What is Route Optimization? Why Your Business Needs It To Boost Profitability in 2022 ?

As faster and same-day deliveries take the center stage, savvy businesses are embracing modern route optimization tools to enhance delivery planning and drastically reduce delivery turnaround-time. The benefits of such tools sprawl across logistics operations in the guise of better delivery productivity, reduced operational costs, enhanced customers experience and more. Before we delve into what all a route optimization can do for your business let us quickly understand what route optimization entails.

What is route optimization?

Route optimization is a tactic facilitated by a route planning software that logistic companies use in order to optimize the delivery routes by devising efficient routes. In other words, it is the process that helps route the most cost and time-efficient route to get from point A to point B.

Route optimization works as a key for success since it helps businesses to not only complete orders but to also do so while effectively incorporating factors like driver schedules, available hours, total stops, fulfillment estimates, and legal requirements. It is important to point out here that route optimization is not about finding the quickest or the cheapest route, it is instead about finding a route that is efficient and satisfactory for all variables involved.

Can’t I Optimize and Plan My Routes Manually?

No. It is difficult to optimize routes manually when then volumes are high and there are more than thousands of delivery agents and destinations involved. Efficiency, scalability, accuracy and flexibility of your supply chain will be compromised when things are done manually.

How does route optimization work and how to optimize delivery routes?

Having established the importance of route optimization, let us understand what goes behind the route optimization and how does route optimization work. 

route optimization

Like most complex processes that cannot be optimally achieved by human or manual competencies, route optimization uses algorithms to achieve its purpose. It is not possible for a human mind and for humanly abilities to account for all nuances involved in computing a route and present a fool-proof optimal route, especially in a small amount of time, day-on-day. Route optimization algorithms, however, can do it all, increasing not only revenue per route, but also, the time saved per route. 

Modern route optimization techniques can:

  • Monitor and analyze historical route data via machine learning to identify low-efficiency routes and to enhance the future route efficiency
  • Leverage the actual, on-road traffic pattern knowledge and on-road contingencies like road blockage or slow-moving traffic to plan an alternate best route

Can businesses leverage Google Maps or Waze to plan routes?

An obvious question that would've at least once crossed your mind by now is “But why can I not use Google Maps to do this?”

As convenient as that may seem, on-ground reality, Google Maps, or similar apps like Mapquest, Waze cannot optimize the routes for you. It should be understood that apps like GMpas and Waze are made for the use of a common man on an individual level and not for the volume and professional requirements of a logistics company. GMaps sure can tell you the shortest delivery route from A to B but think again, how efficient is it when you have to plan a route from point A to point S with nine stops on the way?

A route optimizing software or a route optimizer, can not only plan unlimited optimized routes from any point to any point, but it can also do so accounting for unlimited stops, over vast distances, and last-minute contingencies.

Why do I need route optimization?

As a logistics company operating in the year 2020 it only makes sense for one to incorporate technology in the supply chain model and to use the potentialities of automation in the process. Advanced logistics tools generate the best route optimization algorithm by leveraging Artificial Intelligence (AI) and by screening multiple possible routes from point A to point B, figure the best, most efficient delivery route, thereby reducing manual dependencies, automating the end-to-end logistics process, and saving time and money.

An advanced route planning software could also go a step beyond and take care of other processes involved in the delivery processes by optimizing on-ground operations like shipment, transportation, last-mile delivery, reverse logistics, etc. In order to enhance workforce productivity, making use of technology and automation in the form of route optimizers should be the top priority.

Route Optimization Example and Use Cases 

Route optimization case study #1

Today, to satisfy the rapidly evolving needs of B2B customers, like resellers, hotels, etc. businesses need to do much more than deliver on time. They need to optimize last mile delivery operations. Things like, providing customers with accurate ETAs, ensuring transparency of delivery processes, facilitating seamless collaboration between delivery stakeholders and more are equally important. To deliver on these expectations, businesses need advanced supply chain and logistics tools that improve fleet productivity and visibility, ensure interoperability of disparate systems and provide real-time information on stock availability.

