What is Route Optimization? Definitive Guide to Route Optimization

When your drivers need to visit hundreds, if not thousands, of destinations or clients, manual route planning becomes a laborious and ineffective process.

In numerous industries, driver wages and fuel costs account for 59.8% of the total operational cost per mile.

Therefore, even minor improvements to your driver's routes can not only accelerate package delivery or client service but also generate a substantial impact on your bottom line.

With the right route optimization tools, your business stands to save up to 20% in mileage and enhance order capacity by as much as 100% without expanding your fleet.

In this guide, we'll present a comprehensive overview of route optimization and its potential advantages for your business. We'll delve into real-world examples and offer industry-specific use cases.

Let’s start

Route optimization is the process of improving routes to achieve greater efficiency and cost-effectiveness. It assists businesses in maximizing completed orders or deliveries by considering various criteria such as driver schedules, available hours, total stops, fulfillment estimates, and legal requirements. Delivery routing goes beyond simply identifying the shortest path from point A to point B; it's about determining the most efficient route considering multiple variables.

Logistics Route optimization is pertinent to your company, regardless of whether you provide direct-to-consumer deliveries or operate in a service industry where your technicians visit client homes or businesses.

Routing your drivers and technicians can be an expensive and challenging process, but with the appropriate tool, it can be automated — saving you time, money, and enhancing customer satisfaction.

Let's delve into it!
 

As your team, orders, and business expand, manual route optimization techniques in logistics rapidly become unmanageable.

Several areas are affected when tasks are handled manually:

• Efficiency: Are your drivers using optimal and best scheduling and routing? Are you employing an excessive number of vehicles/drivers to fulfill demand? Beyond a few drivers, resolving these issues manually is nearly impossible.
• Scalability: Manual route planning, considering factors like area, availability, certifications, and other requirements, demands extensive time and thorough understanding of your business. Consequently, even overseeing small fleets necessitates a significant number of dispatching and operational staff.
• Precision: Are all time windows, capacities, qualifications, and skill differences taken into account? The more complex the schedule, the greater the likelihood of human error — even the most skilled operational staff are prone to making mistakes.
• Adaptability: In the event of a driver calling in sick or receiving last-minute orders, how do you respond? At a large scale, it takes hours for a planning team to make adjustments — resulting in potential delays, unsuccessful deliveries, and dissatisfied customers.
• Resilience: How seamless is it to find replacements if your route planners, dispatch management staff, or operational assistants leave? When dependent on spreadsheets and basic tools, substantial local and institutional knowledge is required for them to fulfill their roles effectively.

Definitely not.

Route optimization isn't limited to big enterprises and shipping giants. Modern route optimization is also a valuable tool for small businesses.

By efficiently managing your team of drivers, you can substantially reduce your operational expenses, fuel costs, and driver payroll — a benefit appreciated by both small and large businesses.

Utilizing modern route optimization software, your dispatchers or managers can also save numerous hours of planning each day, allowing them to concentrate on business growth and enhancing the customer experience.

Enough with the theoretical discussions. The most straightforward method to comprehend the impact of efficient routing and planning on your company is to examine real-life examples of route optimization in action.

In this section, we'll explore how two companies (one in express delivery services and the other in supermarket chain) utilized FarEye's route optimization software to decrease planning time and mileage, enhance driver's capacity, maintain scheduled delivery and service times, and elevate customer satisfaction.

SuperIndo, Indonesia's largest supermarket chain, was founded in 1997. Presently, it boasts close to 200 stores nationwide, comprising both large supermarkets and compact store formats. By optimizing its supply chain and inventory management processes, SuperIndo has consistently received awards for its exceptional customer satisfaction.

SuperIndo Routing Challenges:

Managing multiple warehouses, distribution centers, satellite distribution centers, and 188 stores, SuperIndo faced inefficiencies, high costs, and slow manual routing processes. Managers spent up to two hours daily finding optimal routes, leading to decreased logistics efficiency, lower customer satisfaction, and prolonged wait times at stores.

FarEye Route Optimization Solution:

FarEye automated and optimized SuperIndo's routing operations from warehouses to stores, providing the company with the capability to instantly generate digital proof of deliveries. This empowered drivers to undertake more trips, decrease turnaround times, and enabled managers to utilize logistics assets more effectively and efficiently.

