Route optimization is the quickest and easiest way for a last-mile delivery business to get more efficient routes and cut costs. Despite its well-proven power to reduce mileage, many businesses are still stuck in their ways of manual route planning.
We believe that this is because the term route optimization is ill-understood as it can mean different things to different people. It conjures up an image of mathematicians sitting in a room full of formulas on whiteboards, which gives it an air of scary mystique.
The goal of this guide is to dispel the mystique and provide clarity on the topic of route optimization, through a practical lens of small and growing delivery businesses.
We'll also discuss the problems with conventional route optimization and introduce a new concept called Intelligent Route Optimization to address these.
In the 20th century, the Traveling Salesman Problem (TSP) dominated: Given a list of cities, what is the shortest possible route between them that visits each city exactly once and returns to the starting point?
Mathematicians tried various approaches to tackling the problem throughout the 20th century— in the 1950s and 1960s the RAND corporation even offered prizes for solving it.
To this date, the TSP remains an unsolved problem – at least in the sense of finding the optimal route for problems of any size. Instead, many creative meta-heuristics have been developed to approximate a good-enough solution.
Large corporations like UPS or FedEx have spent billions employing huge teams of academics to develop their own in-house algorithms trying to find the best routes. We wanted to bring the power of route optimization to small and medium businesses in an easy and accessible way.
First, we needed to tackle the branding problem so we coined the term Route Optimization back in 2012 to consolidate the various academic terms being used at the time. The few commercial routing softwares that existed before us called themselves “TSP and VRP solvers” or “Multi-stop Routing and Scheduling Optimizers” to name a few. We started marketing the term in earnest in 2015 and you can see on Google Trends that the term Route Optimization has increased 300% in popularity as compared to 2010. But even today, it is still a relatively little-known term.
Secondly, we developed an easy-to-use web application that anyone can learn in minutes – as we’ll see in the section Getting started with route optimization. Existing solutions in 2012 were very complicated for people without a background in Computer Science to get started with. Fast-forward a decade, now there are many good software options on the market – here’s a review of the Best Route Optimization Software in 2023.
And finally, the algorithms needed to account for real-world factors, because the real world is much more complex than the academic world (unfortunately). For one, academic papers describe routes on a blank piece of paper (called a Cartesian plane) whereas real delivery drivers need to follow the road network, with varying traffic patterns throughout the day and week.
What’s more, there are soft human considerations to route optimization that are also important to keep your drivers happy. We'll expand on this concept further in the section on Intelligent Route Optimization.
Perils of manual route planning
In present time
Intelligent Route Optimization
The accuracy of geocoding is vital. Sending a driver to the wrong location on the other side of town can be extremely frustrating and costly.
Good routing software will have very accurate geocoding processes and warn you about potentially faulty addresses to give you a quick way to review and fix those.
Most routing software will allow you to upload a spreadsheet of addresses. The addresses are then interpreted in a process called geocoding and plotted on a map.
The next step is to set up your delivery fleet. At a minimum, you need to specify the number of routes, the start locations, and the route shift times.
With Routific you can choose to spread the deliveries across a pre-defined number of routes, or let the algorithm figure out the fewest number of routes.
You can also specify a capacity on your vehicles to make sure routes are not overloaded – or assign a driver to a territory they're most familiar with.
With the data set up, you’re ready to create your first set of optimized routes!
Human brains are wired to be skeptical of algorithms and AI, especially when you’ve been doing it manually for years. That’s why we’ve created an intuitive and powerful route planning interface that makes it easy to inspect routes and make changes, should you feel the need.
Over time, most route planners learn to trust the algorithm and let it do most of the heavy lifting.
We showed that route optimization can reduce mileage by 20%-40% and how it is the single most impactful lever you can pull overnight to increase the gross margins of your delivery business. We also reviewed the environmental impact of adopting route optimization. Aside from route optimization, it’s important to review your entire delivery management process that may benefit from automation as well.
Yet, many businesses stick to manual route planning. Those that do use route optimization software often still spend hours tweaking the routes to their likings. With Intelligent Route Optimization this is no longer necessary, if it considers driver happiness and route acceptability. Among other things, Intelligent Route Optimization is traffic-aware, creates non-overlapping routes, and provides smart recommendations as the system gets to know your drivers.