to find the most efficient route while reducing order processing time.
The right software is also useful in determining the impact of customer service changes, new customer and market segments, and changes in vehicle types and shift schedules. Below are some of the major benefits of investing in route optimization software.
Reduced fuel costs
Delivery schedules created by routing optimization software reduce the amount of driving and time it takes to deliver goods, which means less fuel is consumed.
Dynamic route planning software takes into account parameters such as vehicle size, specified delivery windows, loading times restrictions, and a driver’s available hours of service (HoS). Once your routing software ingest this information, advanced algorithms create optimal routes to ensure that all of your operational constraints are met at the same time as providing the most cost-effective route for every driver.
Cost savings from vehicle purchases and maintenance
You will probably need fewer vehicles when your fleet travels fewer miles per stop and you can therefore complete more drops per day. Reducing mileage obviously reduces wear and tear on vehicles. And more efficient schedules allow you to deliver more with fewer vehicles. Both of these have a big impact on costs in the long run.
Through advanced routing optimization software, the right vehicles and the drivers with the right skill sets and availability are automatically assigned to the right deliveries.
This ensures that you utilize your vehicles and drivers to their full potential, which will allow you to make as many deliveries as possible. More can be accomplished with less, which reduces costs and makes expanding operations more economically feasible.
When you automate your route planning process, you are not only able to fully utilize your vehicles for outbound shipments, but you can also efficiently manage backhauls and pickups of empty containers or packaging schedules for the return trips. Each trip is thus optimized in terms of driver productivity and vehicle utilization. Moreover, it can eliminate some of the need for additional trips to pick up goods or to pay for third-party service providers.
A routing optimization software program can also provide strategic modeling to support business decision-making. "What if" scenarios, e.g. for increasing your geographic footprint, changing the organization of your transport network, or varying delivery schedules, can be modeled beforehand, so you can see how each decision could impact your bottom line.
Better customer service
While customer satisfaction is not strictly a transportation cost, it should be a key performance indicator across your company. With more accurate arrival times (something that AI-powered routing solutions can provide by continuously analyzing real-time delivery data) accompanied by frequent communication, customers are more likely to be satisfied, resulting in lower inbound call volumes and greater customer loyalty. This is all good for the bottom line.
In the end, routing software has the potential to offer your company an enormous boost both in the short term and in the long run, since all these savings will continue to accrue over the years, providing a good return on investment and helping you keep customers happy well into the future.