SuperIndo saw a number of benefits:

• FarEye's routing engine automated SuperIndo's routing process, reducing the resources required for manual routing.

• The optimized routes generated by the platform increased the number of trips each truck could undertake, thereby enhancing asset utilization and decreasing costs and fuel consumption.

• The FarEye platform provided managers and drivers with improved ETA visibility, reducing wait times at store locations and facilitating SuperIndo in executing more deliveries between warehouses and stores.

• With digital proof of delivery, SuperIndo's managers could access delivery details, assess delivery performance, and efficiently manage their 3PL carriers.

A leading express delivery service provider in Thailand sought to streamline operations and improve efficiencies in their first-mile pick-up segment.

The global third-party logistics (3PL) company offers a range of supply chain solutions, including international freight forwarding and integrated logistics. With a presence in 58 countries, it is the largest international logistics company listed on the Hong Kong Stock Exchange. It particularly dominates key emerging markets worldwide and maintains local coverage across China, India, and Southeast Asia.

Their fleet comprises a combination of owned and outsourced vehicles, handling an estimated 70,000 pick-up points per day (approximately 1 billion shipments per day) directly from merchant locations.

Challenge:

The logistics company encountered many challenges in its operations, such as a lack of load visibility from pick-up stops, inefficient truck planning, the management of a large number of dispatchers/planners for daily operations, and reliance on manual modes of operation. These issues hindered their business growth.

FarEye Solution:

FarEye's "Route" facilitated planning and optimization, suggesting improved volume utilization of the vehicles. Its AI/ML capabilities forecasted the cubic meter (CBM) expected from customers in advance, based on the past 1.5 years of historical data. This aided in planning suitable loads and vehicle types. The entire process was completely automated. The loop optimization engine swiftly and dynamically generated efficient routes, achieving minimal distance per stop and enabling delivery and pick-up on the same route while maximizing vehicle capacity utilization (approximately 97-98%). With real-time dynamic routing, drivers were automatically assigned new pick-up requests without manual intervention. FarEye also provided an embedded BPM engine with low-code or no-code functionality, enabling the addition of new business models within 1-2 days.

Whether you're managing scheduling and routing for a small mom-and-pop florist or a nationwide logistics company, you encounter universal challenges:

• Maximizing orders and revenue from your current fleet and workforce is difficult.

• Manual scheduling and planning can be time-consuming and lack scalability.

• Fuel and driver wages represent significant expenses for your business.

• Adapting to cancellations and employee absences in real-time is complex.

• Delayed and missed deliveries result in unhappy customers.

Delivery route optimization software can be beneficial. Here's how:

1. Enhance Driver Revenue and Cut Costs

Reducing operating costs and increasing revenues per driver are priorities for virtually every business. Whether engaged in delivery routing or on-site service, maintaining profitability in the face of low margins is an ongoing struggle. Effective mobile workforce management entails operating with maximum efficiency to minimize fuel and manpower wastage.

When tackling routing and scheduling, numerous challenging questions must be addressed to enhance efficiency:

• Which route will optimize driver productivity and minimize overhead costs?

• Is it preferable to incur overtime expenses or hire external contractors?

By considering all expenses, including hourly wages and mileage, among others, route optimization aids in cost-saving endeavors without compromising service quality or violating regulations. Moreover, it allows for fleet maximization, empowering each driver to fulfill more orders or service calls, consequently boosting revenue and profits.

2. Grow Your Delivery Team Without Needing Extra Dispatch or Planning Resources

Your team invests significant time organizing people, schedules, shifts, deliveries, and appointments daily.

Utilizing route optimization tools slashes planning time from hours to minutes. Directly import order lists in CSV or Excel formats into FarEye for automatic assignment to drivers based on availability and requirements.

With the ability to create schedules up to 6 weeks in advance, your business achieves superior long-term planning. Advanced delivery route planning software like FarEye enables planning months ahead.

Moreover, it considers various factors such as employee availability (including holidays and PTO), lunch breaks, regulated driver breaks, customer availability (e.g., only Tuesdays and Thursdays), deadlines, and more.

While this may seem risky due to potential changes before delivery or service dates, it isn't. Next-generation route optimization solutions enable instant reactions to unexpected events like customer cancellations or vehicle issues, allowing immediate schedule replanning.

By focusing on long-term planning, your business can identify opportunities for growth and operational scalability, leading to reduced turnover and increased profit margins.

