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WHAT IS ROUTE OPTIMIZATION?

The Definitive Guide to Logistics Route Planning

What is route optimization?

In simple terms, route optimization (RO) refers to the process of finding the quickest and most cost-effective route between any two points on the earth. However, there’s more to it than just route planning or finding the shortest route between A and B. The best routes for a business usually depend on a lot of different factors – where the customers are located, when they want to be serviced, traffic and road conditions at any given time, or which driver or vehicle is needed to do the job.

Why use Route Optimization (RO) for Logistics?

It’s not quite that simple to find the shortest distance between two locations on earth because as the number of touchpoints increases, the number of possible ways to travel between them grows exponentially.

With just nine locations to visit, the number of possible ways of traveling equals the grains in 1 kg of sand. When you increase the number of locations to 22, the possibility of routes increases to the number of grains of sand in the entire universe. Take the number of stops to 102 and the possibilities of the ways to travel become incomprehensible. Globally, the route optimization software market is expected to witness growth at a CAGR of 10.9% over the forecast period of 2020-2025. Delivery route optimization helps drivers to complete day-to-day tasks in less time and eliminates manual delivery route planning with automated multi-stop route planning ability. Such software makes it possible for fleet route optimization as it can optimize the routes for several drivers simultaneously.

What to look out for in route planning software?

Rider preferences

Taking into account rider skills, expertise, and preferences for a smooth transition from traditional routing to AI-based route planning platform

Autonomous route planning

AI-driven route planning that can reduce errors caused by human negligence and minimize human intervention

Accurate geocoding

Advanced geocoding abilities that can convert fuzzy addresses into precise geographic coordinates on the map

Intelligent vehicle allocation

Smart vehicle allocation based on traffic, shipment, vehicle type, etc.

Optimal fleet mix

Offering a best-fitting fleet mix based on consumer preferences

First attempt delivery

First attempt delivery is ensuring deliveries in the first time around, saving you storage and re-delivery costs.

The business case for route optimization


Enterprises today are catering to customers with steep demands. This includes providing world-class products at reasonable prices, and a top-quality experience. For businesses that deliver products and services to doorsteps, a large part of this experience involves making speedy deliveries on time. Because research from McKinsey shows that more than half of omnichannel consumers are willing to switch brands if their delivery timelines are too long. On the other end, the pressure on companies is two-fold: Meet the steep demands of customers while keeping costs in check, and productivity levels high. Or lose them to the competition. The one place with the most potential to accomplish both? The last-mile, given that these deliveries form more than 53% of shipping costs. This is why supply chains need technology to automate logistics activities from end-to-end in order to save time, improve efficiencies and reduce human dependency. To that end, route optimization is the method of using Artificial Intelligence to figure out the quickest and most efficient route to all your stops and destinations. By testing multiple ‘what-if’ scenarios, a route optimization engine gives various route options by taking the costs involved, the resources available, historical data, and real-life road constraints into account. It allows you to cut down on operating costs, save time, and improve workforce productivity. Using advanced route optimization software also helps in streamlining delivery processes and optimizing on-ground operations, including shipment, transportation, last-mile delivery, and reverse logistics. With proper route optimization tools, your business could save up to 20% in mileage and improve your order capacity by as much as 100% without increasing your fleet.

What is real-time dynamic routing software?
Real-time dynamic routing software optimally handles on-demand orders alongside scheduled orders. In case the orders/preferences of the customers change while the rider is out to deliver, it can change and create new routes for the rider instantly. With routing requirements of companies becoming more complex, it is of prime importance that companies choose vehicle routing solutions that operate in real-time, that can help plan routes intelligently to improve delivery efficiency, and reduce costs.

How route optimization helps solve the last mile problem
Last-mile delivery is the end-point in the supply chain, and perhaps the most important one, because this is the point where the customer and your brand interact in person. Customer experience is therefore a top priority for businesses in the supply chain, above and beyond cutting down logistics costs and improving productivity in operations. Route Optimization helps in improving this last-mile experience and solves two of the most challenging logistical problems: the Traveling Salesman Problem (TSP) and the Vehicle Routing Problem (VRP). However, many RO solutions don’t consider on-ground restrictions and lack the knowledge of regional elements. Advanced RO solutions follow global standards in terms of performance while incorporating local constraints, and help companies in creating a differentiating factor for their customers.

How route optimization helps solve the last mile problem

Last-mile delivery is the end-point in the supply chain, and perhaps the most important one, because this is the point where the customer and your brand interact in person. Customer experience is therefore a top priority for businesses in the supply chain, above and beyond cutting down logistics costs and improving productivity in operations. Route Optimization helps in improving this last-mile experience and solves two of the most challenging logistical problems: the Traveling Salesman Problem (TSP) and the Vehicle Routing Problem (VRP). However, many RO solutions don’t consider on-ground restrictions and lack the knowledge of regional elements. Advanced RO solutions follow global standards in terms of performance while incorporating local constraints, and help companies in creating a differentiating factor for their customers.

Fleet's Vehicle Routing & Scheduling Engine

Locus Dispatch Management Platform (DMP) enables organizations to drive real-world efficiency across all fulfillment channels, be it improved SLA adherence, resource utilization, and unit economics across most major fleet types. The platform’s AI-based RO solution, the Vehicle Routing and Scheduling Engine, provides supply chain enterprises with an automated route planning and optimization solution that considers multiple real-life constraints and distribution models. It is a comprehensive solution in logistics that enhances fulfillment operations and increases consistency in transport planning, with nearly no human intervention. The cloud-based tool also facilitates GPS tracking for monitoring vehicles and providing clients with accurate and real-time ETAs. The engine optimizes delivery routes based on three different metrics - geography, time and vehicle, offering a single screen view of the distribution plans. It considers real-life constraints and distribution models to offer the shortest possible and most effective delivery routes, ensuring optimization across freight costs, time on-road, distance on-road, and compliance with SLAs.
Impact of route optimization across different business sectors
Enterprises across different sectors need RO to serve different purposes. The retail industry is trying to fight the e-commerce players by having an omnichannel presence. On the contrary, the e-commerce sector is struggling with increasing customer expectations with respect to deliveries. There are a number of industries in the supply chain such as retail, 3PL, FMCG and home services that still rely on manual, time-consuming logistics processes. Many logistics activities involve human decision making, the processes are time-taking and prone to human errors and there is clearly a lack of visibility of logistics across these sectors. With route planning software providing the most efficient routes for operations, industries can count on their work getting wrapped up quicker than before. This means no overtime costs for staff and less requirement for manual labor.
Route Optimization in E-commerce
Geocoding and locality detection to automate shipment sorting processes inside delivery centers
Optimized routes and automatic allocation to riders based on historical data and dynamic planning.
Servicing when customers want by setting delivery windows and lesser number of failed deliveries leading to SLA adherence and better customer delight.