Route Optimization: A Critical Part of Modern Logistics

Route Optmization: HERE MobiIlity Blog

Route optimization technology helps drivers and dispatchers find the best route for large volumes of deliveries or passenger transport routes. Route optimization can help:

  • Dispatchers cost-effectively manage their fleet
  • Companies save costs and meet service level requirements
  • Consumers by lowering delivery costs and ensuring deliveries arrive as expected, and with more transparency regarding times and delays

Read on to learn about the fundamental vehicle routing problem, and how route optimization solutions help optimize a variety of transport businesses. 

In this article:

  • The Vehicle Routing Problem
  • Route Optimization for Car Fleets
  • Route Optimization for Supply Chain and Delivery
  • Route Optimization for Passenger Transport
  • Intermodal Routing
  • The Increasing Demand for Route Optimization Software

The Vehicle Routing Problem

Two of the most difficult logistics problems are the Traveling Salesman Problem (TSP) and the Vehicle Routing Problem (VRP). 

The first tries to find the shortest route that passes through a set of destinations only once and returns to the starting point. The second tries to find the shortest route for several vehicles going from a single starting point to a set of locations and returning. 

A combinatorial problem requires organizations to factor constraints such as:

  • Quantity of labor needed
  • Number of available vehicles
  • Time windows for deliveries
  • Vehicle capacity
  • Type / size of goods
  • The distance between customers

The increasing number of potential route combinations and constraints are driving companies to adopt route optimization software solutions to help manage their route planning needs, and to find the most efficient combination of routes. 

Route Optimization for Car Fleets

Car hire services often have to deal with challenges such as time-consuming manual scheduling, rides overlap, or inefficient itineraries. Taxis, car hires, school or employee transport services can use an itinerary optimization solution to help them provide a better customer experience. 

Some of the advantages of using itinerary optimization software include:

  • Optimized scheduling: Automated schedule services saves time and avoids human errors such as overlapping rides
  • Optimized routes: Selects the shortest, most optimal route, decreasing mileage driven and saving costs
  • Optimized pick ups and drop offs: No more delayed pick ups and running late due to inefficient routing 

Route Optimization for Supply Chain and Delivery 

Nowadays, with the growth in e-commerce, organizations need to deliver more goods faster than ever. This is no easy feat, and logistics teams have to deal with problems such as a large volume of orders in congested urban areas, short-notice or on-demand delivery, customized customer requirements for each delivery, and a shortage of drivers. 

Challenge: Rapid order fulfillment
Customers want goods delivered quickly without mistakes or delays. These expectations put pressure on logistics hubs to process a growing number of orders and shorten delivery times.

Solution: Route optimization software can help accurately predict arrival times by tracking vehicles and adjusting the route to account for unexpected events such as rough weather or road accidents.

Challenge: Driver shortage
There is a growing gap between the demand for delivery and the number of working freight and truck drivers. Older truckers are retiring and not enough new talent is entering the workforce, and there is only so much fleet managers can do to increase driver retention rates.

Solution: Organizations can use fleet management software to maximize the number of deliveries each driver makes. This software also takes the driver’s preferences into account, such as where they would like to stop overnight and when they want to finish working. Modern route optimization platforms include a mobile application that helps drivers communicate with dispatchers about delays or problems in the route and receive assistance.

Challenge: The need for more delivery options
The new digital customer demands convenience, and this has driven the emergence of smarter delivery options such as secure lockers and flexible pick up locations. Companies need to diversify their points of delivery to satisfy consumer demand, often planning routes to a variety of destination points.

Solution: Delivery and fulfillment software help organizations adjust their flow of orders by optimizing the routes to their different drop off points. This reduces costs, giving customers additional, cost-effective delivery options. 

Route Optimization for Passenger Transport

Route and itinerary solutions take the customer experience to the next level. Long gone are the days where people would wait for a vehicle without knowing an estimated time of arrival.  
Modern route optimization solutions have the following capabilities:

  • Enables customers to check in real time: Individual passengers and groups can check the location of the vehicle they’re waiting for. Furthermore, employees can know exactly what time the company coach is coming to pick them up, and parents can know the whereabouts of their children’s school van and when it will arrive to pick up their children.  
  • Sends alerts and notifications: These alerts let passengers know how long they need to wait for a car or van to pick them up. 
  • Factors consumer preferences: Route optimization factors in passenger needs. For example, if a person wants to be picked up earlier or after a specific hour, or requires a special type of vehicle, the routing software adjusts accordingly.

Intermodal Routing

Intermodal transportation refers to the usage of two or more transport modes to deliver cargo or passengers. Multimodal fleets are becoming more common, with new transportation management systems providing geolocation and real-time data analysis to optimize routes across modes. 

These solutions allow organizations to optimize multi-stop routes by visualizing and tracking shipments, trucks and delivery vehicles, improving arrival times and reducing operational costs. 

The Increasing Demand for Route Optimization Software  

Rising urbanization and traffic congestion, the increasing need for fast or on-demand delivery, and the exponential growth in the sheer volume of deliveries puts a major strain on the last mile of delivery operations. It is becoming impossible to manage large-scale delivery operations in dense urban areas without the assistance of software solutions, many of them driven by AI. 

According to Market Research Future, the route optimization software market was worth $2.5 billion in 2017 and will double itself by 2023, with an annual growth rate of over 11%. As urban populations and e-commerce demand grow, route optimization will have a critical role in keeping supply chain and passenger transport businesses viable and economical.

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