3. Boost Customer Satisfaction

In 2019, 90% of consumers utilized the internet to find a local business, with 82% consulting customer reviews before making a decision.

The influence of customer reviews isn't exclusive to e-commerce giants like Amazon; it affects all types of consumer-facing businesses.

To earn the trust of potential customers with their money, it's crucial to maintain a realistic and positive online reputation.

Your modern business faces increased risk, where customer reviews can significantly impact your success or failure.

Real-time ETAs, tracking, and proactive SMS messages and emails before deliveries or service calls prevent delays and missed appointments, enhancing customer satisfaction and loyalty.

With FarEye, ensure your drivers arrive punctually, minimizing failed deliveries and unnecessary support contacts like frequent "are you here yet?" phone calls.

4. Improves Workload Distribution and Boosts Employee Retention

How do you currently assign deliveries and service calls among your drivers? Like many businesses, you may opt for a geographical approach, assigning each driver their own specific territory.

This method is quick and manageable even for inexperienced route managers or planners since it simply involves dividing work based on geographical boundaries.

However, this approach has its drawbacks...

• Is it possible to distribute work equitably without incurring additional costs in mileage and hours?

• What if certain areas within the city or state have varying volumes of scheduled deliveries or service calls?

• And what about drivers covering different areas with varying vehicle capabilities, such as refrigeration or storage size?

Creating imbalanced workloads where specific drivers handle significantly more deliveries than others, leading to consistent overtime, or where high-cost drivers are underutilized, waiting idly in their trucks, is a common pitfall.

Optimized routing addresses these concerns by integrating them into the initial planning phase. By evenly distributing orders across your entire fleet, you can ensure a balanced workload and promote a healthy work-life balance for all drivers.

This approach significantly impacts employee retention, a challenge in many relevant industries. In 2019, only 54.8% of commercial drivers remained on the job for their first 90 days.

Given the current shortage of commercial drivers, retaining skilled personnel for as long as possible is crucial.

5. Allows for Rapid Replanning

Inevitable last-minute changes to routes pose a significant challenge when attempting manual adjustments across multiple driver schedules on-the-fly.

That's why dynamic planning—swift and automatic route recalculation to accommodate real-world changes—is essential in 2024.

Late orders, cancellations, driver absences, or customer requests for alternative delivery addresses are just a few factors that can disrupt a well-laid schedule instantly.

When conducting routing in advance, the ability to replan and remotely manage your fleet of drivers on-the-fly is paramount.

In instances of driver absences or last-minute orders, FarEye ensures fair distribution by calculating availability and evenly assigning new jobs across your fleet based on location, capacity, and current routes, rather than overburdening a select few drivers.

Challenges in Food Delivery and How Route Optimization Solves Them:

1. Customers' Order Visibility: Challenge: Customers expect real-time tracking of their orders, requiring accurate updates.  Solution: Route optimization provides real-time order tracking and notifications, offering customers visibility into their delivery status, enhancing transparency, and improving customer satisfaction.

2. Constantly-Changing Capacities: Challenge: Fluctuating order volumes and varying vehicle capacities can complicate route planning. Solution: Route optimization allows setting individual capacities and truck capabilities, enabling adaptable planning at the driver and truck level to accommodate changing requirements.

3. Last-Minute Changes: Challenge: Unforeseen circumstances like new orders or driver absences can disrupt planned routes. Solution: Route optimization dynamically replans routes to evenly distribute last-minute orders or shifts changes, ensuring efficient resource allocation and minimizing disruptions.

4. Large Order Volumes: Challenge: Managing a high volume of orders can overwhelm manual route planning processes.    Solution: Route optimization software efficiently plans routes for a large number of orders within seconds, ensuring optimized paths for each delivery and streamlining the entire process.

Challenges:

1. Different Times/Appointments: Challenge: Managing appointments with varying time windows can lead to inefficient scheduling.

2. Team Waiting Around: Challenge: Ineffective scheduling may cause technicians to wait between appointments, reducing productivity.

3. Last-Minute Changes: Challenge: Unforeseen changes, like cancellations or urgent orders, disrupt planned routes.

4. Different Qualifications and Expertise of Staff: Challenge: Assigning tasks based on staff qualifications can be complex and time-consuming.