A large retailer leveraged a modern routing solution to ensure high levels of operational efficiency and delightful delivery experiences. The solution’s unique Business Process Engine helped the organization drastically enhance routing and improve routine delivery tasks and last mile delivery jobs. 

Impact of The Solution

  • Reduced delivery time and higher customer happiness score owing to enhanced route planning, better performance monitoring of delivery fleet and improved productivity
  • Increased recurring orders were driven by greater customer transparency, visibility of stock availability and shorter delivery cycles 
  • Data based decision making and delivery planning were possible owing to analytics driven business insights
  • Provided transparency of field operations by empowering managers and customers track delivery fleet in real-time 
  • Generated accurate ETAs by predicting route delays and managing exceptions better

Route optimization case study #2

Route optimization in eCommerce is absolutely critical. A leading home goods seller in Europe embraced a modern routing and logistics platform to build a customer-centric end-to-end delivery process. The business was facing visibility and productivity challenges when goods were being transported from warehouses to its final delivery destination. Managing returns were becoming a bottleneck as well. All these resulted in poor customer experience and increased operational expenses.

The platform empowered this eCommerce business to enhance delivery tracking and route planning with real-time dynamic routing capabilities. It kept customers abreast with live information on delivery status and deployed customizable workflows to manage reverse logistics better.

Impact of The Solution

  • Optimized multi-stop deliveries by leveraging real-time dynamic routing capabilities
  • Ensured end-to-end visibility of shipments for delivery stakeholders through real-time tracking, tracing and alerts 
  • Made deliveries flexible by using easy-to-change customizable business workflows
  • Improved delivery happiness score by ensuring timely and transparent deliveries

How is a route optimizer better than traditional route planning techniques?

Route optimization, obviously, has not been around since the beginning of time. But it sure has now arrived as the ultimate solution to multiple efficiency-reducing problems and challenges posed by the traditional route planning techniques-

  • Lack of real-time tracking

A route optimizer, unlike traditional routing methods, can account for real-time, on-road traffic conditions. In simpler terms, it means that if there is a blockage 800 meters ahead of your driver's current path, the route optimizer can help them take a diversion and avoid the blockage in real-time. Real-time tracking and route optimization analytics help logistics companies save month-on-month transportation costs, and help ensure on-time deliveries, thereby enhancing not only revenues but also customer satisfaction.

  • Manual Route Planning

As a logistics company, you might hire the best person who might, perhaps, manually devise the best and most efficient routes for the delivery drivers to follow for deliveries. However, what happens to these routes when there’s a blockage or a last-minute contingency like a road blockage owing to an accident? 

  • Poor Delivery Productivity

With the ever-growing e-commerce market and the consequently growing list of destinations, the increasing pressure of adhering to customer expectations, a viable company would want to stay on top of their game, whatever it takes. However, delivery productivity is bound to weigh down if it’s not powered by a sophisticated route optimization engine and GPS tracking possible only via a route optimizer.

  • Inability to Ensure On-Time In-Full Deliveries

Manual route planning and traditional route planning software fail to guarantee on-time and in-full deliveries, because, as mentioned, they cannot take into account real-time traffic conditions and blockages as route optimizers can. Reviewing fleet performance and fleet management also becomes difficult to add to the inability. 

  • Lack of ETA Adherence

ETA planning helps companies to plan in advance and to stay ahead of time. However, since ETA cannot be recalibrated in real-time with traditional means of route planning, there is no ETA adherence

  • Poor Customer Experience

On-time delivery of goods and packages is one of the most influential factors when it comes to measuring customer gratification and customer satisfaction in today’s world of same-day deliveries. Traditional route planning methods, by lacking real-time tracking and ETA adherence, hence, obviously lead to a poor customer service experience that not only causes loss of revenues but also a loss of reputation and business. 

  • Increasing Overhead Costs 

Fuel and labor have been identified as two of the greatest contributing factors to overhead costs in logistical operations. By using traditional means of route planning methods and by failing to optimize routes, companies hence end up losing money on these overhead costs.

Benefits of Route Optimization

By incorporating a route planner and optimizer into your supply chain model, you, as a company, will be empowered to save yourself hours of manual labor, manual dependencies, and the opportunity costs thereof. Route optimization is the easiest way out for any company rooting for greater ROI, greater time savings, limited fuel consumption, and a smooth flow of processes.

Here's how route optimization helps-

  • Delivery Profitability

Route optimization helps maximising the number of drops and pickups, allowing the delivery personnel to attempt much more delivery in much less time than pre-optimization. This, thereby, enhances the delivery personnel's productivity, making each delivery trip more profitable than before. 

  • End-to-end Ground Level Visibility

Route optimization makes a real-time, on-ground, end-to-end visibility of all resource movement, including the fleet vehicles and drivers, across a company’s distribution. This, in turn, enhances the potential for better profits owing to better control across logistics and operations processes.

  • Enhanced Tracking

Route optimization helps companies to focus and drive their operations on intelligent factors like GPS tracking and real-time traffic situations. This, in turn, allows those in managerial level positions to set goals to measure against performance and to analyze KPIs, thereby increasing productivity and keeping the drivers accountable for the job.

  • Reducing Delivery Turnaround-Time

Though route optimization is primarily about finding the best efficient route for the purpose of fulfillment of deliveries, it also helps reduce the turnaround time for customers by optimizing first mile operations.

  • Addresses The Travelling Salesman Challenge

The travelling salesman challenge, also known as an NP-hard problem ( a problem at least as hard as the hardest problems) is also addressed by route optimization. This is a problem, which we'd like to explain with the help of an example. Let's assume you are a salesman who needs to cover 20 cities in a day. Now, how do you plan to do that, via the shortest possible route, ensuring you visit or cross each area only once before returning to the original area? There would be tons of routes between any two points and now with these 20 areas to cover, the possibility of routes increases manifold and let us not even add an angle of making stops on the way. Route optimization and the algorithms of the science behind it make this complex problem rather simple by devising easy-to-use delivery routes for corporations of all sizes.

  • Shrinks Carbon Footprint

Carbon footprint is defined as the number of greenhouse gases (primarily C02) emitted in the atmosphere by particular human activity. However, since route optimization optimizes the human activity as a whole by offering an efficient route with minimal idling of drivers and fleets on the streets, it not only saves fuel costs but also the fuel burn, thereby shrinking the carbon footprint- one delivery at a time!

  • Boosts Customer Experience

There is immense competition in the logistic industry and that is a secret not kept from any player in the business. This also means that if one company fails to meet customer expectations, the customers have tons of other options to instead reach out to. Route optimization, however, helps keep your customers intact and lets you improve customer service pursuits by offering accurate arrival times, efficient and on-time deliveries, shorter turnaround times for return products, and pre-announced time slots for deliveries. 

How can FarEye’s last mile delivery route optimization platform help?

The most successful and seasoned technique of generating revenues is to generate them via existing customers, to not let them go, and to keep the existing customers going instead of having to find new ones. Having said that, an already existing customer is always less likely to switch to a competitor unless their needs and expectations are not fulfilled.

By making use of the potentialities of FarEye's route planning software, not only can you improve customer experience but also generate massive savings on fuel and labor costs. Our intelligent route planner offers fully customizable solutions, address geocoding, intelligent vehicle and route selection feasibility, magic geofencing, FIFO assignment process, customer DNA mapping, real-time dynamic routing options, and interactive route maps with load balancing suggestions that take your routing and delivery process to the next level! To know how we can help your business, signup for a quick demo here.

Route Optimization FAQ

What is route management?

Route management involves planning and optimizing routes in order to make the most of the available fleets. The goals of route management are to reduce fuel costs, driving hours and make deliveries fast and efficient.

How can I improve my last-mile delivery?

Last mile delivery can be improved by adopting an intelligent delivery management software that facilitates end-to-end visibility of delivery operations, automatic route planning and helps in centralizing logistics data. 

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