5. Hard to Plan for the Long Term: Challenge: Planning for long-term operational efficiency while adapting to daily changes can be challenging.

Route Optimization Solutions:

1. Set Time Windows: Route optimization enables setting specific time windows for appointments, ensuring efficient scheduling and reducing wait times.

2. Workload Balancing: Automated workload balancing minimizes the number of technicians on call by distributing tasks effectively.

3. Dynamic Replanning: Route optimization dynamically adjusts routes in response to last-minute changes, ensuring optimal resource utilization.

4. Staff Expertise: Advanced planning factors in staff qualifications, matching tasks to the right experts for efficient service delivery.

5. Advanced Weekly Planning: Utilizing route optimization tools facilitates comprehensive long-term planning, incorporating essential breaks, locations, and client time windows.

Challenges in Big and Bulky Delivery:

1. Space Constraints: Delivering large and bulky items requires ample space in vehicles, posing challenges for efficient utilization.

2. Delivery Time Windows: Coordinating deliveries within specific time windows can be complex due to the size of items.

3. Optimal Route Planning for logistics: Finding the most efficient route to accommodate oversized items and multiple stops is challenging.

4. Special Handling: Bulky items often require special handling and expertise, adding complexity to the delivery process.

5. Last-Mile Challenges: Navigating narrow streets and congested areas for big deliveries can lead to delays and inefficiencies.

Route Optimization Solutions:

1. Capacity Management: Route optimization considers vehicle capacities, ensuring efficient allocation of space for large items.

2. Time Window Optimization: Route optimization tools factor in time windows, helping schedule deliveries effectively.

3. Route Efficiency: Utilizing sophisticated algorithms, routes are optimized for substantial deliveries, resulting in minimized travel time and distances covered.

4. Skill-Based Assignment: Assigning skilled drivers for special handling needs ensures safe and proper delivery.

5. Last-Mile Navigation: Route optimization considers road constraints, choosing paths suitable for oversized vehicles.

Challenges in Retail Ecommerce:

1. High Demand Variation: Fluctuating order volumes and peak shopping seasons can strain delivery operations.

2. Delivery Time Preferences: Customers expect flexible delivery options and accurate ETAs.

3. Multiple Locations: Deliveries to various addresses require efficient routing to avoid delays.

4. Last-Mile Efficiency: Navigating urban areas and congested streets for timely deliveries is challenging.

5. Returns Management: Handling product returns and exchanges efficiently adds complexity.

6. Optimal Resource Utilization: Balancing fleet and driver resources with varying demand can be tough.

Route Optimization Solutions:

1. Dynamic Routing: Route optimization adjusts routes in real-time based on order volume and traffic conditions.

2. Time Slot Management: Transportation Route optimization software offers accurate ETAs and customizable delivery time slots.

3. Multi-Stop Routes: Efficient route planning for multiple deliveries ensures minimal travel time.

4. Smart Navigation: GPS integration guides drivers through the best routes for on-time delivery.

5. Returns Handling: Route optimization assists in planning return pickups and integrating them into routes.

6. Optimal Resource Allocation: Effectively allocate drivers and vehicles according to demand, ensuring efficient utilization.

Utilize FarEye's Route platform to streamline dispatch processes, cutting down manual dispatch time by up to 30%. Seamlessly plan routes and distribute orders, considering variables such as vehicle capacity, traffic patterns, service regions, hours of operation, driver preferences, and route familiarity.

Leverage FarEye's advanced geosmart technology to convert non-standard addresses into streamlined codes, enabling drivers to swiftly locate delivery points. AI-powered Smart Suggestions reduce administrative tasks, empowering drivers to focus on deliveries. FarEye transforms operations for enhanced efficiency, ensuring timely and profitable deliveries.

With FarEye's Route, you can:

• Maintain Scheduled Deliveries: Seamlessly integrate same-day orders into next-day deliveries using hybrid routing technology, preserving your planned schedules.

• Customer-Centric Flexibility: Provide your customers with enhanced flexibility, convenience, and options while ensuring optimal driver productivity and without inflating operational expenses.

• Efficient Capacity Management: Effectively allocate vehicle and driver capacities to ensure compliance with on-time delivery SLAs, enhancing overall service quality.

• Green Fleet Optimization: Minimize fuel expenses and delivery costs by optimizing green fleet deliveries, reducing travel distances and curbing environmental impact.